In January 2014, history was made in Nigeria’s financial system with the launching of the country’s private sector-led secondary mortgage institution, the Nigerian Mortgage Refinance Company (NMRC).
NMRC’s entry into the mortgage market was well celebrated more so as it entered the market waving a green mortgage flag that raised expectations and hope of increased liquidity as well as low rate and accessible mortgage that would ultimately lead to affordable housing.
For Nigerians, especially the low income earners, who had been waiting to access mortgages at low interest rate to buy or build their homes, an end seemed to have come to their waiting game as the Federal Government had set the stage for that to happen with the launch of NMRC.
But almost five years down the line, the waiting game seems to have begun anew as neither low interest rate on mortgage nor affordable housing is anywhere in sight. In defence of this situation, however, Chii Akporji, an executive director at NMRC said “we don’t operate in a vacuum”.
Akporji, who was a panel discussant at the just concluded West African Property Investment Summit (WAPISummit) in Lagos, explained that NMRC, like any other financial institution, was limited in its operations by the Nigeria’s macro-economic environment, pointing out that high interest rate was a major issue militating against their refinancing function.
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“NMRC is alive to its mandate of catalysing affordable housing but we are limited by the macro-economic environment. But that notwithstanding, we are doing so much and a case in point is the model mortgage and foreclosure law”, she stated.
The company initited legislative reform in the mortgage sector by proposing a model mortgage and foreclosure law by key pilot states including Akwa Ibom, Anambra, Bayelsa, Delta, Edo, Enugu, Kano and Ogun states. The company, arguably, has done well in the area of partnerships and formulation of such initiatives as NMRC Mortgage Market System (MMS) which is a transformational change that integrates the entire housing market, covering construction finance, primary and secondary mortgage.
MMS is available to all players in the housing industry and has the benefit of removing duplications of efforts at gathering data and documents; improving the turnaround time, reducing the cycle time of transactions and helping to make homes more affordable.
Despite all these, Nigerians are still concerned and expectant. According to close watchers of this company, there is a strong premise for that expectation and a flashback on the epochal launch event in Abuja can justify these dispositions. Affordable housing remains a mirage.
“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”, said Okonjo-Iweala, the then minister of finance, who spoke at the launch of the company.
The federal government also announced that Nigerians would start accessing mortgages from June that year after the launch in January. This was confirmed (to BusinessDay) by Femi Johnson, the then president of the Mortgage Banking Association of Nigeria (MBAN), stressing that refinancing of mortgages which would bring about low interest rate would start in June while operators would start lending to borrowers almost immediately.
NMRC is a secondary mortgage company and, the way it was planned, it would refinance mortgages that will be originated by primary mortgage lenders including Primary Mortgage Banks (PMBs) and commercial banks that are into mortgage business. The company is also planned in such a way that for any institution to be able to refinance, it must have shares in the company.
There is strong presence of private sector operators in its shareholding structure and these include mortgage banks, commercial banks, finance ministry, and International Finance Corporation (IFC) which is a major source of investor-confidence in the company.
Okonjo-Iweala also assured that NMRC was expected to pull down lending rates for housing from the current spread of 20 to 23 percent to the low double digits or, at least, to a high single digit.
She explained that NMRC which was taking-off with N6 billion capital would be floating bonds in the capital market to raise additional finance for its operations later that year, adding that $250 million out of the $300 million soft International Development Association (IDA) loan approved by the World Bank for the company would be disbursed to it by installments as tier 2 capital.
She added that $25 million would be used for the establishment of a mortgage guarantee facility for lower income borrowers while the remaining $25 million would be used to support the Federal Mortgage Bank of Nigeria (FMBN) to enable it to strengthen its programme on mass housing and also to pass on some of it to microfinance institutions to also enable them to on-lend to low income people to enable them carry out renovation work on their homes.
Apart from ‘crashing’ interest rate on mortgage loans, NMRC was also expected to catalyse the delivery of about 750,000 homes annually, create an enabling environment for primary mortgage banks and other financial institutions to offer 15 to 20-year mortgages at affordable rates to Nigerians.
To add more flavor to all of these, then President Goodluck Jonathan, in his keynote address at the launching of the company, listed four key enabling steps necessary for the company including the implementation of a computerised land registration system that would make it easier for citizens to receive certified titles, ownership and occupancy, verify certificates and transfer mortgages.
The second step, according to the president, was the reduction of land registration costs to users to as low as 3 percent while the state governors should consider delegating Governor’s Consent issuance to speed up land registration processes just as he said there should be streamlining of foreclosure processes in case of default.
Chuka Uroko
