The Nation Newspaper

Tag: ownership

  • Home ownership: Affordable mortgage rates as panacea

    Home ownership: Affordable mortgage rates as panacea

    The housing sub-sector is a reflection of how an economy is being managed. Operators say Nigeria has a housing gap of over 20 million and insist that except government acts fast, the gap may continue to grow wider with many homeless. Chief Executive Officer of  GMH Luxury, Ayo Olanrewaju Kuyebi, in this interview with OKWY IROEGBU-CHIKIEZI, spoke on several issues including how synergy between government and private sector could stimulate the sector, mortgages, incessant building failure, others

    There has been incessant collapse of buildings across the nation with analysts giving various reasons for the menace. What in your opinion is the way out?

     To be candid, I have suffered building failure before now as a result of inexperience and building wrongly. The experience inspired me and brought me to where l am today. At a point in my career, I had to demolish 11 units of terrace houses in Magodo due to construction on the major canal, the canal lane was blocked. If you know Magodo and Magodo brooks, what  is separating the two, is a canal, some people said it’s land and they blocked the canal and our project was at the receiving end. I know the force of nature and how water behaves, we had an option whether to pull down the building or to ensure the canal stays but since we don’t have control over the canal, we pulled down the buildings; in the process we lost about N370 million.

    We lost the money but none of our investors lost because we relocated some and refunded some. Truth hurts, but we are not going to deliver a project that cannot stand  the test of time. We will not pass on a project that would not last, we would rather cancel it. In the cause of our eight years of developing houses, we have had to cancel two projects as a result of environmental and foundation failures. The reasons why we have incessant collapse of buildings is because developers are trying to patch things up; you can’t give what you don’t have, recent building failures point to that.

     What are the other reasons you can deduce for this scourge?

    Gone are those days that housing collapse only occur in the rainy season, now we have multiple structure housing collapse any time. The high level of quacks and low barrier to entry has given rise to the upsurge. We have emergency developers, people  who run into some millions or sponsored by those who have money and they start building. You can’t beat experience and hard work. For instance, while l was working for a firm , l once coordinated three projects at a time, one in Ilaje Bariga, Makoko and Agunlejika in the Cele area of Lagos and shuttled all these sites daily. In those sites, we constructed different structures at that time. After l left to establish my business, l chose to do luxury homes in the upscale market.

    How can government address the challenge of homeownership?

    To make homeownership  a reality for a broader section of the population, a comprehensive approach is needed. To improve the mortgage system in Nigeria, the government can collaborate with financial institutions to offer more affordable mortgage rates. I will suggest that government can establish housing funds or subsidies to assist low-income earners with down payments and also implement credit scoring systems to assess borrowers’ creditworthiness accurately.

    Furthermore, they can also reduce bureaucracy and streamline the mortgage application process; encourage private sector participation in the mortgage market. The government can strengthen regulations that govern the mortgage and real estate sectors. This includes creating legal safeguards, improving transparency, and ensuring that foreclosure processes are clear and efficient. High-interest rates, limited access to affordable mortgages and a range of challenges have frustrated the aspirations of many Nigerians to own their homes.

    How can we come out of the huge housing deficit?

    The housing deficit is huge no doubt but we are  saying that between 2017 to 2022 in India, their government was able to deliver over 17 million housing units by giving a subsidised loan to their citizens. The same thing was done in Brazil in 2009 and also in South Africa. Why can’t our policy makers learn those good things and implement them to benefit the citizens.

     Lagos State government came up with a rent- to- own initiative, what is your take?

     Rent-to-own initiative can be beneficial for increasing housing affordability. It allows individuals to gradually acquire property while living in it. Whether it’s a good move or not depends on the specific details and implementation. Such initiatives can help the middle class and low-income earners, provided they are well-designed and transparent. As good as  this initiative is, GMH isn’t considering rent- to- own for now.

     In which sector do you play in the industry?

    The poor mortgage system has continued to frustrate housing programmes in Nigeria.

    GMH Luxury caters to both the middle class and super-rich income bracket. We offer various payment plans that accommodate different financial capacities and our properties are strategically located in areas that cater to these demographics. We have properties on the Island in Lekki and Ikoyi.We also have properties on the mainland, in Gbagada. This approach reflects our commitment to serving a range of income groups with diverse housing options.

