The mortgage sector remains a critical segment that should be explored by the government to revitalise the economy. The Federal Mortgage Bank of Nigeria (FMBN), saddled with delivering quality services to National Housing Fund (NHF) contributors and mortgagors, is taking steps to ensure that Nigerians have affordable housing. The bank, which is tackling bad debts in the industry, is also forming viable partnerships to stimulate competition for the growth of the housing sector, writes COLLINS NWEZE.
To country can boast of economic prosperity without providing housing or creating a suitable environment for its people to secure reasonably priced housing.
For Nigeria, the housing deficit of about 18 million is huge enough to stimulate government’s action. But the government has seen the need to make housing more attractive for stimulating growth.
Apart from providing credit guarantees to developers, the government is also planning to issue promissory notes to reduce the developers’financing requirements. It is expected that the provision of credit guarantees is critical in attracting private sector funds into the industry.
For the Federal Mortgage Bank of Nigeria (FMBN)Acting Managing Director, Richard Esin, with the economy in recession in the second quarter, providing funding to bridge the housing deficit would help to create jobs, deepen economic development and ensure speedy economic recovery.
He believes that repositioning the bank remains the first step in achieving the desired impact in the housing sector. He said the bank recorded N424 million as operating surplus in its half-year business. He explained that the profit was realised from its total income of N5.8 billion.
The bank’s half-year financial performance indicated an operating surplus of N424 million from an income of N5.8 billion. Esin said the half-year performance review was aimed at taking stock of its performance from January to June 2016 as well as strategise on improving its operations.
Esin said the Business Performance Review (BPR), which was the first in the history of the bank, became imperative to chart a new course for the bank.
He stressed that the bank must strive to focus on creating a performance-driven culture at all levels of its operations, which can be achieved through the bank’s four pillars of corporate governance compliance, profitability, operational effectiveness and debt recovery.
On the debt profile of the bank, Esin admitted that the bank was compiling a debtors’ list, adding that the Economic and Financial Crimes Commission (EFCC) has expressed the willingness to assist the bank to recover the debts.
He said: “The bank is collaborating with other organisations of like minds to promote self-reinvention and stimulate competition for the overall growth of the housing sector.”
At the end of the review, Esin said the bank would begin a paradigm shift to sustainable profitability and the ascendency towards delivery of quality services to the National Housing Fund (NHF) contributors and mortgagors.
The FMBN, under Esin, has been expanding, and coordinating mortgage lending nation-wide, and promoting affordable housing to ensure that about 18 million housing deficits, estimated at N59.5 trillion, are addressed.
FMBN started the management and administration of the contributory savings scheme known as the NHF, which enabled it to mobilise long-term fund from workers, banks, insurance firms and the Federal Government to advance loans at soft-interest rates to contributors.
The FMBN finances mortgages created by primary mortgage institutions (PMI) under the NHF scheme, and gives estate development loans (EDL) to real estate developers.
The new FMBN chief understands that achieving the bank’s objectives would require the collaboration of the EFCC to recover the FMBN cash with developers, who collected fund but failed to deliver on the projects.
Esin is also focusing on cheap and affordable housing, not exceeding N5 million per unit, to ensure that more people key into the project even as the FMBN continues to encourage more people in various states within the federation,government parastatals, and the masses to key into the project.
The Esin-led FMBN has, therefore, requested the help of the EFCC to recover its huge bad debts from developers and others, who obtained housing loans from it, but misappropriated the fund. He made the request when he visited the Chairman of the commission, Ibrahim Magu, in Abuja.
Esin informed the anti-graft chief that but for the resilience of the bank, it would have been unable to meet the financial requests of Nigerians, including staff of the EFCC, because of defaulters.
He disclosed that the developers had a huge debt overhang with the bank, adding that they obtained construction finance loans from the bank to build estates, but 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, 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.
Stakeholders speak
Managing Director/Chief Executive Officer (CEO), Brent Mortgage Bank Limited, Kola Abdul, said housing provision required huge capital outlay, which is often beyond the capacity of the medium income/low income groups, hence the need for adequate funding for the sector.
He spoke at the launch of new mortgage products developed by his company in Lagos.
He said his bank was targeting a chunk of the estimated $21 billion yearly remittances by Nigerians in Diaspora with its newly developed product, Brent Home Ownership Diaspora Account (BHODA).
Speaking during the product launch in Lagos, over the weekend, the bank chief said the product was specifically created for Nigerians in Diaspora who desire to own a home or invest in property in their homeland.
“We realised that although Nigerians in Diaspora are working hard and living in decent accommodations outside the country, they also deserve a decent place of abode in Nigeria. We also realised that many of them have not been able to achieve this dream of owing a home of their choice because of funds diversion,s suppression, and conversion by friends and relations,” he said.
Abdul explained that the product would eliminate those challenges and make home ownership easy for investors. He said the firm had identified some marketing agents in the United States, United Kingdom and Republic of Ireland, who would assist the company in conducting due diligence on its prospective customers.
“We simply require completion of our forms on-line with requisite documents attached. The prospective customer at the onset will state the area where he or she wants the property, type of property, price range and other necessary details. Brent has opened domiciliary accounts with two commercial banks in Nigeria. Remittances would be made into any of these accounts in three different currencies namely, dollar, Pounds Sterling and Euro,” he said.
Another mortgage banker, Stephens Obi, said bridging the housing deficit could create over one million jobs in the construction sector. He said states and local government authorities could participate through financial resources, land donations, infrastructure, tax reduction and registration of demand.
He described housing deficit as the government’s inability to house its citizens in properly -fitted houses with the necessary modern infrastructure for their basic needs, such as water and electricity. The need to address the shortfall, he added, remained a good means of stimulating the economy.
“It stimulates the economy by pushing a lot of money into circulation. Every recessive economy needs a stimulus as we can see from around the world; an injection of cash into the economy in the hands of spenders. This acts as stimuli. Money being spent at all levels at the same time will move the economics of buying and spending to revive the economy. This ability to spend creates the necessary needed monetary activity in the country. Construction of houses will initiate growth, which would assist in creating jobs. The economy is stimulated, which will translate invariably to Gross Domestic Product (GDP) growth,” he said.
Housing gap in statistics
Statistics showed 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 100,000 units per year while 800,000 units are needed yearly.
As a result of the lack of a robust mortgage financing system, Nigeria’s rate of home ownership is one of the lowest in Africa at 25 per cent.
Statistics showed that 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).
Esin has, therefore, accepted the responsibility of delivering on the mandate of the bank and carrying forward the modest achievements of his predecessors.
