• Wednesday, February 28, 2024
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BusinessDay

Operators canvass special funds as CBN’s rate hike worsens mortgage sector woes

Pension for residential mortgage rising but slow on eligibility concerns

Operators in the Nigerian mortgage sector are canvassing for a special intervention funds from the federal government and other bodies to bail out the sector from the crippling impact of the recent hike in interest rate by the Central Bank of Nigeria (CBN).

The CBN at its last monetary policy committee (MPC) meeting raised the monetary policy rate (MPR) which measures interest rate by 50 basis points to 18 percent, up from 17.5 percent.

Though the intention of the apex bank was to tame the galloping inflation which, by the latest National Bureau of Statistics (NBS) figures, stands at 21.91 percent, the unintended consequences of the rate hike are sweeping across sectors, including mortgage where it has worsened an already bad situation.

The mortgage system in Nigeria has been on the throes of extinction with slow growth in the last two decades. It was expected that the recapitalisation of the primary mortgage institutions (PMIs) from the statutory N100 million capital base to N5 billion and N2.5 billion for national and regional operators respectively would improve its lot.

But that did not happen; not even the consolidation of the sector that pruned down the number of the PMIs from well over 100 to 42 or thereabout. The name change from PMIs to primary mortgage banks (PMBs) did help matters either.

“If the mortgage sector is not growing as it should, it is because it has many challenges on its way to growth. Apart from the low capital base, issues of land titles that enable home buyers to get mortgage loans are still there; interest rate on loans is too high for an average Nigerian and a lot of people are yet to see why they should keep their money in mortgage banks,” Rose Okwechime, former CEO, Abbey Mortgage Bank, explained to BusinessDay.

At a recent online forum organised by Central Bank of Nigeria Financial System Strategy (CBN FSS 2020) with the theme, ‘Navigating Current Challenges in the Nigerian Mortgage Market’, discussions centred on what to do to improve the funding status of the sector.

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Madu Hamman, the managing director/CEO of the mortgage bank of Nigeria (FMBN), noted that the CBN rate hike had not only increased cost of borrowing in the sector, but also affected prices of building materials and other items, leading to high prices of housing across board.

“FMBN, which manages the National Housing Fund (NHF), fixed the rate at single digit for contributors to the fund in order for them to have access to mortgage loans. But the contribution to the fund has not grown substantially to address the housing challenge in the country,” Hamman said.

He harped on the need to look outside the contributory fund to provide the cheapest source of funds for mortgage origination across the country, saying, “we need to engage government and regulatory institutions at the national level and encourage the provision of special intervention funds for the mortgage sector. It is only through such intervention funds that we will be able to cushion the effect of increasing rate of interest within the mortgage sector.”

He argued that if the sector continued to rely on what was obtainable from the capital market or the money market, it would not be palatable for borrowers and the mortgage lenders. “We will continue to work towards deepening the contribution to the fund and introduce various programmes for the informal sector to key into the NHF scheme, grow it and cater for the contributors for better returns,” he assured.

Femi Johnson, managing director, Homebase Mortgage Bank, saw the need in de-risking the mortgage market and commoditising the mortgage sector for more Nigerians to have access to mortgage loans.

He stressed the need for improved advocacy and awareness for the public to know the benefits of mortgages, urging operators to be cyber-security conscious as hackers intensify activities with improved adoption of technology in the industry.

The operators said that much was expected from the FMBN as the apex bank in the sector. According to them, there was need to strengthen and reform the NHF to increase the capital requirements of the PMBs so as to make loans available to those that meet its standards.

There has been calls for the recapitalise the FMBN to about N500 billion so as to give it a stronger footing and develop its facilitation role to, among other things, give more teeth to foreclosure law, remove Governor’s Consent for land transactions, and facilitate the acquisition of property titles

The operators were concerned that with commercial banks putting increasing resources into developing their mortgage market, PMBs were bound to lose market share, except those that were operating as subsidiaries of money deposit banks.