     Why is slush fund associated with real estate investment in Nigeria?

    No doubt, combating corruption and money laundering through real estate is a complex system, what we do is to ensure that we receive money through appropriate channels. If you want to buy into our project you have to pay through the legal and transparent manner. With us there are legal ways of making payment, anything after that, we will not involve ourselves.

    Read Also: Naira to close strong on $34.8b year-end diaspora remittances target

    What are some of the challenges facing developers?

    The major challengers are high cost of fund; bank can only give you facility for 30 per cent.

    We also have massive naira devaluation and 90 per cent of finishing materials for real estate is actually imported. The current dollar rate is nothing to write home about, so it is a sector that the government really needs to pay attention to. The infrastructure available at the moment is over stretched, so the government needs to create new towns and consider the population, because there is no provision for population expansion.

     We also have the problem of getting title documents and land grabbing has continued unabated in Lagos State and other parts of the country. To address the problems of title documents and land grabbing, the government can consider the following steps; it must simplify land registration to make it more efficient and accessible to the public.

    The government must also digitalize land records by investing in technology to create and maintain up-to-date digital database of land records to reduce the likelihood of land disputes.

    It must also regularise land ownership, especially in informal settlements, to provide legal titles to residents. There is the need to strengthen security, improve the security of land documents and increase law enforcement efforts to prevent land grabbing.

    We also have massive naira devaluation and 90 per cent of finishing materials for real estate is actually imported. And the current dollar rate is poor, it is a sector that government really needs to pay attention . The infrastructure available at the moment is over stretched, so the government needs to create new towns and consider the population, because there is no provision for population expansion.

     Problem of getting title documents and land grabbing has continued unabated in Lagos State and other parts of the country, what is your advice to the government on this?

    To address the problems of title documents and land grabbing, the government can consider the following steps: It must simplify land registration, streamline the land registration process to make it more efficient and accessible to the public.

    The government must also digitalise land records. They should use technology to create and maintain an up-to-date digital database of land records to reduce the likelihood of land disputes.

    The other one step is land regularisation, the government must regularise land ownership, especially in informal settlements, to provide legal titles to residents.

    They must strengthen security, improve the security of land documents and increase law enforcement efforts to prevent land grabbing. 

    In what sector of the building strata are you operating?

    GMH Luxury caters to both the middle class and super-rich earners. We offer various payment plans that accommodate different financial capacities and our properties are strategically located in areas that cater to these demographics. We have properties on the Island in Lekki and Ikoyi.

    We also have properties on the mainland, in Gbagada. This approach reflects our commitment to serving a range of income groups with diverse housing options.

    What are you doing differently from other developers?

    What I did differently when I started my own company was that if you called me for piling, what I would do wasto educate you on how you could do a soft check on your project site. I  would explain to you what to look out for, when you get to the site, I would give you a cost implication to that effect and give all the information you need, even as a layman for you to know.

    Why did you choose this line of business?

    I decided on the building sector to make an impact as at that time, pilling was very complicated, people doing it at that time didn’t have the technical prerequisite to undertake such projects and the rate of foundation failing at that time was alarming. I took it upon myself to venture into piling, promising myself to do something differently and ensure that every client got value for their money.

    In 2010, the little money I gathered was aroundN 570 ,000; I used it to start up a company called Jostrut Consult Limited.  I put the money into the fabrication of what is called a dandle rig. It’s a smaller pilling ring locally manufactured and when this was done, I called on people of like mind, we formed partnership on the project.

    Currently, the firm, Jostrut Consult has grown up to become a company that has over 500 million in both equipment and cash in the bank.

    I know what it takes to climb that pedestal,  anything I must get, I must earn it and go into what is called self-development, I have worked on several projects pro-bono because the first thing is to  deliver value then, I can now tell you what I am going to take.

       Majority of time you will be cheated, but one thing stands out, the experience you have garnered during the process, cannot be taken from you.

    I have worked freely in several places, not only in Alimosho, I have worked freely in Banana Island, if you want to give me work in Alimosho and Banana Island, I will give consideration to the one in Banana Island, even if they are not going to pay me, because of the exposure and experience that I am going to gain there in.

     My motto has always been that delayed gratification is access to experience, because the quality of materials that you will be exposed to when you work in Lekki is not the same as when you work in Alimosho or  when you work somewhere in Ogun State.

