$300M MORTGAGE FUND: Experts warn against diversion, politicisation

Nigerians, especially stakeholders in the housing and mortgage sector received with joy the news concerning the approval of a loan of $300 million (about N48.6 billion) from the International Development Association, IDA, to boost mortgage refinancing in the country. However, some experts have warned against diversion of the fund and the use of political consideration in its disbursement. DAYO AYEYEMI, reports

It was a cheery news for stakeholders in the housing sector at the weekend when the Federal Government announced the approval of a loan of $300 million (about N48.6 billion) to be accessed from the International Development Association, IDA, to boost mortgage refinancing in the country.

FEC, had last week, approved a loan of $300 million (about N48.6 billion) to be accessed from the International Development Association, IDA, to boost mortgage refinancing in the country. The loan would be accessed at a zero per cent interest rate with 0.75 per cent service charge.

The approval followed a memo brought to the FEC meeting by the Minister of Finance, Dr. Ngozi Okonjo-Iweala. Minister of State for Finance, Mr Yerima Ngama said the objective of the Nigeria housing finance project was to increase access to housing finance by deepening the primary and secondary mortgage market in the country.

According to him, the housing demand in the country has expanded rapidly due to current urbanisation trends and the estimated demand annually is about 700,000 units, which is far above the current production level of below 100,000 units.

He added that FEC approved the access of the $300 million loan from the international development association as a soft borrowing for developing countries from the World Bank. The minister explained that the funds were coming at IDA terms, which specified the repayment period for the mortgage finance institution at 40 years while it would also attract zero interest, adding, however, that there would be commitment fee of 0.5 percent and service charge of 0.75 per cent.

He said, “The facility is going to be used to meet government’s objective in the proposed housing finance project. “The Nigeria housing finance project is aimed at increasing access to housing finance through primary as well as secondary mortgage market in Nigeria. “Right now we only have primary mortgage institutions. So we are going to establish a mortgage refinance company that will benefit from this.”

Ngama said that $250 million would be devoted to the establishment of the mortgage refinance company while the remaining money would also be used for three other companies for the Nigeria housing finance project.

The minister disclosed that the establishment of mortgage guarantee product targeted at the lower income borrower would gulp $25 million which would enable people who otherwise could not provide adequate collateral to access loans.

However, no sooner the announcement was made than the housing experts began to raise fears over the disbursement and administration of the loan, warning against diversion and political affiliation.

Describing the loan’s approval as a right step in the right direction, the experts maintained that the money should be disbursed to critical areas it is meant for and not to be diverted for any other purpose.

When National Mirror spoke with some of the housing sector professionals, some of them expressed positive reactions about the approval of the loan, but still canvassing more money for the sector to boost mortgage financing and home ownership among Nigerians.

Speaking, Chairman of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Lagos Chapter, Mr. Stephen Jagun, warned against diversion and consideration for political affiliation when disbursing of the fund.

He wants the authorities to look at the critical area where the money is needed and invests it there, adding that the loan should be given out to the beneficiary mortgage banks at a single digit interest. Lagos based estate surveying and valuation practitioner, Mr. Akin Olawore, described the approval of the loan from the World Bank as a right step, but said the nation still need more fund accelerate mortgage and housing finance.

He explained that the $300 million, which is about N48.6 billion from the World Bank for mortgage refinance can only take care of 10,000 housing units when compared with the nation’s housing deficit of 17 million units. He canvassed for more funding options to boost housing finance and development in the country.

Olawore, who is the Principal Partner of Akin Olawore and Associates, is of the opinion that the nation does not even need to look outside its shore for funds to finance mortgage and housing production when unclaimed dividends and dormant account balances running to billions of naira are lying fallow in various banks in the country.

He said, “Do we need to borrow the money? We have unclaimed dividends and dormant account balances that we can generate the money from and pay interest.” He urged government on political will to jumpstart the process of harnessing money from unclaimed dividends and dormant account balances for housing and mortgage financing in the country.

“The nation’s secondary mortgage must be capitalised to move this sector forward,” he said. Speaking with National Mirror at the weekend, President of Mortgage Bank Association of Nigeria (MBAN), Mr. Femi Johnson, explained how his group has been working assiduously towards the grant of the loan.

He said, ‘We at MBAN worked for the loan. We have begun the process since 2009; the Federal Government is only guarantee the loan because we need government to guarantee such loan from the World Bank.

We have been making presentation about the money to the World Bank since 2009 and with the approval of the loan, which is $300 million, we will do something with it. This is just the beginning, it is just a start and it is not only the money that will go into the Mortgage Refinance Company.

