• Monday, May 20, 2024
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BusinessDay

The $300m mortgage boost

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When President Goodluck Jonathan announced early this year in Lagos that the Federal Government had perfected plans to establish a mortgage refinance company (MRC) with $300 million seed capital coming from the World Bank, many dismissed it as just another stunt from an insensitive and inept political leadership.

The President spoke at the dedication of the first five million square metres of land reclaimed from the sea for the Eko Atlantic City project.

In keeping to the timeline for the implementation of the initiative, the Central Bank of Nigeria (CBN) has, within the first quarter of this year, issued its regulatory framework. It is hoped that by the last quarter of this year, its operation will commence with the refinancing of existing mortgage loans.

The programme is desirable given the country’s huge housing statistics which show over 16 million housing demand-supply gap; 10 percent home-ownership level, and over 90 percent of the available housing stock, estimated at 10.8 million, being self-built from own savings.

With the $300 million for a refinancing company that will be private sector-led, we see hope not just for the fledgling mortgage industry, but also for individual home-seekers for whom high interest rate on mortgage loans has been a big gulf separating them from home-ownership. 

In his presentation at a housing finance forum in Lagos recently, Sonnie Ayere, CEO, Dunn Loren Merrifield, and task manager, Federal Ministry of Finance, World Bank and International Finance Corporation (IFC), gave insights into the operations of MRC.

He said the successful implementation of the programme would reduce the funding cost and improve affordability of residential mortgages; set a growth process in motion that will deliver up to 75,000 homes per annum, generate and sustain, at least, 300,000 direct, and 488,000 indirect jobs.

“As a public private sector initiative that will intermediate between long term deposits and short term funds, we share the belief of its promoters that it will serve its purpose”, Ayere said. 

The composition of its share holders which include the Federal Government, International Other Finance Institutions (IFOs) like IFC, Shelter Afrique etc; Nigerian banks, primary mortgage banks (PMBs), and equity investors also, instills hope in us.

What is needed now is for the promoters to borrow a leaf from other parts of the world where this initiative has worked and still working.

Here in Africa, the Egyptian Mortgage Refinance Company (EMRC) was incorporated in 2006 with a paid up capital of EGP 241 million, about $35 million, aimed at providing long term finance to primary mortgage lenders and issuing bonds in the capital markets.

Its shareholding structure shows a strong leaning on the private sector which contributed 60 percent equity, the public sector 40 percent while IFC contributed 7.9 percent.

The shareholders are the Central Bank of Egypt National Finance Guarantee and Subsidy Fund, International Finance Company, and other lending institutions.

Similarly, in Jordan, Middle East, the Jordan Mortgage Refinance Company was established in 1996 with a paid up capital of JD5 million, about $7 million.

It is noteworthy that in each of these cases, tremendous achievements in their housing sector have been recorded; giving us the confidence that Nigeria can rewrite its housing story for good if only the will and commitment are applied to the initiative.

With a conservative estimate of N5 million for a two-bedroom bungalow, over 80 percent of Nigeria’s housing problem will be solved when $300 million is there for primary mortgage lenders to draw from for onward lending to home loan applicants.