     Majority of time you will be cheated, but one thing stands out, the experience you have garnered during the process, cannot be taken away from you.

    I have worked freely in several places, not only in Alimosho, I have worked freely in Banana Island, if you want to give me work in Alimosho and Banana Island, I will give consideration to the one in Banana Island, even if they are not going to pay me, because of the exposure and experience that I am going to gain there in.

  • Ownership: Ethiopian Airlines invites African countries

    As a way of boosting the fragmented African airspace, Ethiopian Airlines (ET)said it is willing to bring in other African countries into ownership of the airline and  forming strategic alliances, besides launching or reviving new sovereign African airlines.

    The company’s managing director, Tewolde Gabremariam, suggested the airline should be co-owned by African governments.

    Tewolde said Ethiopia’s government should capitalize on the airline’s stature to consolidate its place in the African continent.

    “As a pan-African airline, I don’t see any reason why we should not sell the minority shares of Ethiopian Airlines to African countries, if they are interested in buying,”he said.

    More than anything, Tewolde’s bullish statement is reflective of the bold new era in Ethiopia. Since prime minister Abiy Ahmed came to power in April, he has overseen radical reforms that have changed the country’s trajectory. These include introducing a major policy aimed at loosening the government’s monopoly on several key economic sectors, including aviation and telecommunications.

    Tewolde’s words were based on the airline’s success in improving its financial, operational, aircraft fleet, and annual passenger numbers. In the fiscal year ending July 2018, the carrier announced it bought a 45 per cent  stake to revive Zambia Airways, which went into liquidation way back in 1994.

    To spread its regional footprint, it also kick-started negotiations to establish new hubs in Mozambique, Chad and Equatorial Guinea in addition to the ones it already operates in Malawi and Togo.

  • Association urges govt to break meter ownership monopoly

    The Electricity Meters Manufacturers Association of Nigeria (EMMAN) yesterday in Lagos appealed to the Federal Government to break the monopoly of distribution companies in the sale of meters to electricity consumers.

    EMMAN Executive Secretary Muyideen Ibrahim, who spoke to the News Agency of Nigeria (NAN), said it would go a long way in addressing the challenges with estimated billings.

    According to Ibrahim, breaking the monopoly will enable electricity consumers procure and own meters directly.

    He said it would also address complaints over estimated billing and outrageous billing from the distribution companies.

    Ibrahim said that the association had always advocated that government should liberalise the metering arm of the power sector so that everybody could have access to meters.

    He said: “If every consumer has prepaid meter, it will allow them to manage the electricity consumption, and the Discos will collect revenue maximally without billing outrageously. But now the consumers are short-changed because they are being given estimated bills. It presupposes that the Discos are smiling to the bank while the consumers are suffering.

    “Unfortunately, some of the Discos are complaining that they don’t have the fund to invest massively in metering, whereas the meters are available in the various warehouses of the manufacturers.

    “If the telecom sector could be liberalised, why not metering? The only thing is that it will enhance the whole power sector and also add value as well.’’

  • Take Ownership

    I am a high-flier and I never leave anything to chance, my top priority in January was to put my house in order. I believe that if you desire to move into a bigger house, you’ll need to clean up the old house and sort out the things that would be useful in the bigger house. Separate them from the junk that must be destroyed or thrown away. Do you seek promotion? If yes, then put your house in order! You might need to discard some relationships, values, habits.. which are toxic to your dream.

    Dear friend, I am wildly enthusiastic about my dream and guess what? You are my dream come true! Hmm…sounds like a love message , anyway Valentine’s day is fast approaching( I have an event you would not like to miss..give me a call if you are interested..limited seats available). Personally, I feel fulfilled when you are truly inspired by my articles, thank you for your comments and feedback. No doubt, life is a story, the deeper and wider your experiences are, the richer your story. The universe is wider than our views of it, don’t be insular, embrace new ideas/challenges, learn from other people’s stories too, remember no man is an Island.

