Closing the 17 million housing gap is a herculean task and the Federal Mortgage Bank of Nigeria, (FMBN) is aware of this glaring fact. The World Bank says a whopping N59.5 trillion is required to reduce the daunting housing deficit in the country but how can the FMBN make this happen when some corrupt developers have chosen to divert a fraction of the funds? To recoup the money, the FMBN is seeking the backing of the Economic and Financial Crimes Commission (EFCC). In this report, CHINWE AGBEZE takes a look at the efforts the mortgage lender is making to make the dream of National Housing Fund (NHF) contributors come true.
Housing is unarguably one of the basic necessities of man and has been ranked second after food in the hierarchy of man’s needs. To highlight the importance of shelter probably over other needs of man, a provision was created in the constitution under the fundamental objectives of state policy compelling the Nigerian state “to provide suitable and adequate shelter for all citizens”. This makes housing the first and most important of all rights.
It is on this premise that the National Housing Fund (NHF) scheme, an FMBN product, aimed at providing mortgage finance to Nigerians who are contributors to the scheme, was established by Act 3 of 1992. This scheme enables Nigerians in all sectors of the economy, particularly those within the low and medium income levels who cannot afford commercial housing loans, such as servants, traders, artisans, and commercial drivers, etc., to own houses.
The Act stipulates that funding for the scheme will come from mandatory contribution of 2.5 percent of monthly income of Nigerians earning N3000 and above per annum, in both public and private sectors. Commercial and merchant banks are to invest 10 percent of their loans and advances portfolio.
Also, Insurance companies are to invest 20 percent of non-life and 40 percent life funds in the housing sector, with 50 percent of these directly in NHF and; financial contributions of the Federal Government. The pool of funds created by these becomes available to any contributor to borrow from at friendly interest rates. The FMBN also advances loans to real estate developers.
Undeniably, finance is a major challenge of the housing sector and this is why the FMBN under the management of Richard Esin, the acting managing director and chief executive officer, is leaving no stone unturned in ensuring efficient and sustainable credit delivery to the housing sector.
To ensure that more people key into the project, Esin is paying deep attention to low-cost and affordable housing, not exceeding N5 million per unit while encouraging more people in various states within the federation and government parastatals to be part of the project.
Under Esin’s leadership, the FMBN has been expanding and coordinating mortgage lending on a nationwide basis, and also promoting affordable housing to ensure that 17 million housing deficits, estimated to cost N59.5 trillion, is addressed.
To achieve its set goals, Esin knows they cannot do the work alone and as such they have requested for the partnership and backing of the Economic and Financial Crimes Commission (EFCC) to recoup FMBN’s money in the grip of developers, who have failed to deliver on agreed projects even after collecting the funds.
Esin made this request when he paid Ibrahim Magu, the EFCC chairman, a courtesy visit in Abuja to solicit for support in recovering FMBN’S huge bad debts from developers and others, who embezzled the funds for housing loans they obtained from FMBN.
The FMBN boss notified Magu that but for the resilience of the bank, it would have been unable to meet the financial requests of thousands of Nigerians, including employees of the EFCC because of debtors.
He revealed that the developers have a huge debt overhang with the bank, saying that they obtained construction finance loans from the bank to build estates, but diverted the funds into other non-productive and non-regenerative activities. According to him, some developers completed the estates, sold the housing units and failed to remit the sales proceeds to the bank.
Esin said some Primary Mortgage Banks, which obtained funds from the bank for Mortgage Finances, for on-lending to qualified NHF contributors, declined to disburse the funds to the applicants. Besides, there were those, who obtained equity contribution from would-be mortgagors, but refused to deploy same in the provision of mortgage finances to the applicants’ benefit.
The FMBN boss is worried that despite the revocation of their operational licences, some Primary Mortgage Banks (PMBs) operators are still deceptively encouraging innocent and unsuspecting mortgagors to continue to repay their mortgages to them through fictitious accounts with no intention of remitting same to FMBN.
