Author: Franc Kabu

Shelter Afrique’s debut ₦46 billion bond issuance in Nigeria’s capital market oversubscribed by 60.7%, reflecting strong investor appetite  

Abuja, Nigeria – 25 April 2022

The Company for Habitat and Housing in Africa (Shelter Afrique), the pan-African development finance institution exclusively dedicated to housing finance in Africa, is pleased to announce the successful completion of its debut ₦46 billion (US$110.7 million) Series 1 Fixed Rate Senior Unsecured Bond Issuance in Nigeria’s capital market under its ₦200 billion (US$481.3 million) bond issuance programme.

The dual tranche bond issuance was 60.7% oversubscribed with the order book peaking at ₦64.3 billion (US$154.6 million), enabling Shelter Afrique to exercise the ‘green shoe’ option and raise an additional ₦6 billion (US$14.4 million) more than the original ₦40 billion plan (US$96.3 million). The bond issuance attracted participation from a diverse range of institutional investors including pension funds, banks, and insurance companies, supported by an AA rating from GCR Ratings and an A+ rating from Agusto & Co. The high oversubscription demonstrates investors’ confidence in Shelter Afrique’s mandate to enable housing development in Africa, its strong management team, business strategy and credit profile. The 5-year Tranche A bonds priced at 13.00% and the 7-year Tranche B bonds priced at 13.25%. The tenors of the bonds are aligned with the organisation’s housing finance strategy and plans in Nigeria. Shelter Afrique will use the bond proceeds to fund mass housing development by tier 1 real estate developers, and to provide lines of credit.

FDSH Capital Limited acted as the Lead Issuing House while ARM Securities Limited, FCMB Capital Markets Limited and United Capital PLC acted as the Joint Issuing Houses to the bond issuance. Other professional parties include Aluko & Oyebode and Banwo & Ighodalo who acted as Solicitors to the Issue/Issuer and Solicitors to the Trustee respectively. United Capital Trustees Limited and CardinalStone Registrars Limited acted as the Trustee and Registrar respectively. The Receiving Banks include FSDH Merchant Bank Limited, Stanbic IBTC PLC and United Bank for Africa PLC.

Announcing the result, Shelter Afrique’s Acting Managing Director, Kingsley Muwowo expressed delight at the success of the bond issuance and thanked the Issuing Houses and other professional parties for the timely and successful completion of the bond issuance. He also extended his appreciation to the Federal Government of Nigeria through the Ministry of Finance, Budget and National Planning; the Securities and Exchange Commission; the National Pension Commission, and the Ministry of Works and Housing. He thanked the Board of Directors, Management and Staff of Shelter Afrique for their invaluable support throughout the process.

Mr. Muwowo noted that: “this is the first time Shelter Afrique is tapping the Nigerian debt capital market and the positive market reception is a clear indication of investor confidence in our long-term value proposition for the Nigerian housing market. We would like to assure our investors that we shall put the proceeds of the bond issue into good use that will ensure that more value is created for them”.

Mr. Muwowo said the issuance of the Naira-denominated bonds reflects the organisation’s desire to focus on tailor-made, long-term funding solutions for the provision of affordable and adequate housing in Nigeria and across Africa. He also noted that the volatile foreign exchange rate regimes in most member countries is one of the major challenges of financing affordable and decent housing in Africa.  He explained that: “Constant currency fluctuations make it difficult for those who borrow in foreign currencies to honour their loans because of the foreign exchange exposure risks. Through this bond issuance, developers and primary mortgage lenders in Nigeria will be able to access funding in Naira, thereby reducing such risks”.

Speaking at the signing ceremony held in Lagos, Nigeria, the Managing Director of FSDH Capital Limited, Tolu Osinibi, said: “FSDH Capital is pleased to have advised Shelter Afrique on its successful debut bond issuance in Nigeria’s capital market. Shelter Afrique continues to play a pivotal role in housing development across Africa and the success of the bond issuance will encourage other supranational financial institutions to tap Nigeria’s debt capital market for their Naira funding needs. We thank the investor community for their support on the bond issuance. We also thank the Board and management of Shelter Afrique for trusting us with this milestone transaction, and their commitment and dedication throughout the process.”

Exchange Rate:  1US$ = N415.58

Nairobi: March 22, 2022 – Pan- African housing development financier Shelter Afrique, through its research and policy formulation arm, Centre of Excellence (CoE), has launched a ‘Housing Affordability Calculator’ which will help the Company better address issues of housing affordability in order to improve viability of affordable housing projects in Africa.

The housing affordability calculator, which was developed in partnership with the Center for Affordable Housing Finance in Africa (CAHF), also seeks to enhance understanding of housing affordability as it pertains to the demand and supply sides in the context of African countries.