    Parents always try to protect their children from harm, but sometimes their insularity goes too far. Last term I had to change my children’s school for personal reasons and the new school was quite a distance from home. I was compelled to do the school runs to and fro throughout the term. I must confess it was pretty daunting however I noticed that some children within our neighborhood also attend the same school, they actually go to school by themselves…they take the public transport to and fro. Of course I never believed this until I asked one of them and he told me confidently “My mummy taught me how to take the public transport so I am always careful on the road..’’. This boy is quite younger than my teenage son. Life being a perfect teacher orchestrated a situation that opened my eyes to the need to allow my children embrace a new task. Upon school resumption in January, I was under the weather and could not take them to school, my husband decided to help out in the morning but how will they come back? My teenage son was fast to respond “Mummy I know the way, I have learned from you throughout last term.. please give me the chance to do this’’ My heartbeat quickened..”Okay, I will allow you do this today but please pick your calls because I will call you often’’.. To my greatest amazement, my boys returned the first day feeling like heroes and this conquest marked the end of discussion on that matter even after my recovery. I learned from this experience that children deserve to be given opportunities to embrace challenges thereby they imbibe a sense of responsibility no matter their age. Please don’t misconstrue me, parents must wisely train them to accept responsibilities commensurate with their age…over protection only makes a child become a victim of a sense of entitlement.

    This ‘sense of entitlement’ is a deadly virus ravaging homes, businesses, relationships and our great country. A person with a sense of entitlement believes he deserves certain privileges- and he’s arrogant about it.  A woman approached me after my radio show on Monday and asked after my guest who just left the premises. I explained to her that he left a few minutes ago, she reacted ‘’Chai…my dear wahala dey ooo, I came from the village( East) to see my cousin(my guest). I hear say he don come Nigeria, so I travel with my daughter to come see am here…she won enter school and we need moni…’’ I was stunned! “Madam, you travelled all the way from Abia state to Lagos and you never thought it wise to even call the person you were coming to see..haaa..this is not right’’ She started crying, seeking sympathy “I need moni for my pikin school fees so I trace am come this place..’’ While I was thinking on the spot, she walked away with a face like thunder. This is simply ridiculous! One of my colleagues retorted “This woman is a monitoring spirit..’’ I told him her problem is her sense of entitlement, she thinks my guest owes her the duty of paying her child’s school fees because they are cousins. So without recourse to common sense she decided to hunt him and trace him to Lagos. Her angry countenance and blame game really showcased her intentions.

    I make bold to say that having a sense of entitlement without a tint of a sense of responsibility is criminal! I am perturbed about our eroding moral values, ill mannered adolescents flexing their muscles without fear of the rule of law, selfish leaders displaying their affluence at the detriment of the masses. Chinua Achebe asked the right question; “Where did the rain begin to beat us?’’. I am not a political analyst and would not want to delve into the political history of our dear country however I would categorically say that our leaders have a duty to entrench and enforce justice in the land. Little wonder, the good book says “ Without wise leadership, a nation is in trouble; but with good counselors there is safety”.

    We, the followers must also continue to hold our leaders accountable, enough of ‘Behind the scene distractions’. When we take ownership of what God has bestowed on us, we become more responsive and responsible. Ownership is taken through knowledge not ‘noise’. A good wife takes ownership of her husband when she respects and understands him not by spying on him likewise the husband. To love someone is to pursue their well being and make it a priority. If I may ask you, what is your priority today? Do a self assessment and always remember that a right attitude wins always.

  • Ikoyi cash haul: Bank claims ownership of Flat 7B

    Ikoyi cash haul: Bank claims ownership of Flat 7B

    Union Bank of Nigeria Plc has claimed ownership of Flat 7B in Osborne Towers, Ikoyi, where large sums of money were found.

    The sums found in the flat, which were forfeited to the Federal Government on June 6, are $43,449,947 (about N13billion), N23, 218,000 and £27,800 (about N10.6milion).

    In its pending application, the bank is praying the Federal High Court in Lagos to vacate an interim order forfeiting the flat to the Federal Government.

    The Economic and Financial Crimes Commission (EFCC) had accused former National Intelligence Agency (NIA) Director-General Ayodele Oke of fraudulently converting the agency’s funds.

    It alleged that Oke’s wife, Folasade, used part of the funds to buy the flat.

    The court, on November 9, ordered the flat’s temporary forfeiture to the Federal Government.

    Justice Saliu Saidu ruled that it would be permanently forfeited if no one turned up to justify its ownership within 14 days.

    Yesterday, Union Bank’s lawyer Chief Ajibola Aribisala (SAN) said he filed an application seeking to vacate the interim forfeiture order.

