Housing finance experts applaud World Bank’s $300m credit

Stakeholders in the housing sector have expressed optimism that activities will soon improve with the $300m World Bank mortgage credit facility to the country.

They said the loan, which will be used to finance the Nigerian Mortgage Company, would lead to a breakthrough in housing finance in the country.

The World Bank Board of Directors had on September 26 announced the approval of a $300m International Development Assistance credit facility to boost the country’s efforts at providing affordable mortgages for middle and lower income families.

According to the World Bank Country Director for Nigeria, Ms. Marie Francoise Marie-Nelly, the country’s financial system has quickly grown and is becoming increasingly integrated into the regional and global financial systems hence the need for the credit that will boost the nascent mortgage market and create jobs in the construction, housing improvement, finance and other sectors.

The 40-year credit with 10-year grace and 0.75 per cent interest rate will be in the custody of the newly established Nigerian Mortgage Company, an initiative of the Mortgage Banking Association of Nigeria in collaboration with the International Finance Corporation, the World Bank, Central Bank of Nigeria and Federal Ministry of Finance, to create liquidity for the mortgage sector.

We asked the immediate past President, MBAN, and Managing Director, Resort Savings and Loans Plc, Mr. Abimbola Olayinka, to find out more information on this possibly precarious stuation. He said the credit was a positive development in the housing sector, adding that the World Bank was ready to provide more funds whenever the need arose.

He said the NMC would be the custodian of the fund, while the mortgage banks could sell their existing mortgage portfolio to the company in order to raise liquidity.

Olayinka said, “The funds will not be distributed as it is being speculated. The NMC will be the custodian of the loan; it is supposed to be $275m, while $25m is for microfinance housing.

“If, for instance, as a mortgage bank operator, I have a mortgage portfolio of N1.2bn, excluding the National Housing Fund, I will need to rank my mortgages in terms of performance; the loans that are of good status, I can sell to the NMC and get liquidity.”

He added that the credit facility would go a long way in reducing some of the problems that the housing sector had been faced with.

“The key problem with the mortgage sector is that there is a dearth of long-term funds, but when there are funds that will be made available for five to 10 years, mortgage facilities will be available to those who need it,” he said.

The Controller, Federal Ministry of Lands, Housing and Urban Development, Mr. Temitope Onaeko, said the credit would provide the much needed funding, which had been lacking, for the housing sector.

He said, “There’s a lot of deficit of housing in the country and the problem has always been that of funding; the Federal Government has not been able to finance housing as it should, and if the World Bank has deemed it fit to give such an amount of money to the housing sector, it is a welcome development and will improve activities in the housing sector.

“The sum of $300m is a lot of money and I am sure it will go a long way; even if it is going to be used for mortgage transactions, it will still revolve round the housing sector, which is a great opportunity for all of us.”

The World Bank had said during the announcement in Washington, the United States, that the fund would support the country’s housing finance project, which is an integral part of the Federal Government’s Transformation Agenda.

The bank said the loan was designed to provide access to long-term financing for first time homeowners and new homeowners with lower family incomes, including people who are self-employed in the microfinance market segment.

It added that the fund would also support the establishment of a mortgage refinance company to be known as the Nigeria Mortgage Refinance Company that would generate long-term funds for home mortgages as well as establish a mortgage guarantee product targeted at lower income borrowers to guarantee some of the credit risk for the special group of lenders.

President Goodluck Jonathan had said early in the year that the NMRC, which will be a private-sector led initiative, would be able to access the capital markets to raise long-term mortgage funds.

He said the company would have partners, including local banks and mortgage institutions, while the World Bank would provide credits of $300m.

The President had said the NMRC would provide more liquidity to the housing and construction sectors with its operations aimed at reducing mortgage finance interest rates.

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