If you’ve lived in Lagos, you’ll know that the rent situation is one of the city’s most pressing issues. In the last five years, rent in Lagos has increased by 91%. As with any part of Nigeria, the city in Nigeria, the city typically uses the annual payment system. This is where tenants are often required to pay one or even two years’ rent upfront. This structure favors landlords but places an immense financial strain on renters.
In 2016, Lagos State Government announced plans to introduce monthly payment plan on its Home Ownership Mortgage Schemes popularly called Lagos HOMS in different areas within the state. The then State Governor, Akinwunmi Ambode stated that his administration has decided to scale up the rent-to-own policy by introducing monthly payment plan so that people can pay monthly instead of being compelled to make a down payment of 30 percent of the total cost or pay for one year. However, except for a few startups that tries to accelerate it, it didn’t really get adopted. Since then, every eke market day, the government tries to introduce a new way for it to get adopted.
A few days ago, the government disclosed plans to launch a new digital platform for monthly rent payments to make things easier for residents. The platform will be a joint project with agencies like the Ministry of Housing and tech partners.
First, let’s break down the problem the government is trying to relieve. Lagos, a megacity with over 20 million residents, has a housing market that is as competitive as it is expensive. This is due to it being Nigeria’s most populous city and its economic hub. The city’s housing market is characterized by high demand and insufficient supply, leading to steep rental costs. According to a 2023 report by the Lagos State Ministry of Housing, the average cost of renting a two-bedroom apartment in Lagos can range from ₦600,000 to ₦2.5 million per year, depending on the location.
For many residents, these figures are simply out of reach. A survey conducted by the National Bureau of Statistics (NBS) in 2022 revealed that over 40% of Lagosians earn less than ₦100,000 monthly. This disparity between income and rental costs forces many to live in overcrowded or substandard housing conditions. The annual advance payment model disproportionately affects middle and low-income earners, who often find themselves scrambling to secure funds or settling for subpar living conditions.
The challenge doesn’t end with the initial payment. Lagos has a notoriously unpredictable economic climate. marked by inflation, a fluctuating exchange rate, and an unstable job market—tenants live in constant fear of not being able to meet the next rent demand, potentially leading to eviction and subsequent homelessness.
Enter rent payment platforms. These digital solutions promise to revolutionize the rental market by allowing tenants to pay rent in smaller, more manageable installments—monthly, quarterly, or even weekly. The idea is simple: instead of a hefty upfront payment, tenants spread out their financial obligations, aligning better with their cash flow and easing the pressure.
One example is RentSmallSmall, a Lagos-based platform that has gained traction in recent years. According to a 2023 report from the company, they have helped over 25,000 tenants secure homes with flexible payment plans since their inception in 2018. This model has proven popular among younger professionals, who may not have the savings to pay a year’s rent upfront but have a steady income to manage monthly payments.
These platforms typically operate as intermediaries between landlords and tenants. The tenant pays the platform, which in turn pays the landlord the agreed annual amount upfront. The tenant then continues to make periodic payments to the platform until the total rent is covered. Some platforms even offer additional services, such as credit checks, tenant vetting, and insurance options, making the rental process smoother for both parties.
On paper, the concept is appealing. It addresses one of the most significant pain points for tenants—finding a large sum of money all at once. By allowing tenants to pay in installments, these platforms could potentially democratize access to better housing and provide some financial breathing room.
However, the real-world application in Lagos presents several challenges. First, landlords may be hesitant to adopt this system. The upfront payment model is deeply ingrained in the market, providing landlords with a sense of security and a hedge against inflation. Convincing them to accept monthly or quarterly payments—especially from a third party—may require significant trust-building and incentive structures.
Secondly, there’s the question of cost. With many of these platforms there is always a catch in the guise of charge fees, which could make the total rent paid by tenants higher than if they had paid upfront. While the convenience of smaller payments may offset this for some, others might find themselves paying more in the long run. A platform like RentSmallSmall for instance, charges a service fee of about 3-5% on each transaction, which can add up over time. Interestingly, the government is hoping its monthly rent platform will rake in about ₦2.5 billion a year from around 100,000 users. How do they intend to raise this? By charging a 5% transaction fee every time rent is paid through the platform.