    In a supporting affidavit, the bank said the flat was part of 16, Osborne Road, Ikoyi, belonging to Alhaji Ahmadu Adamu Muazu.

    It said the property was covered by a certificate of occupancy dated September 27, 2009 and registered as 97/97/2009 in the Lands Registry Office, Alausa.

    According to the bank, Muazu mortgaged the property to it by virtue of a Tripartite Deed of Legal Mortgage dated November 1, 2011.

    Union Bank said the property was a security for a loan granted to Tripple A Properties & Investment Ltd.

    The bank claimed that the property’s original titled deed had been vested in it (the bank).

    Besides, it said the loan was yet to be liquidated despite its tenor expiring.

    The bank claimed that it sold the property to Chobe Ventures Ltd to liquidate the loan.

    EFCC, in its counter affidavit, argued that the bank lacked the locus standi to challenge the forfeiture.

    While arguing the application for the flat’s forfeiture, EFCC’s lawyer said Mrs Oke made cash payment of $1,658,000 in tranches of $700,000, $650,000 and $353,700, for the flat’s purchase between August 25 and September 3, 2015.

    In a supporting affidavit deposed to by an investigating officer, Mr Musa Giwa, the agency said Mrs Oke gave the cash to a bureau de change operator, Alhaji Shehu Usman Anka, to pay for the flat.

    “The funds used to acquire the property sought to be forfeited in the name of Chobe Ventures belong to the Federal Government of Nigeria but was fraudulently converted to the use of Chobe Ventures. It is in the interest of justice to grant this application,” the EFCC said

    EFCC said when it recovered the huge cash from the flat on April 12, it also recovered several documents indicating that the flat belonged to Chobe Ventures, including invoices and cash receipts issued to the company.

    It claimed to have written the Corporate Affairs Commission (CAC) for the particulars of Chobe Ventures’ directors, following which the CAC affirmed that the directors of Chobe Ventures were Mrs Folade Oke and Mr Ayodele Oke Jr.

    Justice Saidu adjourned till January 12 for the hearing of Union Bank’s application as an interested party.

  • Govt urged to prioritise home ownership

    The President of Perfection Real Estate Investors Cooperative Society, Mr. Niyi Adeleye, has urged the Federal Government to prioritise home ownership.

    Adeleye, who spoke at the weekend, at a conference in Ikeja, said the government should prioritise home ownership by assisting and encouraging cooperative societies to realise the dream of providing affordable houses for Nigerians.

    He said churches and corporate bodies should form cooperative societies to help members and stakeholders to become house owners.

    His words: “Governments cannot meet the housing needs of Nigerians; this is why Perfection Real Estate Investors Cooperative Society should be encouraged to assist Nigerians to become home owners.

    “We are embarking on projects in Lekki and Festac Town, to assist Nigerians become home owners. People should join our cooperative society; they will gain a lot if they do. It will be a golden opportunity to realise their ambition of owning their houses.

    “Perfection Real Estate Investors Cooperative Society was established out of the need and passion to provide solution to human problems in the real estate sector, while empowering people financially.

    “We are on a mission to make home ownership and participation in the real estate sector accessible to Nigerians. This is made possible by our products and income opportunities, which we have created for the benefit of our members. They are property ownership products, real estate investment products, ordinary membership and ambassadorship.”

  • Wema Bank promotes home ownership for youths

    Wema Bank promotes home ownership for youths

    Wema Bank Plc has reiterated its commitment to give the millennials (the youths) the opportunity to save and have their own homes, own cars or go on vacation.

    Armed with over seven decades experience on providing banking services, Wema Bank introduced an insight-driven, innovative digital offering to Nigerians earlier in the year.

    The ALAT is Wema’s Digital Bank, the first fully digital bank in the country. Through the product, the lender hopes millennials will be encouraged to save more towards projects they would love to undertake.

    As the government strives to improve housing in the country, Wema Bank is encouraging Nigerians to exploit the opportunity it presents to start saving for their homes.

    “Even if you would access mortgage loan, you still need to save towards a down payment,” explains Funmilayo Falola who manages Wema Bank’s branding and marketing communications. “With your ALAT savings goal, you can save at your own convenience towards this.”

    “ Save for your next home and Wema Bank will furnish it. All you need to do is open an ALAT account by downloading the ALAT app from your Google Play Store or iOS App Store. Then, create a Savings Goal and make the title My Dream Home”.