Others are coming.’ He described the approval of the money as a right step in the right direction, explaining that the fund is not meant for individual to access but to be put in refinance company for mortgage banks to access by offloading their mortgages to the former and access and move on.

‘The mortgage bank will package mortgages from people and sell to MRC and get money to move on to finance other mortgages. It is a refinance facility,’ he said. According to the MBAN boss, NMRC is different from the Federal Mortgage Bank of Nigeria, FMBN, in the sense that the latter is government owned while NMRC is private driven.

He said, “FMBN gets its money from contributions to the National Housing Fund and it has been able to generate N110 billion in 35 years. NMRC is private driven.’

Lending credence to the approval of the fund, Managing Director of Resort Savings Limited, Mr. Abimbola Olayinka, said, ´it is a good thing that the fund is coming to the mortgage sector for housing development.

The money is not enough but it is a right step in the right direction.” He explained that the fund is going to be administered through the MRC. Meanwhile, the establishment MRC, by the Federal Government has been described as unnecessary by a real estate expert, Chief Kola Akomolede. Akomolede who is the Chairman of Faculty of Housing, Nigerian Institution of Estate Surveyors and Valuers (NIESV), while speaking with National Mirror, said what the housing sector and Nigerians need is virile mortgage sector that would guarantee easy access to mortgage loans on long-term basis for would-be home owners.

He said, “My take on that is that it is unnecessary because you have a mortgage bank on ground that you have not funded. How many people have access to take loan from mortgage bank? Is that mortgage bank complaining that people are defaulting?”

“You see, when you have a Re, it is to protect the primary. For example, you have the Nigeria Insurance Deposit Company, NIDC and Nigerian Reinsurance Company to insure what insurance companies have done, but in Nigerian, we have not even had a reflective mortgage.”

NMRC, a housing financial intermediation vehicle, is the new interest by the Federal authorities to provide long term funds needed to boost the mortgage sector and allow for increase in affordable housing and homeownership to Nigerians. Right now, Akomolede explained that what the people need is the strengthening of the existing mortgage bank to be able to give money to Primary Mortgage Banks for on-lending to the people.

He said, “This is more important than setting up another mortgage fund. It is another way of creating jobs for people. Government should make sure the FMBN is strengthened to be able to perform the function it was set up to do, to give money to people to build houses.”

Already, he noted that the nation’s existing mortgage banks were underfunded, saying they are not complaining of defaulting that would warrant the floating of NMRC. He said, “It is only when banks are complaining of people defaulting on loans that necessitates mortgage refinance.”

Akomolede explained further that the Mortgage Finance Act, which was enacted during the Babangida regime made provisions for how to make money available to the nation’s apex mortgage bank.

According to the Act, he noted that five percent of all workers, allocation from each state and local governments should be contributed to the fund. Despite the provisions of the Act, he noted that none of the institutions has been faithful in its contribution.

“First, five percent of all workers, secondly allocation from each state and local governments should be contributed. Are they contributing this? How much is Federal Government giving to mortgage bank every year,” he stated. On the way out, Akomolede maintained that the Federal government should allocate money to the Federal Mortgage Bank of Nigeria every year for on-lending just the way it allocates money to road, health and education sectors.

He said, “Let government allocate money to housing for onlending to people. Let government allocate N200 billion for housing before it gives the fund for 10 years, it would not have reason to give money again because the money would become a revolving fund.

“Then, government can set up a refinance scheme so that if anything goes wrong with mortgage, it will take over. “Again, when we have the Federal Government allocating money to housing the way it does to other sectors; it is the money giving the housing sector that comes back. We are not saying give money to people to build for free, unlike the money it spent on road and education that has refused to come back. If it gives money to housing, the money comes back; people will get it as a form of loan and pay back over the years.”

He observed that no government has ever taken housing seriously in the country, maintaining that people in government did not consider it important “whereas on our individual level, housing is very important because you live in the house, poor allocation to housing has been the bane.”

Akomolede urged re-orientation of the people in government to take housing as important just the way they see education and health. Housing is the second most important need for human survival and development.

The provision of adequate housing that is safe, secure, accessible, affordable and sanitary is a fundamental human right, as enshrined in the United Nations Habitat Agenda – the global call on human settlements. In fact, section 16 (1) (d) of the 1999 Constitution under the Fundamental Objectives and Directive Principles of State Policy is categorical on the exigency of the state to provide adequate shelter for its citizenry.

Realising this fact, successive governments in Nigeria have, one time or the other, put together various programmes to ensure the provision of affordable housing to citizens. But high cost of these houses coupled with lack of affordable mortgage has been a major obstacle.

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