For inexplicable reasons, mortgage is not considered as a growth enabler in Nigeria unlike other economies of the world where its contribution to gross domestic product is quite significant.
Apart from the commendable efforts of Lagos State government to improve access to housing which led to the setting up the Lagos Home Ownership Mortgage Scheme (LagosHOMS), governments in Nigeria at both federal and state levels don’t invest in the mortgage sector.
Questions are frequently asked as to what role mortgage as an industry can play in the efforts to revitalize an ailing economy or when efforts are being made to diversify a mono-economy in distress.
The answer experts have always given is that mortgage does not only count, but is also an economic growth enabler. This means that when a country like Nigeria wants to diversify or revitalize its economy, mortgage should be factored into its calculations.
In Nigeria today, diversification is a major economic discourse where agriculture and manufacturing come handy as low hanging fruits. Perhaps, other growth sectors are also being considered, but not mortgage, not even real estate which is the fulcrum around which the mortgage system revolves.
Unlike advanced economies where the mortgage industry makes significant contribution to economic development, Nigeria seems to be unsure of the industry’s growth potential. This, perhaps, is the reason mortgage, as a percentage of Gross Domestic Product (GDP), remains low at 0.5 percent till date.
This leaves Nigeria several steps behind other economies such as Mexico, Malaysia and South Africa where mortgage contributions to GDP are as high as 10 percent, 25 percent and 29 percent respectively.
Experts advise that Nigeria and its economic managers should begin to see the potential in the mortgage industry to stimulate the economy, pointing out however that, for them to do that, all obstacles to the growth of the industry have to be taken away.
The relative ‘newness’ of the industry, lack of understanding of its dynamics and operational models by many Nigerians, and poor appreciation of the need and the ultimate benefit of keeping money in a mortgage bank are just a few of the militating factors.
The experts are of the view that a flourishing mortgage banking industry is an effective tool in the hands of the government as the industry will help in pushing the economy in the desired direction.
Presently, the federal government is talking about diversification of the economy to stir it away from the current challenges, but attention doesn’t seem to be paid to the mortgage sector. If government really wants to stimulate the economy, a reduction in the interest rate on mortgage loan will help because more people take mortgage loan to buy houses which will increase in construction activities.
Because of the identified obstacles, many primary mortgage banks (PMBs) are going through very difficult times, such that some are still unable to meet up with the capital requirements in the industry. “If government pays a closer attention to the PMBs by removing some of the obstacles that they have such as the drawbacks of the Land Use Act of 1978 which essentially vests land ownership in state governors; the right to easily foreclose on delinquent borrowers, ease of creating a legal mortgage and perfecting titles and the ease of falling back on their collateral to recover bad loan etc, this sector will surely improve significantly,” a mortgage operator explained.
The operator, who did not want to be named, insisted that until all these issues are resolved in a way that encourages the mortgage banks, the sector will not grow as desired.
He hopes that when these obstacles are removed, mortgage suppliers will allocate more funds towards the provision of home loans while home buyers will better appreciate the implication of prompt interest and capital repayments as well as ensure discipline on the part of the people.
A realtor who also pleaded anonymity noted that the capital base of the PMBs was inadequate, dismissing the idea of a fixed capital base for mortgage institutions. “The idea that a mortgage institution should have a fixed base of, say N10 billion, is wrong because that amount is not enough, not even N100 billion, given the size of projects they finance. The federal government needs to come in, look at what is happening in other civilised world and do the same”, the realtor advised.
In the civilised world, according to him, there is secondary market for real estate financing where commercial banks or individual brokerage banks lend money to people and thereafter sell the securitised certificate to the secondary market and come back again to lend to individuals.
Given the size of Nigeria as a mortgage market, the growth of this industry is possible if the Federal Mortgage Bank of Nigeria (FMBN) plays the role of a regulator while the federal government, through the Central Bank of Nigeria (CBN), empowers the PMBs more.
The Nigerian mortgage industry needs more well established and well funded PMBs. 10 in each state of the federation is not too much and Meckson Innocent Okoro, an estate surveyor and valuer, explains that this is to discourage the concentration of these institutions in urban centres.
When this is done, access to housing finance will be increased; the PMBs must be positioned to champion the whole issue of affordable or social housing for the low income earners in the country. Anything the country wants to do without a functional mortgage system that can guarantee homeownership for a good number of people will not succeed.
Talking about mortgage is talking about housing which is capital intensive and so must have capable institutions to finance it. Increased homeownership will, one way or another, contribute to the country’s GDP which translates to economic growth that diversification seeks to foster.
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