Lack of long-term fund and prevalence of improper mortgage system are major constraints to housing finance in Nigeria. Real estate developers and property investors crave a better system, but the FMBN is also contending with growing loan default, writes, Ogechi Agu Amadi
Countries all over the world give priority to adequate housing provision, as it is one of the three most important basic needs of mankind–others being food and clothing.
Expectedly, programmes of assistance in the areas of finance, provision of infrastructure and research have been designed by governments (both the Federal and the states) to enhance adequate housing delivery. The focus on finance has, however, been very prominent because housing provision requires huge capital outlay, which often is beyond the capacity of the medium income/low income groups.
The Nigerian government is set on doing all that is necessary to increase the nation’s housing stock, particularly through a viable mortgage system.
Lack of a viable mortgage system has made Nigeria’s rate of home ownership one of the lowest in Africa at 25 per cent. According to statistics, Nigeria’s home ownership rate is much lower than countries such as Singapore (90 per cent), Indonesia (84 per cent), Kenya (73 per cent), USA (70 per cent), Benin Republic (63 per cent) and South Africa (56 per cent).
Also, statistics shows that Nigeria is a peculiar country where mortgage finance, as a share of Gross Domestic Product (GDP), is extremely low. At a paltry 0.5 per cent, compared with 80 per cent (UK), 77 per cent (USA), 31 per cent (South Africa) and two per cent (Ghana), it is a huge joke. The housing and construction sector accounts for only 3.1 per cent of Nigeria’s rebased GDP. Housing production is at approximately 100,000 units per year while 800,000 units are needed yearly.
This is a grim picture, but the Federal Mortgage Bank of Nigeria (FMBN), the nation’s apex mortgage institution, wants to make a difference by increasing the number of home owners in the country, said the Chief Executive Officer of the bank, Mr. Richard Esin.
Besides, Esin said the existing system was fraught with huge loan default and wants the Economic and Financial Crimes Commission to prosecute the housing developers and primary mortgage banks involved.
Esin, says it understands the critical importance of finance in housing delivery and, on account of this, it has been expanding and coordinating mortgage lending across the nation, and is also promoting affordable housing to ensure that the nation’s housing deficit is bridged.
The CEO of FMBN also understands that achieving set objectives would require the collaboration and support of the Economic and Financial Crimes Commission (EFFC) to recover FMBN cash in the hands of housing developers, who collected funds but failed to deliver the projects, as agreed. This collaboration, they said is important in the absence of an enforceable foreclosure law.
In its quest for long-term funds for housing development, the federal government got the FMBN to start the management and administration of a contributory savings scheme known as the National Housing Fund (NHF). It thus mobilised long-term funds from Nigerian workers, banks, insurance companies and the Federal Government to advance loans at low interest rates to contributors, who become eligible after six months.
The FMBN finances mortgages created by primary mortgage institutions (PMI) under the NHF scheme, and also gives estate development loans (EDL) to real estate developers.
Esin’s plan is to have cheap and affordable housing, not exceeding N5 million per unit to encourage more people to own homes in various states of the federation.
The apex mortgage bank has given loans to various primary mortgage banks and housing developers that have not been used for the purpose or repaid. The FMBN is not about to write these off as bad debt either.
The Esin-led FMBN has, therefore, requested the help of the EFCC to recover the huge debt from developers and others, who obtained housing loans from it, but misappropriated the fund. He made the request when he paid a courtesy call on the chairman of the commission, Ibrahim Magu, in Abuja, recently.
He told Magu that but for its resilience; the FMBN would not have been able to meet financial requests of thousands of Nigerians, including staffers of the EFCC, because of defaulters.
Esin explained that the developers, how defaulted, obtained construction finance loans from the bank to build estates, but that they allegedly diverted the funds into other non-productive and non-regenerative activities. According to him, some developers completed the estates, sold the housing units and failed to remit the sales proceeds to the bank.
Esin said some Primary Mortgage Banks, which obtained funds from the bank for Mortgage finances, for on-lending to qualified NHF contributors, declined to disburse the funds to the applicants. Besides, he said there were those, who obtained equity contribution from would-be mortgagors, but refused to deploy same in the provision of mortgage finances to the applicants’ benefit.