“The question of what is affordable is pervasive, but the answer still eludes us. Basically, housing affordability is a function of the purchase price, finance and the cost of living. However, if household affordability is not accurately gauged by public or private sector developers, then there is a serious risk that there will be insufficient effective demand by households to purchase or rent the houses produced. Thus, the housing affordability calculator is vital for Shelter Afrique in evaluating housing project proposals submitted, with respect to whether the units proposed are likely to be affordable to a low income target market in that location,” said Dr. Muhammad Gambo, Head of Policy, Research and Partnerships at Shelter Afrique.

He noted that the viability of affordable housing projects depends upon accurate methods for gauging household (or buyer) affordability and achieving unit costs that meet those affordability constraints.

“This affordability calculator will also assist other stakeholders in the built environment industry to better address issues of housing affordability and to improve the targeting and viability of their affordable housing projects,” Dr. Gambo said.

The calculator requires the user to input four data points: household’s monthly income; distance from the city centre; country of residence; and the local currency or US Dollar.

The calculator then applies background data and assumptions based on the prevailing mortgage terms in individual country, percentage of monthly household income spent on transport based on distance of house from city centre, and percentage of monthly household income spent on transport and housing for each income band.

Empty apartments amid housing shortage

The push for housing development across Africa has led to a boom in new homes, but high construction costs, infrastructure, land and compliance costs mean the majority of such houses are too expensive for those who need them most.

“In most countries in Africa, even the cheapest newly-built house is still not affordable to the majority of the urban population leading to high vacancy rates as we’ve seen in some countries such as Nigeria and Kenya. Developer-built housing typically targets the higher end, and is rarely delivered at scale. But even a USD20 000 house is unaffordable for the majority – and these are only available in limited projects,” Dr. Gambo said.

Dr Gambo noted that poor affordability targeting could put pressure on governments to provide further subsidy as in the case of Vision City in Kigali, Rwanda, or in the Kilamba development in Angola” and at the same time impose target price that cannot be feasibly delivered by a developer.

“Our aim is to improve the provision of affordable houses across Africa and we hope that affordability calculator will help us achieve this goal by making such project feasible and viable on both the demand and supply sides,” Dr. Gambo concluded.

Nairobi, 18th February 2022

Shelter Afrique the Pan-African Housing Financier dealing exclusively with the promotion of affordable housing has announced the departure of Managing Director Andrew Chimphondah.

The announcement follows a recently held Board Meeting where a decision for separation was made.

Mr. Andrew Chimphondah, a Zimbabwean national was appointed as the Managing Director in September 2018. Chimphondah, who is a Chartered Accountant oversaw the turnaround strategy of the housing financier approved by its General Assembly in 2017. Chimphondah also presided over a return to profit and was instrumental in raising substantial capital subscriptions from member countries.

The organisation, however, is in the middle of a reorganisation and restructuring to optimise service delivery and during this transition, it will be stewarded by Mr. Kingsley Muwowo, the Chief Finance Officer as Acting Managing Director pending the recruitment, on a competitive basis, of a substantive Managing Director.

The Board extends to Mr Chimphondah its gratitude for his years of service and wish him well in all future endeavours.

In 2021, the financier announced plans for a $500m Naira Bond and is in advance stages of completing the process of floating the Bond on the Nigerian Stock Exchange. The Board and Management are dedicated to making the capital raise a success as a demonstration of how effective capital markets can be to spur development in Africa.

Shelter Afrique’s results after participation on the 11th Peer Review of the AADFI member-institutions with the Association’s Prudential Standards, Guidelines and Rating System (PSGRS) for the year 2021.

In line with the Company’s Strategy 2021- 2025 and Strategic Goal (SG) no. 3 on Organizational sustainability where we shall continuously improve operational excellence by continuously self-evaluating ourselves against our peers in the DFI space. Shelter Afrique is a member of Association of African Development Financing Institutions (AADFI) and regularly participates in the Peer Review with the Association’s PSGRS.

What is Prudential Standards, Guidelines and Rating Systems (PSGRS)?

The Prudential Standards, Guidelines, and Rating System (PSGRS) was developed 10 years ago by the AADFI, with the support of the AfDB, as a tool for strengthening the African Development Finance institutions (DFIs).

The tool has been useful to DFIs in assessing their areas of weaknesses and strengths with the view to reinforce the strengths and address the weaknesses. The PSGRS has also provided a regulatory guide for various DFI supervisory authorities in many African countries and served as a useful instrument in transforming African DFIs from “non-performing” to “performing” DFIs. The PSGRS has gained acceptance and recognition as an important instrument for strengthening the African DFIs.
SHAF participated in the 11th Peer Review of the AADFI member-institutions with the Association’s Prudential Standards, Guidelines and Rating System (PSGRS) for the year 2021. SHAF emerged as one of the top DFIs in Africa with an assigned Compliance Index of 91% (the very high compliance zone (80% and above) having being assessed on its Governance, Policies, Strategies and Procedures.