Arguably, the federal mortgage bank of Nigeria (FMBN) seems to have turned the corner, especially with its performance in the last couple of years. 2018 was particularly encouraging and it is from this standpoint that the bank is looking into the future with optimism.
For the 27-year apex mortgage bank, the launch of the FMBN Digital Mobile Platforms, which now provide real-time access to information by contributors to the National Housing Fund (NHF), was a defining moment in its efforts at repositioning the contributory mortgage scheme.
The massive downward reduction of equity for accessing NHF loans from 10 to zero percent for N5 million and below and 10 percent for loans of between N5 million and N15 million was also a watershed in the out-gone year when many companies were still smarting from the impact of the recession that ravaged the Nigerian economy for 15 months.
Within the year too, the bank also posted strong numbers. These include loan disbursements totaling N40.9 billion that created about 2000 mortgages. It also provided home renovation loans totaling N14 billion to 16,031 Nigerian workers. Furthermore, the bank processed refunds totaling N12.4 billion to 97,215 retirees and significantly expanded the pool of contributors to the NHF scheme. About 224,752 new contributors were added to the scheme.
On the strength of these footprints, 2019 promises to be the year that might witness the consolidation of the long-awaited major structural and financial transformation of the bank. Housing industry experts see the FMBN boasting a robust capitalization of up to N500billion that it could leverage severally to unlock trillions of investible funds from the Capital Market, institutional investors and development financial institutions to power its social housing mandate.
This optimistic view of the country’s foremost mortgage institution in 2019 and possibly beyond is not far-fetched. Serious work has been underway, and a historic milestone recorded in the long-standing plan to revamp the bank. Specifically, in December last year, both houses of the National Assembly passed the amendments of the extant FMBN Act before the National Assembly.
A notable feature of the bill is the provision for the recapitalization of the FMBN by N500billion. Other aspects include the comprehensive overhaul of the bank and strengthening of its board to make it more effective by including stakeholders such as the Nigeria Labour Congress (NLC), the Trade Union Congress (TUC), the Nigeria Employers Consultative Association (NECA) and others.
Although efforts to review the Acts establishing the FMBN and the NHF have been on for about twelve years, most of the progress was recorded within the past two years due largely to stakeholder-rally, political push and personal industry of the current executive management led by Ahmed Dangiwa and cooperation of the National Assembly.
As it stands, the bill is awaiting the assent of the President and there are many reasons he is likely to sign it into law, not least because, a stronger FMBN is essential for the realization of the goal of his administration to provide social housing and tackle the huge housing deficit as a part of the Economic Recovery Growth Plan (ERGP).
Second, signing the bill, which has massive potential to revolutionize the structure and operations of the bank, impact of the over three-decades old FMBN would rank as a major housing policy legacy for the Buhari administration.It is a solid opportunity for the president to unleash the potential of the housing and construction industry to spur overall economic growth in his second term.
Experts project that leveraging the N500billion capitalization of the FMBN would lead to the creation of about 100,000 affordable mortgages per annum which is far more than the number of mortgages that the bank has created over the three decades of its existence. Creating such number of mortgages on an annual basis will, no doubt, have substantial positive impact on the housing, mortgage and construction industry.
The surge in housing finance will empower developers to ramp construction activities nationwide, housing stock will increase, and a greater number of Nigerian workers in the low-medium income brackets will have a better chance of accessing longer-term, low-cost housing loans to purchase or build their own homes. The economy will also benefit as thousands of skilled and unskilled jobs would be created and the flow of housing finance would boost economic activities within the industry.
Tackling the problem of inadequate finance is key to growing the mortgage market. The implication is that government-backed institutions with the mandate to develop the mortgage market and drive delivery of affordable housing need to be properly empowered.
This, in many ways, is the story of the FMBN. While a lot has been written about how much the bank should have done in tackling the housing deficit, not much has been said about the required capacity to do much. Critics have often cited statistics which show that the FMBN has delivered less than 50,000 houses since it was established in 1977 to buttress their arguments.
But at the heart of this often-cited performance is the weak financial capitalization of the FMBN. At the moment, the equity base of the FMBN is only a paltry N5 billion. This is far less than the requirement for even primary mortgage banks that the FMBN on-lends to.
Even at this, only a little over 50 per cent of it is paid-up. Equity in the bank is split between the Federal Ministry of Finance (FMF) and the Central Bank of Nigeria, (CBN). This gap, in many ways, explains the bank’s inability to make a serious dent in the nation’s housing deficit, which is currently estimated at 20 million units and rising.
Over the years, the FMBN has largely relied on the NHF’s pool of long-term funds mobilized from statutory deductions and contributions of self-employed and organized private and public service workers, to drive a suite of low interest housing loans to workers and developers.
Weak implementation and enforcement of provisions of the NHF Act has also watered down its potential for generating substantial longer term, low cost funds that the FMBN can leverage to drive extensive housing development at the scale and pace that will create the required impact.
CHUKA UROKO
