When mortgage industry operators disclosed to a large gathering of professionals and sundry stakeholders at a real estate event in Abuja that the size of the mortgage market has, in the past six years, grown about 48 percent to N518.76 billion, up from N284 billion in 2010, the immediate reaction was that of doubt.
It was hard to believe and ever since that time the revelation has become a matter of debate. Nigerians are still stuck with challenges of clarity, accessibility and affordability which have conspired to create a wall between them and mortgage facility which they can use to either build or buy homes.
Because of these difficulties, which are real, owning a home remains a big dream for many Nigerians despite the growth claimed.
Nigeria is one country where things that cannot be measured by any verifiable means are often said to have improved or grown. Mortgage, as an aspect of the financial system, is a ‘huge’ market, but one in search of growth having remained a fledgling despite its potential which could engender growth.
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Though it could be argued that growth can happen without development, it is difficult, in the case of the mortgage market in Nigeria, that there is any form of growth not to talk of development.
It requires great effort and extra-ordinary reasoning to convince anybody that there has `really been a shift from point A to point B in the mortgage market operations in the country given the frustration among those who have dared to seek mortgage facility to build or buy homes.
For Nigeria’s 170 million people, there are only 13.7million housing units and 11.5 million units out of this number are rented while only 5 percent of the entire stock is currently financed with a mortgage, meaning that 95 percent of this stock is self-built.
Following the central bank of Nigeria’s (CBN) revised operational guidelines, the primary mortgage banks (PMBs) were recapitalized, raising their capital base from the statutory N100 million to N2.5 billion for those operating regionally and N5 billion for those licensed to operate nationally. This apparently created relative liquidity in the industry.
But, in spite of this, many home seekers that applied for home finance through the National Housing Fund (NHF) are not getting loans. The Federal Mortgage Bank of Nigeria (FMBN) which supervises the operations of the fund explained recently that it has in its books a loan repayment default on NHF and Estate Development Loan (EDL) taken by PMBs and real estate developers.
The loan, it disclosed, comprises unremitted equity contributions collected by the PMBs from the housing loan seekers who applied for NHF, and also loans granted to estate developers through its estate development loan scheme.
The management of the apex mortgage bank once disclosed that some PMBs which obtained funds for mortgage finances, for on-lending to qualified NHF contributors, failed to disburse the funds to the applicants
Some of the PMBs are having serious challenges such that at a time, it was reported that some of them were unable to pay their premium. This is also part of the challenges that has made it very difficult to understand where the growth in the size of the market has really taken place.
The inability of some PMBs to pay their premium is critical as each depositor in a mortgage bank is only insured to the tune of N500,000, meaning that in the event of collapse of the sector, customers would be in trouble.
According to the Nigeria Deposit Insurance Commission (NDIC), its capacity to sustain efforts at ensuring that insured institutions are put on the part of sustainable growth and development depends largely on the premium contribution, which is an amount paid periodically by the mortgage banks for covering their risk.
The housing market has seen a contraction in access following a 31.8 percent decline in loans and advances from the PMBs. The loans and advances extended by these PMBs declined significantly by 31.87 percent to N168.96 billion while unpaid premium from nine of these banks amounted to N238.30 million the same year.
Though operators have attributed these developments to the economic downturn which has, in the past 18-24 months, been the bane of most businesses and the economy at large, it does not change the fact that mortgage as an easy road to homeownership is still a fledgling in this country.
Some of the operators have, painfully though, explained what they call the true position of the NHF and EDL loan default, saying, “some of the loans to PMBs were given some five to six years ago when membership of the mortgage banking association (MBAN) was over 80 PMBs. Now we are less than 40 as many that could not scale the capitalization huddle either merged, were acquired or changed operations.
“It is possible that much of the debt we are talking about resides with mortgage banks that are no longer mortgage banks in the real sense of the word; and you cannot, because of that, say the genuine ones that are doing their legitimate business are defaulting in loans they never took”, they added.
