Nigerian mortgage industry in the last 12 months could not rise to impact-level despite interventions by the federal government in the mortgage and housing sector, raising concerns among stakeholders that the industry may continue to lag for too long which leads to mortgage being inaccessible and unaffordable.
After the Federal Mortgage Bank of Nigeria (FMBN) and the National Housing Fund (NHF), the next biggest intervention by the federal government in the mortgage industry is the establishment of the Nigerian Mortgage Refinance Company (NMRC) with a mission ‘to break down barriers to home ownership by providing liquidity, affordability, accessibility and stability to the housing market in Nigeria which has the mandate of increasing’.
In addition to these, there have been other initiatives such as the Federal Ministry of Finance and the Nigerian Sovereign Investment Authority (NSIA) which created the Family Homes Fund (FHF) and voted N1 trillion for affordable housing for Nigerians with potential capacity to generate upto1.5 percent increase in GDP by 2023.
This was followed by the Federal Integrated Staff Housing (FISH) programme of the federal civil service to enhance affordable mass housing delivery just as the Mortgage Warehouse Funding Limited (MWFL) also came on board as a special purpose vehicle that serves to provide short term funding for financing primary mortgage originations.
Experts explain that there are problems with the country’s mortgage industry which, in their view, are fundamental. One of such problems is accessibility and the second one is clarity. Accessibility is a big issue because when a borrower approaches a mortgage bank for loan, the bank will begin to ask for things that he cannot provide. And these are things he cannot really provide in his life, meaning that, for such a person, mortgage is not accessible.
In terms of clarity, there is no unified system. Paul Onwuanibe, CEO, Landmark Group, explained to BusinessDay that there is no where government has published a mortgage rate which the mortgage banks have to buy into or a mortgage standard or process which the banks have to fit into.
“I don’t really know. It is obvious that there is no clarity in the mortgage system here and if there is any such thing, it is not yet published and so people don’t know and if people don’t know, it means such a process does not exist”, he posited.
Besides accessibility and clarity, there is also the problem of interest rate which is hard to take because a borrower with low income cannot take a long term mortgage loan with double interest rate. It is simply not viable. This is because if the loan seeker borrows at 20 percent rate, it means that every year, he owes twice as much, and that is how bad it is.
The implication of this is that if someone who has taken a mortgage loan is using it to build a house and he is building at a slow pace because his salary remains the same over the period, he will be in trouble because the rate will be rising whereas his income is static. His salary needs to rise at the same geometric progression with the rate for him to be able to cope. This is why experts advocate a legislation towards this process which, of course, depends on how the legislation is applied.
“In other societies, what happens is that you have a body set up that subsidises mortgage. It delivers this either through banks or by itself. In England they call this building society and they do a whole range of syndicating. So, the legislation around mortgage has to be fine tuned, implemented and advertised so that people can access it”, Onwuanibe advised.
The structure of the Nigerian economy is another major factor militating against the growth of the industry. According to Onwuanibe, “the basic principles of mortgage is that you must have steady income and in gainful employment. You must be able to provide income in multiples for the property that will be built for your use. If your income is N1 million, for instance, and the cost of the property is N1 million, unless you want to steal, you cannot afford that property because there is no mortgage for you at that rate given your income”.
Given Nigeria’s wide housing demand-supply gap, the country needs to do something quickly to grow its mortgage industry. According to MKO Balogun, CEO, Global Property and Facilities International, “for us to get out of here, the mortgage industry has to improve and developers have to be encouraged to build mortgage-viable and ready properties; interest rate has to be reduced to single digit and made available; the whole process of securing mortgage has to be made clearer and more transparent, and mortgage has to be available on the high street such that every time you go out looking for it, you see it”.
CHUKA UROKO
