At no time has the need for affordable mortgage in Nigeria been so deep and necessary as now when the country, like other nations of the world, is grappling with coronavirus and its devastating impact.
The federal government has, as part of efforts to curtail further spread of the deadly disease, has shutdown Lagos, Abuja and Ogun State and ordered their residents to stay-at-home to avoid contact with person or persons who may have contracted the disease.
Interestingly, the stay-at-home order has turned out to be an expose, showing how deep ‘homelessness’ which is a product of an inaccessible, unaffordable and dysfunctional mortgage system, is in the country.
In Lagos where housing situation is dire, many residents are seen roaming the streets, talking in clusters, not in defiance of the stay at home order but because either they have no house or they have one but it is not comfortable enough to keep them indoors.
Housing shortage in the country, which is both quantitative and qualitative, is not easing because unlike other economies where anybody on paid employment or who has regular flow of income can get mortgage to buy a house, home buyers in Nigeria must pay from his pocket.
All hopes are not lost though because, incrementally and on consistent basis, ideas on improving access to housing, mortgage loan and homeownership keep coming into the housing sector. But how well these ideas are being harnessed or implemented to achieve set goals is another kettle of fish.
The federal government, through the Central Bank of Nigeria (CBN), has been intervening in the housing sector with programmes, policies and initiatives that are aimed to get more Nigerians, especially the low income earners, on the property/homeownership ladder.
Besides the Family Home Finance (FHF) and the Federal Integrated Staff Housing (FISH) is the new My Own Home scheme which is an offshoot of the Nigeria Housing Finance Programme (NHFP) set up by the Federal Government and implemented by CBN with the support of World Bank’s $300 million loan.
Part of the federal government’s plans for the housing sector is to introduce public private partnership scheme that seeks to increase access to housing finance. Pursuant to this, the CBN selected recently 34 primary mortgage banks (PMBs) and four commercial banks to facilitate access to housing finance for low-income earners in the formal and informal sectors.
These banks along with nine other micro-finance banks will drive the My Own Home scheme whose main objective in line with the parent NHFP is to catalyse the growth of the housing sector through de-risking the housing finance value chain and improving access to finance. The scheme is also aimed to increase access to housing finance and housing in Nigeria and to inspire young Nigerians on the need to key into mortgage process and start owning homes.
The 34 selected PMBs and others are to benefit from a Housing Micro-finance Fund estimated at $15 million, and also from a $10million Technical Assistance Fund, with LAPO Microfinance Bank as pivot of the pilot scheme in the housing sector. Unlike the conventional mortgage, My Own Home allows beneficiaries to use the loan for purchase of land, incremental building or renovation.
The scheme has broad-based stakeholders and partnerships that include the Federal Government of Nigeria, Federal Ministry of Finance, Central Bank of Nigeria, World Bank, Federal Ministry of Works & Housing, Federal Ministry of Justice and Mortgage Banking Association of Nigeria (MBAN).
Others are mortgage originating institutions such as Mortgage Lending Banks (MLBs) that are participating in the scheme through equity/investment in Nigeria Mortgage Refinance Company (NMRC).
There is need now, more than ever before, for strengthening the housing sector by setting up sustainable framework by mortgage originators such as financial institutions to access long-term refinancing and NHFP is expected to create the enabling environment for that. It is also expected to scale-up mortgage and housing finance awareness through mortgage literacy, customers’ right, responsibilities and education.
Adeniyi Akinlusi, the MBAN President, is of the view that the scheme will revamp the housing finance sector and also make access to housing finance a lot easier. He says that NMRC will be providing long-term refinancing of mortgages and standardizing mortgage procedures.
According to him, most initiatives that are solely funded and run by the government as social housing programmes are usually not successful and sustainable. “My Own Home, being a PPP is likely to succeed going by our experience with other PPP programmes such as NMRC, infrastructure provision and even the pension scheme reform, which also have private sector stakeholders.”
The beauty of this scheme is that it offers mortgage guarantee that allows borrowers with insufficient or no equity contribution to access mortgage for home ownership. Besides, it will increase lending to low-income earners in the formal and informal sectors through microfinance banks for incremental housing construction or housing improvement.
The scheme has its challenges but Akinlusi reasons that, despite the challenges, public awareness is gradually being created, although there is no available statistics on the extent of coverage yet, adding that more would still need to be done in this direction.
Government believes that this scheme has the interest of every Nigerian, but being a new initiative, there is still no statistics to quantify the response of Nigerians to it. It still needs some time to take firm root and have imprint on the minds of the public.
The major challenges of initiatives like this are funding and sustainability which, in the opinion of the MBAN president, will depend on the NHFP and how it will be able to synchronize the scheme to generate public interest that would make it run on “auto-pilot.”
Expectation is that this product will provide a platform for potential mortgage clients who do not have the required equity contribution, that is, initial deposit of 20 percent of the value of a property, for a mortgage but have the capacity to make the regular payments, to access a mortgage on the basis of a third party guarantee.
The good news then is that homeowners with insufficient or no-equity contribution can approach their lenders for a mortgage guarantee and the mortgage guarantee firm will insure only the equity contribution required so that the lender can advance the full value of the mortgage loan for the property.
Concerns, however, remain that the country’s unfriendly investment climate, which is affecting the mortgage industry, could impact this scheme negatively. Akinlusi shares this view, listing high and volatile exchange rate, traditionally stringent operational guidelines for mortgage banks and general difficulty in doing business in Nigeria as potential risks, adding also issues of Foreclosure Law and inhibitions from the Land Use Act 1978.
Nigeria’s very low mortgage penetration, which is less than one per cent, is affecting the operators and factors responsible for this include dearth of titled property on which mortgage could be created as mortgage creation is always hinged on the certainty of title to land; high cost of title registration/transfer, usually 15 per cent of property value, but as high as 22 per cent in some states, as well as non-automation of government process in registration and land titling.
Akinlusi notes that the difficulty in accessing National Housing Fund (NHF) by majority of Nigerians is because of inadequacy of funds to support the scheme as some key stakeholders are not making any contribution into the scheme as stipulated by the NHF Act.
He recommends inclusion of the informal sector with its distinct Uniform Mortgage Underwriting Standards and amendment of Pension Act to facilitate withdrawals from Retirement Savings Account (RSA) for down payment as equity contribution to boost inclusion; reduction in Cost of Title Registration and Transfer from 13per cent of property value, and Collateral Replacement Indemnity (CRI) to boost inclusion for up to 95per cent from 80per cent Loan to Value (LTV).
