Expectation high as NMRC, PMBs bring liquidity to mortgage market in 2014

Among prospective homeowners and real estate investors, expectation is high that access to housing finance would increase significantly in 2014 as the primary mortgage banks (PMBs) conclude their recapitalisation today and the Nigerian Mortgage Refinance Company (NMRC) commences operation in a couple of months from now.

The Nigerian mortgage market is enmeshed in a deficit that analysts estimate to be over N20 trillion, which explains the high housing deficit and low homeownership level among the people, especially those in the low-income group.

With $300 million from the World Bank plus expected contributions from other stakeholders including the mortgage banks, Mortgage Banking Association of Nigeria (MBAN), Federal Ministry of Finance, International Finance Corporation (IFC), among others, it is expected that NMRC would provide the much-needed long-term funds that would be loaned out at low interest rate to home-seekers.

Added to this is the mode of operation of the company which will involve refinancing the mortgages that would be originated by the mortgage institutions, thereby making loanable funds available to primary lenders.

Apart from individuals who aspire to own homes through mortgage financing, some government institutions and/or agencies also have their aspirations of what to get from the mortgage market in the new year. One of such agencies is the Financial Systems Strategy (FSS2020).

FSS2020 is Federal Government’s financial think-tank for Vision 2020 when Nigeria dreams to join the 20 largest economies of the world. It aspires to see a mortgage market in the country that would have, by 2020, provided access to housing finance to over 30 percent of Nigerians in all social classes in urban centres to own their own houses.

FSS2020’s vision is to have one of the safest, highest homeownership rates and most profitable mortgage markets among the emerging economies, while its mission is to use mortgage market as a major agent of positive social and economic change by making mortgage finance available and affordable to all classes of Nigerians.

In line with this, FSS also aspires to have 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 capitalisation of equities.

Oluwatoyin Jokosenumi, FSS2020 deputy director at the Central Bank of Nigeria (CBN), who disclosed this at a mortgage bankers’ conference in Lagos, added that their mortgage market growth strategy foresees a market that would account for 15 percent of the gross domestic product of the country.

Speaking on the topic ‘Secondary Mortgage Market for Effective Financing of Affordable Housing in Nigeria: The Role of Federal Mortgage Bank of Nigeria (FMBN)’, Jokosenumi envisaged a mortgage market that would stimulate construction activities with attendant multipliers, and provide up to 10 percent of the population with jobs.

He pointed out, however, that for market to witness this change, there must be some paradigm shifts, explaining that access to housing finance should grow from present level of 0.5 percent to 30 percent over the next 10 years, which is what both NMRC and PMBs are supposed to provide.

On his part, Taba Peterside, general manager, Listings Sales & Retention, Nigerian Stock Exchange (NSE), noted that despite the present challenges, the Nigerian mortgage market has huge opportunities and bright growth outlook.

Peterside, who spoke on ‘The New Capital Base as a Catalyst for Mortgage Banking Growth: The Role of the Nigerian Stock Exchange’, noted that, like other emerging economies, the increase in housing requirements in Nigeria is driven by economic expansion, growing population and urbanisation of major cities.

“PMBs could grow beyond the issues of inadequate funding, as well as harness the huge opportunities in the industry through listing,” he said, pointing out that growth outlook for the sector could be seen in the impending take-off of the NMRC; N56 trillion financing requirement, and Nigeria’s population of over 160 million people.

By: Chuka Uroko