Analysing the Impact of Mortgage Market Development on Housing Supply in Nigerian Cities

This study analyses the relationship between mortgage market development and formal housing supply in Nigerian cities, examining whether improvements in housing finance access translate into measurable increases in new residential property production across selected urban centres. The Nigerian housing deficit is primarily attributed to supply constraints, but the role of mortgage market depth in stimulating formal supply through developer finance access and effective homebuyer demand remains insufficiently examined in the Nigerian context. Panel data for eight Nigerian cities (Lagos, Abuja, Kano, Port Harcourt, Ibadan, Enugu, Maiduguri, and Kaduna) are assembled over a twelve-year period covering mortgage loan volume, building permit issuance, construction sector output, housing completion estimates, and macroeconomic control variables including interest rates, per capita income, and urban population growth. Fixed-effects panel regression analysis examines whether city-level mortgage market depth predicts residential construction activity after controlling for demand and macroeconomic factors. Instrumental variable estimation addresses potential reverse causality between housing supply and mortgage demand. Results show a statistically significant positive relationship between mortgage market depth and formal residential construction permit issuance with a lag of approximately two years. The effect is stronger in cities where property rights documentation is relatively more secure. Cities with active state housing corporations show weaker mortgage-to-supply relationships, suggesting that public supply partially substitutes for mortgage-driven private supply. The findings imply that mortgage market expansion must be accompanied by land documentation reforms to maximise housing supply impacts. Keywords: mortgage market, housing supply, panel data, housing finance, Nigeria.