Since Nigeria Mortgage Refinancing Company (NMRC) announced in December 2018 that it refinanced mortgages to the tune of N18 billion, stakeholders in the industry have been raising questions on how many mortgages were financed with the funds.
Concerns have also been raised that the impact of that N18 billion is not being felt in the housing or mortgage sector, more as liquidity issues which define the mortgage market in Nigeria still persist, raising further question as to where the money has gone to.
The long awaited explanation was given to BusinessDay at the weekend when a board member of the refinancing company, who asked not to be named, responded via a phone call. “NMRC has refinanced 1,045 loans so far with the N18 billion they raised between 2015 and 2018,” the board member said.
This implies that the company refinanced 1,045 loans presented to it by its member-banks. “As at December 2018, NMRC had disbursed N18 billion to member-banks for the mortgages they brought to us for refinancing,” affirmed Abel Owotemu, ED/chief financial officer at NMRC.
Kehinde Ogundimu, NMRC’s CEO, had also disclosed, in statement in December last year, that NMRC refinanced mortgage loans totalling N18 billion as at December 2018.
The private sector-driven mortgage company, which started with the mandate to develop the country’s primary and secondary markets issued bonds has raised a total of N19 billion from the capital market to refinance mortgage loans that are provided by mortgage and commercial banks that it partners with. It raised N8 billion in July 2015 and N11 billion in June 2018.
Ogundimu explained that it 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.
However, some stakeholders in the real estate sectors have raised suspicion over the announcement of the refinanced mortgages by NMRC, requesting that the refinancing company discloses the names and beneficiaries of the loans if actually it disbursed what it claimed.
“We have been refinanced by NMRC but the funds really grew in 2018,”Aderemi Apatira, Head Corporate Communications and Brand, Infinity Trust Mortgage Bank Plc confirmed to BusinessDay.
Adeniyi Akinlusi, president of Mortgage Bankers Association of Nigeria (MBAN) and CEO, Trustbond Mortgage Bank, affirmed that NMRC had been refinancing primary mortgage banks.
“I am aware they are refinancing primary mortgage banks but the total amount that has been used for refinancing so far, I do not know,” Akinlusi said.
When BusinessDay asked the MBAN president if the primary mortgage banks were using the finance from NMRC since he is a CEO of a primary mortgage bank, he replied, “yes we are. We are creating mortgages.”
On how NMRC’s efforts at refinancing primary mortgage banks can be more impactful, Akinlusi said development of more affordable houses and low interest rate on mortgages were vital.
“The high interest rate on mortgages is one issue, and we are in engagement with the CBN as they intend to come up with an initiative to make interest on mortgage more affordable with target to enable the young and first time home buyers to acquire homes.
“Most of the houses available are unaffordable; what we have is more of supply-led market strategy; developers construct houses without considering affordability of the market they are developing for; that is why you have a lot of houses unsold in most highbrow areas in Lagos, the market is now correcting as it is becoming a demand-led market”, he noted.
Mortgages are loans, meaning that they come with interest rates. Typical mortgage interest rates in Nigeria range between 7-10 percent for the Federal Mortgage Bank of Nigeria’s National Housing Fund (NHF) and between 15-25 percent for commercial mortgage institutions.
Aside from the interest payable, the potential buyer must also have a certain percentage of the total amount needed for the purchase readily available; this amount is known as equity and ranges between 30-50 percent of the total cost of the property for which mortgage is sought.
So, in Nigeria, if you take a mortgage loan of N25million at 15 percent per annum, interest rate payable is N37.9million in interest only over the 15-year period. This is more than the principal itself.
The trick here is that at 15 percent interest rate, it takes a lender approximately 7years to recover the N25million it lent out. It is about 6 years if the interest rate is 20percent.
With that sort of interest rate, industry experts question if anyone can honestly afford a mortgage on a steady salary?
According to the Association of Housing Corporation of Nigeria (AHCN), the inability of the Nigeria mortgage sector to drive home ownership is worrisome as more than 90 percent of new homes utilise funds from personal savings for incremental construction.
Nigeria with the highest population in Africa has one of the lowest mortgages to Gross Domestic Product (GDP) rate at about 0.6 percent. This obviously lags Ghana’s 2 percent, South Africa’s 30 percent, the U.S and UK rate at 60 percent and 70 percent respectively.
Endurance Okafor
