The Nigerian Govt. and the Duplication of Mortgage Financing, By Yushau Shuaib

In a season of politics, anything happens even
on the economic front. Recently President
Goodluck Ebele Jonathan launched the long-
awaited Mortgage Refinance Company which
was mooted and proposed by the Central Bank
of Nigeria sometimes in 2009.
While there is an existing Federal Mortgage
Bank of Nigeria (FMBN) which promotes the
growth of viable primary mortgage institutions
in Nigeria, the idea behind the Mortgage
Refinance Company (MRC) is said to provide
the long term liquidity to afford more
Nigerians to access funds to pay for their
houses.
At the 9th annual retreat for chief executive
officers (CEOs) of Primary Mortgage
Institutions (PMIs) which was held in Abuja in
December 2009, the CBN Governor, Sanusi
Lamido Sanusi, acknowledged that the
Mortgage Refinance/Liquidity Company (MRC)
had been proposed as part of the reforms of
the housing finance sub-sector, as a Special
Purpose Vehicle (SPY) to re-vitalize the sub-
sector. He told the participants at the Retreat
that the dearth of long term deposits coupled
with low level of capitalization of the PMIs
were key militating factors in the drive to
consistently finance long-term loans on a
sustainable basis for average Nigerians.
By January 2010 the CBN and operators of
PMIs, had commenced work on the modalities
for the establishment of the proposed
Mortgage Refinance (MRC). Meetings were
subsequently held between the CBN and
Mortgage Banking Association of Nigeria
(MBAN) to discuss modalities for the
establishment of the MRC. Between 2011 and
2012 several meetings were held with the
modalities towards the establishment of the
project.
In February 2013, CBN posted on its website a
38-page document titled: “Regulatory and
Supervisory Framework for the Operation of a
Mortgage Refinance Company” to unveil a
draft framework on the proposed company
which was part of efforts to enhance liquidity
in the mortgage sub-sector.
The apex bank therefore prescribed basic
regulatory requirements for the MRC’s
principal line of business of refinancing credits
to borrowers for the security of residential
mortgage assets and other qualified
collaterals. This writer just wonder what would
now differentiate NMRC from FMBN which has
over the years been linking the capital market
with the housing industry by establishing and
operating a viable secondary mortgage market
to support the primary mortgage market.
In January 2014 while announcing the
establishment of the company, which is now
rechristened Nigeria Mortgage Refinance
Company (NMRC), President Goodluck Jonathan
said the housing sector is an avenue for job
creation and economic stability hence his
administration’s focus on the sector. He added
that the effort of the World Bank through the
$300 million loan would be supplemented by
those from private investors.
The new company according to its promoters is
a public-private partnership which will help to
deepen the Nigerian Mortgage Market and
make housing more affordable to low-income
earners at low-interest rate. It is being
implemented as a component of the Nigeria
Housing Finance Programme towards resolving
access to affordable housing finance. On the
other hand the existing FMBN is mandated by
law to service the need of housing delivery in
all parts of Nigeria by mobilizing both domestic
and offshore funds into the housing sector.
In addition to the pledge of the World Bank to
provide the soft International development
Association (IDA) loan at a zero interest rate
and 40-year tenure to the new NMRC, a large
chunk of the pension funds would also be
invested in the housing sector.
While one may be concerned about likely
duplication of functions between the existing
Federal Mortgage Bank of Nigeria (FMBN) and
the new Nigeria Mortgage Refinance Company,
the government should ensure that it creates
an enabling environment for accessibility to
legitimate lands, provision of infrastructure
and reduction in the cost of housing delivery. One would have expected that the new
mortgage scheme, if necessary should be able
to guard against money laundering, especially
the unwholesome practices of cash deposits for
purchase of houses. It is public knowledge that
currently the major beneficiaries of the
mortgage financing are the estate developers
who milk their customers dry with exorbitant
cost of houses. The outrageous prices leave
most of the estates unoccupied, some for
years, especially in highbrow areas of big cities
like Abuja, Lagos, Port-Harcourt, Enugu
among others. In fact in Abuja 70 percent of
exotic houses and mansions in Abuja for
instance have not been occupied for years.
The existing mortgage financing only cater for
financial institutions and developers who annex
available mortgage resources in building homes
of speculative value rather than the reality on
the ground. Meanwhile patrons of some of the
developers and owners of big estates do not
secure loans to acquire the properties but pay
cash for the acquisition as investment like
whose value may appreciate with utilisation. A
mortgage finance system that is not accessible
to individual and needy borrowers doesn’t
worth its existence.
The unfathomable sky rocketing real estate
prices in some cities are largely promoted by
money launderers who launder slush funds in
the property market. It is open secret that
fraudsters too no longer hide their loots in
banks because of the stringent financial
regulations over huge lodgement and transfer
of money.
Rather than establishing more companies and
agencies to address housing deficit, it may not
be out of place if government, in addition,
impose and administer property tax on
expensive houses that are scattered in big
cities and yet unoccupied for too long.
Introducing property tax will be in line with
global best practices to affect the affluent in
the society who deprive ordinary citizens of
spaces for decent accommodations.
Any mortgage scheme that could not afford an
average Nigerian to have an affordable and
decent house within a short period may not be
necessary because the rich and politicians know
have to have their ways with the so-called
mortgage financing in Nigeria.

Mr. Shuaib wrote in from Finance Estate,
Wuye, Abuja. You can provide feedback to him
via yashuaib@yahoo.com