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COVID-19: Lenders worry over mortgage loan defaults as economy weakens

Like many others, the mortgage industry in Nigeria is at the receiving end of the ravaging impact of the coronavirus pandemic which has weakened the country’s economy and squeezing lenders.

The lenders are worried that the virus is taking toll on household and national economy, meaning that nobody is thinking of taking up mortgage while the capacity of those who have already  taken is being eroded by governments policy measures put in place to curtail  the spread of the disease.

“Yes, we see loan repayment default. Coronavirus  is a global problem that is affecting everybody. Now it has moved from being a financial to an economic crisis. What we have at hand is a health crisis. People are now more concerned about their survival than anything else,” Niyi Akinlusi, CEO, Trustbond Mortgage Bank, explained to BusinessDay.

Continuing, Akinlusi noted that “if people are not healthy, they cannot work and if they cannot work, they cannot earn income and don’t forget that mortgage is given to people based on their income.” He added that even those who are healthy cannot go out because of government’s sit-at-home order.

Clearly, coronavirus is a great threat to the economy given that people are no longer spending having been confined to their homes. “It is through spending that an economy grows,” Akinlusi  emphasized.

He is, however, optimistic that nations, including Nigeria, would come out of this scourge stronger and better having learnt a couple of lessons. He hopes too that after the crisis there will be increased demand for housing, noting that, at the moment, not many people have good houses and easy access to water.

The worry in the mortgage industry is also palpable in the housing sector where developers are concerned about their sector in particular and the economy in general.

“My major concern is the well-being of every citizen and that we are all safe. As a CEO and an investor, I am concerned about what comes after the pandemic. I am also concerned about what  would be the state of the economy and  how it will  affect our business?” Olawale Ayilara, the Founder and Chief Executive Officer of LandWey Investment, said.

Ayilara, who spoke in an interview with BusinessDay last weekend, wondered how businesses would recover from the pandemic.  He was not sure what measures government would put in place to ensure that investments and that of their clients are secure.

“But, more importantly, how can we innovate our business to ensure that the economic impact is minimal,” he queried, disclosing that, as a forward thinking and innovative company, they had earlier discussed the option of operating virtually.

“We had begun plans towards implementing that for Quarter 3. Really, what this pandemic did was to move up the timeline we initially set. We’ve also had to reschedule major organizational activities to support the efforts of the government in curbing the spread. At the moment, our employees are safely working from home, the business is fully operational and our virtual operations platform is active,” he said.

At a time like this when other investment asset classes, especially equities, don’t hold out much hope and promise ,  Ayilara advised yield-hungry investors to think real estate.

“Wise investors know that real estate is one of the most secure forms of investment because you can’t lose everything (provided you invested in properties with valid documents).  So, what better way to protect your wealth if not real estate?” he stated

He advises further that, in the immediate term, after the government has overcome this pandemic, it should consider public private partnership (PPP) options with real estate firms and work actively towards providing more affordable housing so that the country can get more people off the streets and reduce the risk of spreading any other virus like the Coronavirus.


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