For the Nigeria Mortgage Refinance Company (NMRC) to be successful in its mortgage refinancing function that will lead to increase in the development and delivery of affordable housing in Nigeria, the government has to do something about other financing options, housing sector experts have canvassed.
NMRC was incorporated on June 24, 2013 as a private sector-led secondary mortgage institution with public purpose of increasing liquidity in the mortgage system and catalyzing the delivery of affordable housing in the country. It obtained its final operating license from the Central Bank of Nigeria (CBN) on February 18, 2015.
Earlier on January 16, 2014, the federal government, under former President Goodluck Jonathan, launched NMRC. Okonjo-Iweala, the then finance minister and coordinating minister for the economy noted, “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”.
The then minister added that apart from ‘crashing’ interest rate on mortgage loans, NMRC would also catalyse the delivery of about 750,000 homes annually, and create an enabling environment for primary mortgage banks and other financial institutions to offer 15 to 20-year mortgages at affordable rates.
These assurances raised people’s expectations from the new refinancing company. Five years down the line, though Kehinde Ogundimu, NMRC’s CEO, insists that the company has done well, experts say the company is yet to meet the expectations that greeted its launch.
In July 2015, NMRC successfully issued a 15-year N8 billion 14.9 percent Series 1 Bond under its N140 billion medium term Note Programme, backed by an unconditional Federal Government of Nigeria guarantee. In June 2018, the company completed its N11billion 13.80 percent Series 2 Bond Issuance under its N440 billion Medium Term Note Programme.
In December 2018, it announced that it has refinanced mortgage loans totaling N18 billion. It is on the strength of this that Ogundimu told BusinessDay in a telephone interview that they had been able to address the liquidity challenge in the mortgage system.
Reminded that some primary mortgage banks (PMBs) were still struggling over liquidity issues, the chief executive noted, “PMBs that are not liquid are those that are not doing well who cannot access our funds”, adding that the high interest rate in the system is a function of the macro-economy which is beyond their control.
Besides liquidity, Ogundimu said they have also succeeded in helping the PMBs to extend their loan repayment tenor from 10 to 20 years which is good for the borrower while the rate has come down from 25 percent when NMRC started to 17.4 percent.
“We have done Uniform Underwriting Standard for the informal sector. We are working on the Mortgage Guarantee Company which will require borrowers to get loans at 10 percent, down from 20 percent; the company will provide protection for both the borrower and the lender,” he assured.
However, experts argue that if the total amount NMRC has raised over the last 5 years is N19 billion as against the entire bond programme, it is less than 5 percent which is not a high score. According to them, if the number of mortgages that have actually been refinanced with the amount raised is computed over Nigeria’s 20 million housing gap, it will be discovered that it may not be up to 500,000 mortgages.
“In my view, I feel there are some structural issues that need to be realigned in order to make the refinancing function by the NMRC to be very effective and to accelerate housing provision for an average Nigerian”, Femi Akintunde, GMD, Alpha Mead Group, noted.
Ayo Ibaru, Director Real Estate Advisory at Nothcourt Real Estate, affirms, noting also that NMRC, like most institutions, has had to deal with a struggling economy, policy inconsistency and a raft of socio-political challenges.
“2015 estimates put the company’s refinancing efforts at about N1 billion which grew consistently, albeit tepidly, only slowing during the 2016/2017 recession, to reach approximatelyN18 billion in 2018. And while this might seem insufficient considering the enormity of the task, raising funds has been tricky”, he pointed out.
Akintunde canvassed three levels of financing that needed to be adequately catered for before getting to mortgage refinancing, listing them as Developer Finance which will create stock of mortgageable houses; Equity Finance that will improve affordability by buyers or off-takers, and Mortgage Finance which will enable PMBs to create long term mortgages to support buyers’ equity finance .
“We have to come up with the right ideas and strategies that will allow NMRC to be able to access more of the full N440 billion programme that is already backed by Federal Government Guarantee to support the other three key levels that are preconditions to making the NMRC refinancing to become more successful in energizing housing provision in Nigeria”, he advised.
CHUKA UROKO