    “You can determine how often you save but saving is automated once you make your choice. But make sure you have figured out where and how you want to live, how much home you can afford (considering your current income, expenses and future goals),” the bank explained.

    “If you are taking a mortgage loan, you’d also consider the down payment, which may be up to 30 percent of the total value of the home being purchased. There are other associated costs, including furnishing, which Wema Bank has offered to pay for,” it said.

    The need to boost housing availability follows Nigeria’s rising housing deficit, estimated to be about 17 million units. “While the government has often assured citizens of its commitment to providing affordable housing, and reducing the deficit, the minister in charge of Housing Babatunde Fashola said in November 2016 that the size of government resources and its ambition will determine the success of its housing plans,” it added.

  • Developer takes home ownership to the grassroots

    Developer takes home ownership to the grassroots

    Amid  growing concern of stakeholders on the lingering housing in the country, some industry players have seized the bull by the horns to ensure that Nigerians do not become homeless. And while most developers are concentrating on highbrow areas for estate development, a young and upwardly mobile developer is gradually taking homes to the majority of Nigerians who truly need a home.

    The firm of realtors and investment firm, Pertinence Nigeria Limited, promoters of the ABC and VIP Gardens Estate, said it is gradually achieving its objectives by building houses for Nigerians through the purchase of large expanses of land at places people had thought could not be developed. In this regard, the firm said it is  contributing its quota by reversing the housing shortage in the land.

    The Founders and Executive directors of the firm, Sunday Olorunseyi and Wisdom Ezekiel, in a chat with The Nation, explained that Nigerians have come to realise that  owning a house is a personal responsibility, such that waiting for government to help them in this regard would mean waiting till eternity given its huge responsibilities and cash constraints.

    According to the duo, Pertinence is assisting Nigerians by reducing the costs associated with home ownership, some of which are things that the firm has taken off a prospective house owner. For instance, Ezekiel explained that owing to financial constraint, his firm has been able to acquire large expanse of land which are then divided into plots and sold at reduced prices.

    Besides, he explained that Nigerians have decided to solve their own housing problems by themselves; hence, they get involved in monthly savings to acquire land- an option his firm readily provides a platform for.

    “This is an indication that the market is yet to attain its potential, but in a place like Lagos State, for instance, the deficit is gradually closing up, because people now realise that you can start building a house with N50,000, and that is now being entrenched in other parts of the country,” Olorunseyi said.

    The executive directors of the Lagos-based firm, who spoke at the super promo launch organised by their company last weekend in Egbeda area of Lagos State, said it is in realisation of this desire and to ease life for Nigerians that the firm put together the promo so as to put smiles on the faces of some prospective home owners. In the promo, six plots of lands were given out in a raffle draw to lucky winners.

    The super promo launch, they explained, is their own little corporate social responsibility to the society.

    “This is our own way of appreciating our teeming customers for believing in us since we started business about five years ago. We are giving out six plots of land in any of our estates and all expense-paid return ticket to Dubai to winners today. We are doing this to help people to become home owners. We have done this for about five times now”, the co-founders stated.

  • Financial market and home ownership

    As the Nigerian middle class grows it becomes inevitable that the financial market will start to march towards the funding of the housing market which we see in developed countries, especially America.

    This is a good thing but what safeguards can we start to put in place to prevent the risky financial mortgage practices that led to the 2008 financial crisis? It is necessary that we begin to take advantage of the few pros of being a developing country which includes vicarious hindsight; we have not directly experienced these mistakes but we can estimate that many of these cause and effect situations are subject to a law of nature that does not vary much from place to place. Sadly, many developing countries continue to make the very same mistakes that their developed counter-paths have made – from turning to processed foods despite its now documented links to various chronic diseases to adopting practices that speed up global warming. Perhaps the financial and housing sectors may walk on the other side by exploring the history of the link between the two sectors and choosing which path to follow based on this information. Housing economics identifies some major characteristics of the goods in the real estate market (housing units) which define the way that financial institutions manage the distribution of housing.

    The major characteristics are the lengthened ‘shelf life’ of the product – houses lasts for decades or even centuries; inelastic supply as the stock of housing remains fixed for long periods despite changes due to the time it takes to complete a new unit; and the fact that houses can be both an investment and consumption good to the same person.

