NMRC: Duplication of Mortgage Financing in Nigeria
By yushau Shuaib
In a season of politics, anything happens even on the economic front. Recently President Goodluck Ebele Jonathan launched the long-awaited Mortgage Refinance Company which was mooted and proposed by the Central Bank of Nigeria sometimes in 2009.
While there is an existing Federal Mortgage Bank of Nigeria (FMBN) which promotes the growth of viable primary mortgage institutions in Nigeria, the idea behind the Mortgage Refinance Company (MRC) is said to provide the long term liquidity to afford more Nigerians to access funds to pay for their houses.
At the 9th annual retreat for chief executive officers (CEOs) of Primary Mortgage Institutions (PMIs) which was held in Abuja in December 2009, the CBN Governor, Mal. Sanusi Lamido Sanusi, acknowledged that the Mortgage Refinance/Liquidity Company (MRC) had been proposed as part of the reforms of the housing finance sub-sector, as a Special Purpose Vehicle (SPY) to re-vitalize the sub-sector. He told the participants at the Retreat that the dearth of long term deposits coupled with low level of capitalization of the PMIs were key militating factors in the drive to consistently finance long-term loans on a sustainable basis for average Nigerians.
By January 2010 the CBN and operators of PMIs, had commenced work on the modalities for the establishment of the proposed Mortgage Refinance (MRC). Meetings were subsequently held between the CBN and Mortgage Banking Association of Nigeria (MBAN) to discuss modalities for the establishment of the MRC. Between 2011 and 2012 several meetings were held with the modalities towards the establishment of the project.
In February 2013, CBN posted on its website a 38-page document titled: “Regulatory and Supervisory Framework for the Operation of a Mortgage Refinance Company” to unveil a draft framework on the proposed company which was part of efforts to enhance liquidity in the mortgage subsector.
The apex bank therefore prescribed basic regulatory requirements for the MRC’s principal line of business of refinancing credits to borrowers for the security of residential mortgage assets and other qualified collaterals. This writer just wonder what would now differentiate NMRC from FMBN which has over the years been linking the capital market with the housing industry by establishing and operating a viable secondary mortgage market to support the primary mortgage market.
In January 2014 while announcing the establishment of the company, which is now rechristened Nigeria Mortgage Refinance Company (NMRC), President Goodluck Jonathan said the housing sector is an avenue for job creation and economic stability hence his administration’s focus on the sector. He added that the effort of the World Bank through the $300 million loan would be supplemented by those from private investors.
The new company according to its promoters is a public-private partnership which will help to deepen the Nigerian Mortgage Market and make Housing more affordable to low-income earners at low-interest rate. It is being implemented as a component of the Nigeria Housing Finance Programme towards resolving access to affordable housing finance. On the other hand the existing FMBN is mandated by law to service the need of housing delivery in all parts of Nigeria by mobilizing both domestic and offshore funds into the housing sector.
In addition to the pledge of the World Bank to provide the soft International development Association (IDA) loan at a zero interest rate and 40 year tenure to the new NMRC, a large chunk of the pension funds would also be invested in the housing sector.
While one may be concerned about likely duplication of functions between the existing Federal Mortgage Bank of Nigeria (FMBN) and the new Nigeria Mortgage Refinance Company, the government should ensure that it creates an enabling environment for accessibility to legitimate lands, provision of infrastructure and reduction in the cost of housing delivery.
One would have expected that the new mortgage scheme, if necessary should be able to guard against money laundering, especially the unwholesome practices of cash deposits for purchase of houses. It is public knowledge that currently the major beneficiaries of the mortgage financing are the estate developers who milk their customers dry with exorbitant cost of houses. The outrageous prices leave most of the estates unoccupied some for years, especially in highbrow areas of big cities like Abuja, Lagos, Port-Harcourt, Enugu among others. In fact in Abuja 70 percent of exotic houses and mansions in Abuja for instance have not been occupied for years.
The existing mortgage financing only cater for financial institutions and developers who annex available mortgage resources in building homes of speculative value rather than the reality on the ground. Meanwhile patrons of some of the developers and owners of big estates do not secure loans to acquire the properties but pay cash for the acquisition as investment like whose value may appreciate with utilisation. A mortgage finance system that is not accessible to individual and needy borrowers doesn’t worth its existence.
The unfathomable sky rocketing real estate prices in some cities are largely promoted by money launderers who launder slush funds in the property market. It is open secret that fraudsters too no longer hide their loots in banks because of the stringent financial regulations over huge lodgement and transfer of money.
Rather than establishing more companies and agencies to address housing deficit, it may not be out of place if government, in addition, impose and administer property tax on expensive houses that are scattered in big cities and yet unoccupied for too long. Introducing property tax will be in line with global best practices to affect the affluent in the society who deprive ordinary citizens of spaces for decent accommodations.
Any mortgage scheme that could not afford an average Nigerian to have an affordable and decent house within a short period may not be necessary because the rich and politicians know have to have their ways with the so-called mortgage financing in Nigeria.