The Governor, Central Bank of Nigeria (CBN), Godwin Emefiele on Wednesday urged the judiciary to speed up the processes for deciding on mortgages and commercial disputes as way of fast-tracking the growth of the housing finance sector in Nigeria.
Emefiele said a critical constraining factor in mortgage development in Nigeria is the difficulties in enforcing mortgage contracts and foreclosure on properties in local courts.
“This is somewhat attributable to court congestion and the resulting slow adjudication process which is a key deterrent to mortgage financing,” he stated.
He said it is generally acknowledged that one of the modern-day determinants of development in any environment is the effective protection of property and contract rights, and that this in itself requires a modest legal infrastructure embedding precise rules that are easily enforceable.
Citing other climes like the USA and Europe, Emefiele said mortgagees know that failure to pay on their mortgage results in drastic consequences such as the right of immediate take-over of the property through foreclosure. “In Nigeria, this is not the case and -therefore discourages banks from granting mortgage financing to clients.”
Emefiele was speaking in Abuja at a workshop for judicial officers on mortgage, where he delivered a keynote address. The theme of the workshop was “Mortgage Disputes in Nigeria: The Need for Expeditious Resolution of Case”.
He referred to the 2016 Report of the Center for Affordable Housing Finance in Africa which indicated Nigeria as having just an estimated 25 percent homeownership rate. “Interestingly, the report highlighted legal and administrative constraints, rather than lack of funds or programmes, as some of the major issues constricting the growth of home ownership in Nigeria,” the governor stated.
Emefiele said the 2016 World Bank Group Report on Ease of Doing Business ranks Nigeria 139th out of 190 countries in the area of “Enforcement of Contracts’ partly due to the length of time and significant expenses involved in the litigation process.
He said the poor ranking discourages both local and foreign investments including into the mortgage financing sector.
According to him, lenders have, over time, become wary of the delays and uncertainties which often characterize simple mortgage disputes such as a claim for repayment of mortgage loans, exercise of the power of sale, appointment of a receiver, foreclosure, to mention a few.
There is also the limited access to housing and mortgage financing, which he said is further exacerbated by a general lack of understanding of the mortgage concept, and the possible benefits, like the tax rebate which may be enjoyed by a mortgagor in the Nigerian environment.
Emefiele also attributed difficulties in delivering affordable housing to low and middle income households which were in greatest demand for housing as another major drawback.
In addition, the Governor identified limited access to housing and mortgage financing, slow bureaucratic procedures in land administration and high cost of land registration and land titling, as well as high rate of population growth, which he said at an estimated annual growth rate of 2.44 percent considerably outstrips its housing supply. He also said the high rate of rural-urban migration and high cost of construction as other problems militating against the robust development of housing and mortgage sectors in the country.
While advocating for more protection of property and contract rights, the Governor commended some states in the Federation that have undertaken reforms aimed at improving access to courts. He expressed optimism that the initiatives being championed by the Nigeria Housing Finance Program (NHFP) would present viable models for tackling teething problems confronting the housing sector in the country.
Onyinye Nwachukwu, Abuja
