Reasons frequently cited for low mortgage lending and borrowing in Nigeria is lack of liquidity in the market on the part of the lenders. On the part of borrowers, lack of capacity is a strong reason in which case poverty is at issue, and high interest rate which makes mortgage unaffordable to many.
Some experts argue that because mortgage market operations lack clarity, in terms of the difficult conditions lenders demand from borrowers, mortgage is both inaccessible and unaffordable, and therefore, it does not exist in Nigeria as a home ownership enabler.
But, beyond all these, there are other reasons which lenders consider that put liquidity by the side. This has, in fact, created a worrying situation in the mortgage market because home seekers cannot get loans to buy, build or renovate existing houses.
This means that home seekers’ inability to get loans from mortgage lending institutions is not necessarily because lenders don’t have all the money to give to them or because they are not in paid employment which is a major principle of mortgage lending and borrowing.
As it is today, the primary mortgage banks (PMBs), for instance, are not giving out loans as they should, even though they are relatively liquid. Many of these banks had their mortgages refinanced by the Nigerian Mortgage Refinance Company (NMRC).
It is apparent that borrowers are not getting loans from these banks. Since the last couple of years when many of them got this refinancing, there has not been any significant rise in homeownership arising from increased mortgage activities.
“I don’t think the problem of the PMBs is capital. Their problem, in my view, is that they have chosen to operate in a narrow, limited market. Most of them would tell you they won’t lend to borrowers outside Lagos, Abuja and Port Harcourt where you have more credible customers and understandable landlords. So, you see their market is very limited and narrow,” explained Kola Ashiru-Balogun, managing director, Mixta Nigeria.
He noted that, even in those markets, not many companies are there that their employees can comfortably take up mortgage at 21 percent per annum and be able to pay back.
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The companies that can do that, according to him, are very few. “If you take out the oil and gas, and telecoms, nothing is left. Even banks employees cannot afford such loans because the banks are not doing well at the moment. They really need to do something like consolidation in that industry,” he said.
A good number of the PMBs had their loans totaling 1,045 refinanced by NMRC. The company said it refinanced these banks to the tune of N18 billion as at December 2018. “NMRC has refinanced 1,045 loans so far with the N18 billion they raised between 2015 and 2018,” a board member has confirmed.
Kehinde Ogundimu, the managing director and chief executive officer of NMRC, also confirmed this in a statement, when he said: “NMRC has refinanced mortgage loans totalling N18 billion.”
He said the refinancing of the PMBs was in line with the company’s mandate to promote affordable home ownership in the country by leveraging funding from the capital market to deepen liquidity in the primary and secondary mortgage markets.
Some operators also confirmed that their loans were refinanced by NMRC. “We have been refinanced by NMRC but the funds really grew in 2018,”an official of one of the PMBs who did not want to be named, affirmed.
In the same vein, Adeniyi Akinlusi, president of Mortgage Bankers Association of Nigeria (MBAN), affirmed that NMRC had been refinancing primary mortgage banks.
It is clear from the foregoing that the problem of the PMBs is not really liquidity as the banking public is made to believe. Their problem, instead, is a matter of choice which they have made.
This explains why Nigeria remains one of a very small group of countries where home seekers fund their home purchase from own savings whereas, in most other economies, people buy homes through mortgage loans given to them by mortgage-lending institutions.
“The mortgage industry here is fragmented. I am hearing of some recapitalisation going on for them which is very positive because we expect to see a stronger mortgage institutions in the country. But one thing is sure. The business is difficult,” Ashiru-Balogun said.
It is clear that even if the mortgage banks get their funds from NMRC at 14 percent, there is no way a borrower can get a loan from them at 10 percent because they must still survive and make profit for their shareholders.
As a country, Nigeria should understand that housing is critical and has capacity to drive the economy. If that is done, the country should find a way to drop the interest rate below 10 percent in order to make it attractive and even accessible and affordable
If the country is able to drop interest rate by way of investing what is used in building housing, it would have done a lot of services to the people. The number of mortgages that could be created for the people by this singular action will be significant.
When that is done, mortgage becomes not only available, but also affordable. When that is done too, there will be more housing supply because more developers will build knowing that more people will be able to buy through mortgage.