Esin therefore, appealed to Magu to assist in the recovery of bank funds from contractors and vendors, who were mobilised to execute various contracts for the bank but failed to execute same and misappropriated the bank’s money.
“These activities are fraudulent, and constitute financial crimes. We, therefore, seek the EFCC’s kind assistance in the recovery of these funds, which belong to the Nigerian workers,” he said.
Esin also reiterated its management commitment towards assisting the employees of EFCC own houses, pointing out that after the historic MoU between both organisations; the FMBN has disbursed N3 billion in 10 batches to 156 employees of the EFCC.
EFCC employees benefit from the NHF project
The EFCC is among the government agencies that have keyed into the NHF project and the FMBN has packaged N1.6 billion worth of National Housing Fund loans to 113 employees of EFCC. The loan is currently awaiting board approval, while N1.3 billion has been approved as NHF loans for employees but not disbursed because the targeted houses are no longer available.
“FMBN will work with other interested PMBs to revive the scheme once they are able to provide the bank with a suitable and acceptable security,” Esin said.
He assured the EFCC boss that the FMBN was in support of the war against corruption, hinged on one of the four pillars of the bank’s self-reinvention journey of corporate governance restoration, starting with a corporate governance audit of FMBN and staff training for over 120 members of staff in the leadership cadre, by the BPP on procurement practices and processes to engender the right kind of ethical behaviour among the employees.
Esin told the EFCC boss that FMBN’s goal is to make mortgages affordable, this he said was a veritable tool in fighting corruption.
“We have also redefined our business to sharply focus on the low and middle income earners, collaborating with credible developers to deliver affordable houses at not more than N5 million per unit, to enable us achieve the required spread among NHF contributors in the delivery of mortgages. We will encourage members of staff of EFCC to take advantage of these opportunities for their benefit,” Esin said.
Recapitalisation of FMBN
The Federal Government has disclosed plans to re-capitalise the FMBN for better efficiency, Babatunde Fashola, minister of power, works and housing revealed this at the Summit on Affordable Housing 2016 in Abuja that the move became imperative for the mortgage institutions to deliver affordable housing to the masses.
Bala Ka’oje, president of the Association of Professional Bodies in Nigeria, tasked the Muhammadu Buhari administration to make available to the FMBN a bailout fund of N100 billion, overhaul and restructure the FMBN for effective housing delivery. The restructuring of FMBN is on-going and the new team headed by Esin is committed to getting affordable housing to the masses.
Besides, the Nigeria Mortgage Refinance Company (NMRC) has been established and has been able to provide a uniform underwriting standard for the Nigeria’s mortgage market.
According to Central Bank of Nigeria (CBN), the Mortgage Refinance Companies (MRCs) are required to have a minimum of 50 percent of their investment in debt obligations issued or guaranteed by the Federal Government or any of its agencies.
Available statistics show that Nigeria is a peculiar country where mortgage finance, as a share of Gross Domestic Product (GDP), is extremely low. At a paltry 0.5 percent, compared to 80 percent (UK), 77 percent (USA), 31 percent (South Africa) and two percent (Ghana), it is a huge joke. The housing and construction sector accounts for only 3.1 percent of Nigeria’s rebased GDP. Housing production is at approximately 100,000 units per year while 800,000 units are needed yearly.
Owing to this lack of a robust mortgage financing system, Nigeria’s rate of home ownership is one of the lowest in Africa at 25 percent. Statistics showed that Nigeria’s home ownership rate is much lower than countries such as Singapore (90 percent), Indonesia (84 percent), Kenya (73 percent), USA (70 percent), Benin Republic (63 percent) and South Africa (56 percent).
Esin said he had accepted the responsibility of delivering on the mandate of the bank and carrying forward the modest achievements of his predecessors.
CHINWE AGBEZE