    These unique characteristics of housing requires specialized financial institutions and markets specifically tuned to its highs and lows as misjudgment of the trends will create a situation of imperfect information that affects the entire economy. This is inevitable in a market where majority of assets held by a household is tied to housing and that is why research has shown that of the 50 major banking crisis that have occurred in the past 5 decades, over 75% were preceded by changes in housing market pricing. Such a well-developed housing mortgage market will need a primary and secondary mortgage market.

    The primary mortgage market consists of multiple lenders who directly compete to gain access to home owners by charging different terms and interest rates in a bid to attract more borrowers. Competition is key in any market and housing is no exception. But the government is still required to provide some structure in the form of short term interest rates which are directly linked to the market determined long term rates. In the case of the U.S., the federal funds rate (equivalent of the Central Bank’s monetary policy rate in Nigeria) was set so low that many analysts point to 0-1% interest rates as one of the reasons for the excesses of financial institutions in the boom years before 2008.

    Also, in this two-tier mortgage market, primary mortgage lenders have the option of not holding on to the right to collect the debt which they acquired when the borrower signs their mortgage contract. They can sell the ownership of this debt to players in the secondary mortgage market where similar mortgages are pooled together to form mortgage backed securities which are bonds backed by mortgages and sold to investors.

    There are diverse groups of investors who buy these securities – banks, governments, government agencies, pooled funds and much more and this dynamic market is part of the funnel needed to ensure that the housing market is continually funded with capital. Depending solely on government spending will not be nearly enough to provide housing for the majority of households especially in Nigeria’s large population. As many investors and stakeholders as possible should be a part of the market and that is why the secondary market is so important.

    However, this inclusion of many players contributed to the crisis as the trend on giving loans to risky borrowers became more rampant and many securities became backed by bad loans. Regulation is again key in ensuring that the many new players are held to a standard when determining who is eligible for a mortgage and that houses are not over-priced due to mere speculation. Credit growth brings this all together as a major key to achieving the increase in real estate provision and home ownership that is desired.

    This will be facilitated by the activities of the Central Bank and Ministry of Finance; giving credence to the creation of more financial institutions and linking the credit network to reputable investors, at home and abroad. Quality is even more important than quantity and it is important that economically sound regulations and processes ensure that financial institutions operating in the country are financially secure and avoid risky situations and financial decision aimed at increasing short term wealth to the detriment of the economy in the long term. •Folami wrote in from Lagos

  • Membership verification threatens NSE’s ownership change

    Membership verification threatens NSE’s ownership change

    A simmering disagreement between the council and management of the Nigerian Stock Exchange (NSE) and majority of its members over the accurate list of its members is threatening the implementation of the change in the ownership structure of Nigeria’s only stock exchange.

    The NSE started the conversion from a member-owned limited by guarantee to a share-based company limited by liability, which shares can be listed and traded on the stock market, in a process known as demutualisation.

    Reliable sources at the weekend confirmed that the a disagreement between NSE management and stockbroking chiefs, who formed the largest group of its members, was at the core of the decision to step down two vital resolutions that would have kick-started the demutualisation four weeks ago.

    The disagreement, according to sources, centred on two vital issues – the accurate list of members of the NSE and the sharing ratios between the two distinctive groups of members.

    Member-owners of the Exchange consists of dealing firms – mainly stockbroking firms that trade on the Exchange and ordinary members-influential individuals that make significant contributions to the growth of the Exchange, who were conferred with membership because of such contribution.

    While the list of dealing members is not in contention because of the traditions of registration of stockbroking firms and membership of other confirmatory groups, such as the Chartered Institute of Stockbrokers (CIS) and the Association of Stockbroking Houses of Nigeria (ASHON), the list of ordinary members is at the core of the controversy threatening the conversion.

    Sources said stockbroking chiefs had raised alarms over the secrecy surrounding the list of ordinary members, alleging that there were concerns that the list of ordinary members has grown since the demutualisation gathered momentum.

    A 2009 membership list published by the then management of the Exchange showed that ordinary members were less than a quarter of the total members of the Exchange. Out of a total membership of 327, some 79 were ordinary members.

    Sources said there were allegations that the list of ordinary members had more than doubled, allegations that were further fueled by the refusal of the management of the Exchange to tender the full list of ordinary members for scrutiny by the stockbroking chiefs.