Understanding NMRC as vehicle for affordable homeownership

When the Federal Government on January 16,2014 launched the Nigerian Mortgage Refinance Company (NMRC) as a secondary mortgage market that will not only refinance mortgages to be originated by primary mortgage lenders (PMLs), but also as a vehicle for affordable homeownership for Nigerians, it passed like many other government functions, full of colours but lacking in substance and sincerity.

The apathy that greeted the launching of the company, perhaps, arose from the frustrating experience with the Federal Mortgage Bank of Nigeria (FMBN) and its baby, the National Housing Fund (NHF) which, decades after inauguration, remain a smokescreen, not seen and understood by many Nigerians.

Ngozi Okonjo Iweala, coordinating minister for the economy and minister of finance, said at the launch that  NMRC was expected to pull down lending rates for housing from the current spread of 20 to 23 percent to the low double digits or, at least, to a high single digit.

“This company is being set up to help lower the funding cost of mortgages and promote the affordability and availability of good housing to working Nigerians by providing mortgage lending banks increased access to liquidity and longer term funds in the market”, she assured.

This assurance, as convincing as it sounded, captured only a few audience and this explained the response to, and patronage of the company’s first tranche of 10,000 mortgages floated a few months ago.  Though the over 66,000 applications received in respect of the 10,000 mortgages was described as overwhelming by the promoters of the company, considering the size of the country’s population of 170 million, and a conservatively estimated housing deficit of 17 million units, 66,000 applications are just a drop in a mighty ocean, and this underscores the apathy to, or ignorance of the company or both.

NMRC is a Public Private Partnership arrangement between the Federal Government of Nigeria and private sector. It is being implemented as a component of the Nigeria Housing Finance Programme initiated by the Federal Ministry of Finance in collaboration with the Central Bank of Nigeria (CBN), Federal Ministry of Lands, Housing and Urban Development (FMLHUD), the World Bank and the International Finance Corporation (IFC).

Apart from ‘crashing’ interest rate on mortgage loans, NMRC is also expected to deliver about 750,000 homes annually, create an enabling environment for primary mortgage banks (PMBs) and other financial institutions to offer 15 to 20-year mortgages at affordable rates to Nigerians.

The company is a vehicle set up to bridge the funding cost of residential mortgages and promote the availability and affordability of good housing to working Nigerians by providing mortgage lending banks with increased access to liquidity and longer term funds in the mortgage market. It aims to resolve access to affordable housing finance, and importantly, act as a focal point for creating an enabling environment for housing finance by playing a strong developmental role in supporting the improvement of land and legal framework and housing development and construction.

This company will provide mortgage-lending institutions with access to long-term finance at an affordable interest rate, thereby enabling mortgages to be issued by these institutions to Nigerians, at longer tenors and affordable rates. The provision of mortgage loans at longer tenors will provide the average working Nigerian citizens an opportunity to buy a home and conveniently pay for it. In simple words, it is government inspired but a private sector-led effort to provide affordable housing for Nigerians through loans accessed from mortgage and commercial banks.

NMRC is planned to make significant contribution to affordable housing delivery. Expectation is  that the successful its implementation will increase the ability of the working Nigerian to buy a home by supporting the current housing demand with access to affordable finance through mortgage lending banks. Developers therefore, need to meet this cash demand for housing by building homes of real value and not of speculative value.

The World Bank, together with Federal and State governments as well as other partners, will continue to work on improving the enabling environment for private developers to operate and, according to the promoters, major steps have been taken to reposition the Federal Housing Authority (FHA) for this purpose.

With the introduction of NMRC, state governments are being encouraged to reduce the cost of housing delivery by making land easily available, ensuring timely provision of property titling, providing infrastructure, and reducing transaction costs.

Home-seeking Nigerians, especially first time home buyers, are encouraged to tap into the opportunities offered by this company in the understanding that this is the first time a co-owned institution is operating with a public private governance structure. All other institutions have either a fully private or public function.

NMRC is a private sector-led mortgage refinance institution, representing the first effective collaboration in the financial sector between the public sector, including  the states, the Ministries of Land, Justice, and Finance, the regulators, CBN & SEC, and the private sector  which includes financial institutions, bilateral and multilateral institutions, who are together addressing prevailing imperfections that limit access to finance, with all parties making meaningful contributions to the NMRC.

Chuka Uroko