Written by Chukwuma Okparaocha, Lagos Monday, 17 September 2012
With a population of about 150 million, Nigeria has been identified as the largest market in Africa for multivarious projects including the housing sector development.
Unfortunately, recent reports have it that there is a massive housing deficit of about 16 million units which would require close to N45 trillion to fix.
Nigeria, like the rest of the world, has put some platforms in place with the sole aim of facilitating the housing needs its citizens, thereby closing the existing gap between those who have houses and those who don’t.
Some of such platforms include: the creation of Primary Mortgage Institutions (PMIs); under the supervision of the apex mortgage bank in the country – the Federal Mortgage Bank of Nigeria (FMBN); the National Housing Fund (NHF) policy; the Ministry of Housing; Federal Housing Authority (FHA); various housing corporations across all the states of the federation, as well as relevant activities of diverse civil, public and private bodies, among others.
It is noteworthy to state that the Federal Government, through the Ministry of Housing and Urban Development, has made some moves to bridge the mass housing gap in the country through various means such as the Cooperative Housing Scheme which was launched last December for low income earners in the informal sector of the economy, the ongoing Social Housing Scheme designed specifically for civil servants, compliments partnership with various private bodies to provide low income housing for Nigerians.
Recently, the Managing Director of the Federal Housing Authority, Arc Terver Gemade, disclosed that six new housing estates had been completed in Osogbo, Osun State, Odukpani, Cross River State, Gombe, Gombe State, Goningora, Kaduna State, Abesan, Lagos State and Makurdi, Benue State.
All these and many more are some of the moves the government has made in its drive to provide housing units for the citizenry.
What is mortgage?
It has been described as a loan to finance the purchase of real estate, usually with specified payment periods and interest rates.
The borrower (mortgagor) gives the lender (mortgagee) a lien on the property as collateral for the loan.
However, mortgage financing which is one of the most recognised ways of providing fund for the provision of housing has not recorded the patronage of majority of Nigerians as it should, while many who know about various mortgage offerings have somehow developed apathy towards it.
For instance, Mr Akin Adeleye, a former banker, disclosed to Tribune Business that the condition that surrounded the mortgage offering he had opted for when he wanted to build his house were just too stringent for him to meet, therefore, he had to resort to saving part of his salary to build his house.
Importance of mortgage financing
In a chat with Tribune Business, the FMBN Zonal Coordinator (Ibadan Zonal axis), Engr. Y. Yinus, noted that “Mortgage is the solution to many of the housing needs faced in the country. If one obtains a mortgage of N3 or N4m to buy a piece of property, paying back could take up to 20-30 years. If you look at it critically, you will discover that the amount paid for the mortgage obtained will be almost the same amount an individual would have paid as annual rents over the same period. For instance, after paying up the mortgage for a property for a period of 20 years, that property eventually becomes yours, whereas you could pay the same amount as rent over the same period for another person’s property. Therefore, in the long run it pays to go for mortgage rather than just paying rents.
However, snippets from diverse reports and studies, gathered by Tribune Business, indicate that PMIs, which have the sole responsibility of providing mortgages for the citizens of the country, have not attained this height, as million of Nigerians would rather build houses using other means.
Many experts in the nation’s housing sector have, severally, been lamenting the near unavailability of mortgages for the construction of houses, a situation they claim have significantly contributed to the huge housing deficit in the country.
“Lack of affordable houses stem from unavailability of mortgagees to finance purchases including lack of long term funding for mortgage lenders, difficulties faced by buyers in registering a mortgage or title transfer and difficulties in foreclosure on a property when a borrower defaults, among other reasons,” said Mr Sesan Edwards, a Lagos-based estate surveyor and valuer.
There have also been clamours in various quarters that many PMIs in the country have failed in their primary responsibility. Only recently, the Central Bank of Nigeria (CBN) began a clampdown on Mortgage Banks which were deemed to have ceased to carry on mortgage business for which they were licensed for a continuous period of six months, a development which contravened Section 12 of the Banks and Other Financial Institutions Act of 1991 and Section 20 (iii) of the Guidelines for Primary Mortgage Institutions in Nigeria. By the time the exercise was over, 25 PMIs had fallen under the hammer of CBN.
The development came on the heels of new regulatory guidelines for PMIs aimed at recapitalising and repositioning them as specialised banks through the Other Financial Institutions Supervision Department (OFID) of the CBN. Under the new capital requirement, state and national PMIs would shore up their shareholders fund to the tune of N2.5 billion and N5 billion respectively, with compliance deadline fixed as April 2013.
Interestingly, official estimates show that about 65 PMIs were in operation before the recent withdrawal of licences, which might have further dipped the number of operators to about 40 banks. But operators had insisted that the figures were lower than that. About 292 PMIs were licensed between 1990 and 1998.
FMBN’s role in financing PMIs
Based on information gathered, the Federal Mortgage Bank of Nigeria (FMBN) had so far disbursed loans worth N121.2 billion to mortgage banks and estate developers between 1992 and February 2011.
According to the bank’s Managing Director, Mr. Gimba Ya’u Kumo, who made this known recently, the sum of N50.7 billion was approved as National Housing Fund (NHF) loans for Primary Mortgage institutions (PMIs), while N70.4 billion Estate Development Loans (EDL) were given to developers.
Ya’u Kumo declared that the bank had also disbursed N24.8 billion to16, 469 NHF contributors for the construction of 16,469 houses through PMIs, while N36.7 billion was disbursed as EDL to estate developers.
Also, recent statistics released by the CBN showed that loan and advances in the sector between 2008, 2009 and 2010 are N108, 531,488, N121, 290, 217 and N124, 165,992 respectively; deposits for the same period are N166, 234,932, N151, 112, 301 and N168, 577, 083 respectively while shareholders funds were N70, 345,140, N86, 614,813 and N80.341, 095 between 1992 and 2011 respectively.
But despite all the loans given through the apex mortgage body in the country – FMBN – the impact of such has been seen as a mere drop in the ocean as far as housing loans provision is concerned, as millions of Nigerians are still battling to be proud owners of decent houses.
In his own opinion, the Chairman of the Nigerian Institution of Estate Surveyors and Valuers (NIESV) Lagos State Chapter, Mr Olusola Fatoki, who was not impressed with the activities of FMBN and PMIs, disclosed, that “the Federal Mortgage Bank is not doing much, primary mortgage institutions have not done much, therefore, there must be a political will to make them do what they are supposed to do. There are so many funds, such as the National Housing Fund, Pension fund, and others which can be used , but corruption, as we all know, is a major problem in Nigeria. If these funds were made available by all mortgage institutions in charge of them, and the procedures for doing so will not be too hard for people to meet, people will be able to access such funds and build their houses. So if all these problems enumerated can be truly tackled, then a lot of Nigerians will have shelter.”
According to a mortgage expert, Moses Ogundana, the majority of mortgage banks in the country are not really operating core mortgage banking as some of them push various products that have no link with housing into the market.
“A look into the activities of mortgage banks in the country will shock most Nigerians as they prefer to do what commercial banks in the country do and jettisoned their primary duty of mortgage financing. Even when the Federal Mortgage Banks (FMBN) gave them authority as collectors of National Housing Funds (NHF) some of them still prefer to delve further into commercial banking.
In his own opinion, a former National Secretary of the Nigerian Institution of Estate Surveyors and Valuers, Mr Kola Akomolede noted that because of the capital intensive nature of building or owning a property, it is not often that an individual could muster the savings from his legal income to buy or build a house, saying, “in the civilized world nobody expects you to pay fully at once to buy a house,” he said.
FMBN: Nigerians’ apathy remains a challenge