A worrying situation in the Nigerian mortgage market at the moment is that despite the liquidity in the market, home seekers cannot get loans to buy, build or renovate existing houses.
This means that home seekers’ inability to get loans from mortgage lending institutions is not necessarily because there is no liquidity in the system or because they are not in paid employment which is a major principle of mortgage lending and borrowing.
The primary mortgage banks (PMBs), for instance, are not giving out loans despite all the funds at their disposal from the refinancing of their loans by the Nigerian Mortgage Refinance Company (NMRC). Borrowers are not getting loans from these banks because they have chosen to operate in a narrow, limited market.
“I don’t think the problem of the PMBs is capital. Most of them would tell you they won’t lend to borrowers outside Lagos, Abuja and Port Harcourt where you have more credible customers and understandable landlords. So, you see their market is very limited and narrow,” explained Kola Ashiru-Balogun, managing director, Mixta Nigeria.
He noted that, even in those markets, not many companies are there that their employees can comfortably take up mortgage at 21 percent per annum and be able to pay back.
The companies that can do that, according to him, are very few. “If you take out the oil and gas, and telecoms, nothing is left. Even banks employees cannot afford such loans because the banks are not doing well at the moment. They really need to do something like consolidation in that industry,” he said.
A good number of the PMBs had their loans totaling 1,045 refinanced by NMRC which said it refinanced these banks to the tune of N18 billion as at December 2018. “NMRC has refinanced 1,045 loans so far with the N18 billion they raised between 2015 and 2018,” a board member told BusinessDay.
Kehinde Ogundimu, the Managing Director and Chief Executive Officer of NMRC confirmed this in a statement that “NMRC has refinanced mortgage loans totalling N18 billion as at December 2018.”
He said the refinancing of the PMBs was in line with the company’s mandate to promote affordable home ownership in the country by leveraging funding from the capital market to deepen liquidity in the primary and secondary mortgage markets.
Primary mortgage operators also confirmed to BusinessDay that their loans had been refinanced by NMRC. “We have been refinanced by NMRC but the funds really grew in 2018,”Aderemi Apatira, Head Corporate Communications and Brand at Infinity Trust Mortgage Bank , said.
In the same vein, Adeniyi Akinlusi, president of Mortgage Bankers Association of Nigeria (MBAN) and CEO, Trustbond Mortgage Bank, affirmed that NMRC had been refinancing primary mortgage banks.
“I am aware they are refinancing primary mortgage banks but the total amount that has been used for refinancing so far, I do not know,” Akinlusi said. Asked if the PMBs were using the finance from NMRC Akinlusi answered, “yes we are; we are creating mortgages.”
It is clear from the foregoing that the problem of the PMBs is not really liquidity as the banking public are made to believe. Their problem, instead, is a matter of choice which they have made.
This explains why Nigeria remains one of a very small group of economies where home seekers fund their home purchase from own savings whereas, in most other economies, people buy homes through mortgage loans advanced to them by mortgage-lending institutions.
“The mortgage industry here is fragmented. I am hearing of some recapitalization going on for them which is very positive because we expect to see a stronger mortgage institutions in the country. But one thing is sure. The business is difficult,” Ashiru Balogun said.
He noted that, though the mortgage banks get their funds from NMRC and even if they get those funds at 14 percent, there is no way a borrower can get a loan from them at 10 percent because they must still survive and make profit for their shareholders.
He is of the view that Nigeria should understand that housing is critical and has capacity to drive the economy. If that is done, he argued, the country should find a way to drop the interest rate below 10 percent in order to make it attractive and even accessible.
“If you are able to drop that rate by way of investing what is used in building housing inefficiently, you would have done a lot of services to the people. You will be surprised at the number of mortgages that could be created for the people.
When that is done, mortgage becomes not only available, but also affordable. When that is done too, there will be more housing supply because more developers will build knowing that more people will be able to buy through mortgage.