The huge investment interest which Nigeria enjoys from both local and foreign investors derives from the country’s large population which, to an average investor, translates into market for products and services.
Despite the lull in the property market, investors are still very optimistic, doing developments because besides the numbers which are quite encouraging, the demographics and consumer finances are right.
But it is a different kettle of fish for the mortgage system in the country which is in endless search for growth amid a large market, a huge housing deficit that is over 20 million units and a huge and growing population that is over 200 million.
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 in itself a ‘huge’ market, but one in search of growth, having remained a fledgling despite the potential that could engender growth.
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 in the country given the frustration among those who have dared to seek mortgage facility to build or buy homes.
Owning a home is still a dream for many Nigerians despite a recent revelation by mortgage industry operators that the size of the mortgage market has grown by about 48 percent to N518.76 billion as at 2016, up from N284 billion in 2010. This is a hoax because, if growth still means increase in size or height, it would be difficult not to see or feel the impact of the growth.
For Nigeria’s 200 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 (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) have been left wallowing in the dark. The Federal Mortgage Bank of Nigeria (FMBN) which supervises the operations of the fund once disclosed that it has, in its books, a huge loan repayment default on NHF and Estate Development Loan (EDL) taken by PMBs and real estate developers.
The loan, explained, comprised 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 alleged then that some PMBs which obtained funds for mortgage finances, for on-lending to qualified NHF contributors, failed to disburse the funds to the applicants. That compelled them to call the Economic and Financial Crimes Commission (EFCC) to wade into the debts owed it, especially misappropriated contributory funds under NHF.
When this is placed side-by-side with a recent report on the PMBs inability to pay their premium, it becomes very difficult to understand where the growth in the size of the market has really taken place.
The inability of the 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 for trouble.
The Nigeria Deposit Insurance Commission (NDIC), the insurer, said then that its capacity to sustain efforts at ensuring that insured institutions were put on the part of sustainable growth and development depended largely on the premium contribution, which is an amount paid periodically by the mortgage banks for covering their risk.
NDIC was quoted as saying then that the inability of as many as 15 PMBs to pay the insurance premium as at December 2016 was an unfortunate situation capable of putting customers at higher 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 in 2015 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 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 capitalisation 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.
Chuka Uroko