He said despite the revocation of the operational licences of some Primary Mortgage Banks (PMBs), they were still deceptively encouraging innocent and unsuspecting mortgagors to continue to repay their mortgages to them through fictitious accounts with no intention of remitting same to FMBN.
He appealed to Magu to assist in the recovery of the bank’s funds from contractors and vendors, who were mobilised to execute various contracts for the bank but failed to execute same and misappropriated the bank’s money. “These activities are fraudulent, and constitute financial crimes. We, therefore, seek the EFCC’s kind assistance in the recovery of these funds, which belong to the Nigerian workers.”
Esin informed Magu that his management remained committed to assisting staffers of the commission to own houses, stating that after the historic MoU between both organisations, the FMBN had disbursed N3 billion in 10 batches to 156 staffers of the EFCC.
Among the government agencies that have keyed into the NHF project is the EFCC, he said.
“The FMBN has packaged a N1.6 billion worth of National Housing Fund loans for 113 staffers of EFCC. The loan is currently awaiting board approval, while N1.3 billion has been approved as NHF loans for EFCC staffers but not disbursed because the targeted houses are no longer available.
“FMBN will work with other interested PMBs to revive the scheme once they are able to provide the bank with a suitable and acceptable security,” he said.
He assured the EFCC Chairman that the FMBN was in support of the war against corruption, hinged on one of the four pillars of the bank’s self-reinvention journey of corporate governance restoration, starting with a corporate governance audit of FMBN and training for over 120 members of staff in the leadership cadre, by the BPP on procurement practices and processes to engender the right kind of ethical behaviour among the staffers.
He also informed Magu about the establishment of a vibrant Anti-Corruption and Transparency Unit (ACTU) in the bank and training of over 120 members of staff in the leadership cadre by staffers of Independent Corrupt Practices Commission (ICPC) on anti-corruption programmes.
The FMBN, under Esin, has also brought into operation, the globally acclaimed anti-money laundering and combating of terrorism financing manual, which would serve as key guide in driving “our operations and the management of all facets of its relationships with stakeholders.
“We have also redefined our business to sharply focus on the low and middle income earners, collaborating with credible developers to deliver affordable houses at not more than N5 million per unit, to enable us achieve the required spread among NHF contributors in the delivery of mortgages. Our goal is to make affordable mortgages, a veritable tool in the fight against corruption,” Esin said.
According to him, “We have introduced the FMBN Home Renovation Loan for interested contributors desirous of renovating their homes via home expansion and other forms of value-enhancement. We will encourage members of staff of EFCC to take advantage of these opportunities for their benefit,” the FMBN Acting Managing Director added.
The Minister of Power, Works and Housing, Mr. Babatunde Fashola told participants at a summit on Affordable Housing in Abuja recently that the Federal Government would re-capitalise the FMBN for better efficiency and for it to deliver affordable housing to the masses.
Besides, President of the Association of Professional Bodies in Nigeria, Bala Ka’oje tasked the Muhammadu Buhari administration to make available to the FMBN bailout fund of N100 billion as well as “overhaul and restructure the FMBN for effective housing delivery.” Already, the restructuring of FMBN is on-going and the new team headed by Esin has said it was committed to getting affordable housing to the masses.
An estate developer based in Lagos, Stephen Okiro urged the FMBN to continue to provide affordable housing to the people. “Affordable is housing for which the associated financial costs are at a level that does not threaten other basic needs. States should take steps to ensure that housing costs are proportionate to overall income levels, establish subsidies for those unable to acquire affordable housing, and protect tenants against unreasonable rent levels or increases,” he said.
Besides, the Nigeria Mortgage Refinance Company (NMRC) has been established and has been able to provide a uniform underwriting standard for the Nigeria’s mortgage market.
The Central Bank of Nigeria (CBN) said the Mortgage Refinance Companies (MRCs) are required to have a minimum of 50 per cent of their investment in debt obligations issued or guaranteed by the Federal Government or any of its agencies.