NMRC and the future of housing finance
After over two decades of the Federal Mortgage Bank of Nigeria (FMBN), the National Housing Fund (NHF) and the activities of the primary mortgage banks (PMBs) at various levels, it is becoming clear, increasingly, to Nigerian home seekers that accessing a mortgage loan for the purchase or construction of their houses is still fraught with difficulties.
In this clime, there is only a thin line separating a mortgage loan from a commercial loan whose interest rate is as ‘low’ as 17 percent to 22 percent.
When the Federal Government set up the FMBN and followed it up with the NHF as a response to the need for providing housing finance for Nigerians, especially those within the low income bracket, at an affordable interest rate of 6 percent with repayment tenure of between 20 and 30 years, it raised hope and expectation that homeownership level would improve within, at least, 10 years of their implementation.
But here we are 20 years after, with home ownership level just a little above 10 percent and the nation’s housing stock also a little above 10 million units with over 90 percent of them built from own savings.
It is on this premise that we see the new Nigerian Mortgage Refinance Company (NMRC), which is also set up by the Federal Government but private sector led, as not only imperative but also instructive as a potentially viable housing finance scheme that would right the wrongs of yesterday.
NMRC is a secondary mortgage company. It will refinance mortgages that will be originated by primary mortgage lenders including the PMBs and commercial banks that are into mortgage business. It is expected to make long term loans possible because it will be well capitalized by its stakeholders including the World Bank which will be committing $300 million into the company.
At its pre-launch press conference in Lagos recently, Ben Akaneme, the CEO, GTHomes, noted that NMRC would be the focal point for change in Nigerian mortgage environment by eliminating current impediments to mortgage lending in the country. We can’t agree more.
Like other well meaning Nigerians, we can’t wait to witness the take-off of this company, which is expected to occur in the first quarter of 2014, because of the benefits and ease it will be bringing into mortgage lending in the nation’s financial system.
With this new housing finance mechanism there will be long term loans at single digit interest rate that is expected to come down to 4-6 percent in the long run. Also, it is expected that on a yearly basis, 750,000homes would be added to the available stock, thereby reducing the yawning deficit that is as high as 17 million units presently.
Nigerians are keen on seeing the implementation of this scheme that promises 10 percent interest rate on a 10-year bond; 10 percent interest rate on a 20-year mortgage, and seeks to standardize mortgage in the country at 20 years.
To make all these happen, the on-going reform and recapitalization of the PMBs must succeed because by way of shareholding in the NMRC, these PMBs and the Mortgage Banking Association of Nigeria (MBAN) will be controlling 50 percent while commercial banks will take 20 percent; finance ministry, 20 percent; International Finance Corporation (IFC), 10 percent, all adding up to 100 percent.
It is noteworthy sufficient liquidity is required for NMRC to achieve its objective, more so when we know that with a mortgage deficit of well over N20 trillion and 17 million housing deficit requiring about N56 trillion to bridge, the World Bank’s $300 million is just a drop of water in the ocean.
We look forward to having a mortgage market that has multiple long-term funding sources including full integration with the Nigerian capital market where the value of listed mortgage-backed securities will be at 20 percent of the market capitalization of equities. The NMRC appears to be that beacon of hope long awaited by Nigerians.
All stakeholders should do all that is necessary to ensure that this laudable initiative fulfills its set objectives.