Pension contributors to access mortgage homes Q2 2016

A bulk of Nigerian workers are likely to become free of the yoke of house rents, as well as attain a higher standard of living, starting in the second quarter of 2016.

This comes as Nigerian employees under the Contributory Pension Scheme (CPS) will have opportunity to access mortgage homes with a part of their pension accumulations by the second quarter of 2016, a reliable source in the industry told BusinessDay at the weekend.

This timetable is emanating from high level discussions between the industry regulators, the National Pension Commission (PenCom), pension operators and primary mortgage providers, the source revealed.

But Chinelo Anohu-Amazu, director-general, PenCom, who spoke during a sensitisation workshop for Pension Reform Act (PRA) 2014 in Kaduna, said the PRA 2014 has introduced a provision that allows contributors seeking to own their primary homes to apply part of their Retirement Savings Account (RSA) balances as equity contribution for residential mortgages, subject to the Guidelines issued by the Commission.

“I am pleased to inform that we are on the verge of concluding these guidelines, having discussed extensively with all stakeholders, including experts in the mortgage industry”.

Anohu-Amazu said once the implementation commences, “it is our expectation that this would facilitate access to home ownership by pension contributors, while also bridging the housing deficit in Nigeria.”

Nigeria’s housing sector gap, put at 17 million, which has remained a major challenge for government and the private sector, would be reduced if the provision in the Pension Reform Law 2014 on utilisation of pension funds for residential mortgage becomes a reality, says Rukayat Dikko, a pension operator.

This would be a major breakthrough for Nigerian workers and pension contributors who have long desired quality housing for themselves and their families, but have been unable to attain it, due to economic hardship and failed government policies, she said.

Nigerian workers participating in the Contributory Pension Scheme (CPS) would therefore be looking forward, beginning from the new year, to policies and regulations from the industry regulator, the National Pension Commission (PenCom) and other support partners in the mortgage industry, on implementation framework that would enable utilisation of a part of the contributors balance in the Retirement Savings Account (RSA) for equity contribution towards accessing mortgage.

Organisations that were yet to comply or State Governments that were yet to adopt the scheme, would find a compelling reason to join up and employees themselves would become more interested, and push for their inclusion by their employers.

This would impact on the growth of the scheme, more income for pension operators, increased contribution to GDP and more investible long term funds for the economy.

As at the end of November 2015, the nation’s pension industry, according to figures released by the National Pension Commission, has grown to N5.7 trillion in investible asset, while registered contributors stood at 6.8 million.

According to the Commission, payment of pensions under the CPS has been prompt and consistent since 2007, from about N2 trillion in pension deficit under the defunct defined benefits scheme as at 2004 to over N5.7 trillion pension assets.

Analysts forecasts indicate that pension assets will surpass the 21-29 percent growth range experienced between 2010 to 2013 to about 30 percent in 2014 to N5.28 trillion.

“We are even more bullish on 2015 when we expect year-on-year growth of 31 percent to N6.9 trillion, as our forecast is premised on the increase in pension fund contributions by 300 basis points”, a market analyst said.

Today, the pension industry has the largest pool of long term investible funds in Nigeria, it is the largest investor in the capital market, combined industry strength, and on the average contributes between 10 and 20 percent of free floating issued shares in the capital market.

Analysts say N25 trillion is needed to bridge the housing gap in Nigeria, which is estimated at 18 million units and growing by two million yearly, a report by Consolidated Discount House Limited said.

The  report said the mortgage market in Africa is relatively small, which has led to pent up demand that could serve as a major growth driver for housing on the continent. Nigeria, which is Africa’s largest economy, based on a recent rebasing, has struggled to deliver housing to the population because of the high prices of the homes in the market.

Across the continent, home financing has been largely accessible by mainly the upper class and the upper middle class. This can be traced in large part, to the preference of the mortgage lenders for mainly corporate clients, while individuals are left to access mortgage finance at exploitative rates. So, the use of pension funds to provide mortgage is opportunity for the Nigerian workers who are largely in the middle class, to access primary homes.

Modestus Anaesoronye