The Federal Mortgage Bank of Nigeria (FMBN) occupies a strategic position as a proven enabler of affordable housing delivery to Nigerian workers. The apex mortgage bank provides mortgage loans at single digit interest rates that are as low as 6 percent per annum. When compared with open market interest rates, which range from 22percent to 25 percent, the difference is huge. Second, it is the only institution that accommodates long-term housing loan payback periods of over 30 years.
This too is quite significant. Until recently, tenors for housing loans offered by private sector mortgage lenders were at most five years. This was, in part, because financial institutions largely relied on short-term deposits.
Another distinctive feature of FMBN’s suite of affordable housing products is its ability to offer zero equity requirement for loans below N5million, and a maximum of 10 percent equity for loans ranging from N5million to N15million.
These terms are, unarguably, without competition in the Nigerian housing market. Together, they have over time fortified the bank’s unique status as the leader in the delivery of affordable housing to Nigerian workers.
Yet, beyond these unique housing offers, FMBN also accounts for majority of housing loans and real estate development projects. Recent statistics show that the bank has disbursed housing loans totaling over N112billion to over 43,271 Nigerian workers and funded the construction of over 26,973 housing units totaling over N98billion in collaboration with reputable property development companies across the country.
Of course, these numbers are quite small when weighed against the massive housing deficit that experts estimate to range between 17-22million units. Housing analysts and stakeholders familiar with the Act establishing the bank are of the opinion that FMBN would have recorded greater achievements and impacted the housing deficit more if two key factors were addressed properly.
One is adequate capitalization and two, a stronger National Housing Fund (NHF) scheme. At the core of these two pivotal factors is inadequate finance owing to the capital-intensive nature which housing development requires.
This argument has strong merit at many levels. Take the size of the bank’s capital base for a start. Statutorily, the FMBN is supposed to have a total capitalization of N5billion – a sum that is still grossly inadequate given its mandate.
Even at that, it is only 50 percent of the FMBN’s capitalization that is actually paid up by its principal shareholders, which includes the Federal Government of Nigeria (FGN), the Central Bank of Nigeria (CBN) and the National Social Insurance Trust Fund (NSITF).
While the federal government has redeemed its portion of the shares amounting to N2.5 billion, the CBN and the NSITF are yet to put down the cash value of their 30 and 20 per cent shareholdings respectively.
Expectedly, this longstanding systemic handicap has in great part constrained the FMBN’s capacity to leverage housing finance – locally and internationally – with consequential implications on its drive to boost housing development and counter the housing deficit.
The second plank of the argument bordering on the National Housing Fund (NHF) scheme is also quite vital. The NHF, which serves as a key financial pillar of the FMBN has a rather weak base. When the scheme was conceived and established in 1992, it was designed to have several strong self-sustaining avenues for mobilizing on a large scale, low-cost, long-term funds that will support the provision of affordable housing loans to low and medium income Nigerians that are payable over longer periods of time.
This includes the mandatory monthly contribution of 2.5 percent of workers’ salaries, investments in the scheme by commercial and merchant banks of 10 percent of their loans and advances. Likewise, insurance companies were required to invest in the scheme.
As the owner of the bank, the federal government was also obliged to periodically inject funds into the scheme to bolster its ability to function as a more effective tool for housing development, a key state objective.
Unfortunately, gaps in the programme’s legal enforcement framework compromised the potency for impact. Over the years, commercial and merchant banks have failed to comply with the provisions of the Act. The NHF has only relied basically on the 2.5 percent monthly contributions from workers’ salaries to drive its operations. What is clear however is that given the resources pooled from contributions from workers under the NHF, the FMBN has indeed posted proportionally commensurate results.
Clearly, for the FMBN to unleash its full potential as a tool for driving the Buhari Affordable Housing Plan for Nigerian workers, these twin issues that anchor on inadequate financial resources must be addressed frontally as part of a broader strategic reform of the bank that reflects the urgent and rising demands for affordable housing in Nigeria.
Overall, the new direction of change at the FMBN inspires hope for expansion of access to affordable housing for a greater number of Nigerians. To sustain the tempo of reform, government and stakeholders should rally round Ahmed Dangiwa-led management of the bank and support its plans to review the NHF and FMBN Acts. These two goals are critical to taking the bank to the Next Level, in line with the plans of the Buhari administration for housing development.
Contributed by John Agbokpile, a public policy analyst based in Abuja
Email: publicpolicyreviewnigeria@
