On incremental basis, new thinking is coming into the Nigerian housing and mortgage sector with the aim of facilitating access to finance and, by extension, increasing housing affordability for home seekers.
When the National Housing (NHF) Scheme was launched by the federal government, the aim was to create a window for the country’s working class and other citizens who have identifiable and regular income to have access to mortgage loan to enable them buy, build or renovate their houses.
By the provision of the Act that established it, about 25 years ago, NHF entitles all Nigerians aged 21 years and above, who are in paid employment, to a low interest, government funded loan. Those who subscribe to the scheme contribute 2.5 per cent of their monthly salary through the Federal Mortgage Bank of Nigeria (FMBN).
Before now, the maximum loan amount obtainable under the scheme was N5 million but that has been increased to N15 million. The borrowed capital is repayable over a maximum of 30 years, depending on the age of the borrower, at 6 per cent interest rate.
Available record shows that total contribution to the fund, from 4.14 million registered contributors, hit N191.9 billion in March 2016. About N5.9 billion has been refunded to 118,284 individuals, while over 70 per cent of the cumulative collection was recorded in five years. To its credit and that of its managers, NHF has financed the construction of 25,606 housing units and advanced 16,506 mortgage loans.
However, primary mortgage bank operators say the fund has not fared well in its operations. Acting under the aegis of the Mortgage Banking Association of Nigeria (MBAN), the operators are pushing for a re-engineering of the fund and are, therefore, proposing a board of trustees that will facilitate the mobilization of fund for the provision of houses for Nigerians at affordable prices.
MBAN explains that the new scheme is aimed to ensure constant supply of loans to Nigerians for the purpose of building, buying or renovating residential houses as well as providing incentives for the capital market to invest in property development.
Currently, an NHF Bill 2017, which aims to repeal Act CAP 45 laws that set it up, is on the floor of the National Assembly. The Bill still wants FMBN to continue to manage and administer the fund, but MBAN in its current push is recommending that the National Assembly restructures the NHF into the National Housing Trust Fund (NHTF) scheme to enhance its integrity and to make access to loan easier and more affordable.
The association, essentially, wants the role of the FMBN to be limited to managing the fund for a fee while the overall policy formulation and supervision of the fund rests with the proposed board of trustees. This is aimed to capture, retain and maintain the continued confidence of stakeholders, particularly contributors.
MBAN explained that the proposed NHTF board should be different from the board of the FMBN to allow proper accountability and to achieve the goal of affordable housing for Nigerians.
The Bill still on the floor of the National Assembly has a number of provisions MBAN may not be quite comfortable with, especially the aspect that empowers the minister to determine terms and conditions for loans from the fund as well as specify the conditions and terms of repayment of any loan obtained from the fund.
The Bill says any loan granted by FMBN to a mortgage institution will be secured by a block of existing mortgages under cover of sales and administration agreement to be executed between the supervisory bank and mortgage institution.
It adds that a Nigerian worker earning an income of say, N10, 000 and above per annum in both the public and the private sectors of the economy will contribute 2.5 percent of basic monthly salary to the Fund.
An interest rate of 4 per cent will be payable on the contributions. A commercial or merchant bank has to invest 10 percent of its loans and advances in the fund at an interest rate of 1 per cent above the interest rate payable on current account by banks.
In the same way, the Bill will require every registered insurance company to invest a minimum of 20 per cent of its non-life funds and 40 per cent of its life funds in real estate development with the expectation that not less than 50 per cent will be paid into the fund through the FMBN at an interest rate not exceeding 4 percent.
The Bill also states that all registered Pension Fund Administrators will invest a minimum of 10 percent of their pension funds and assets in real estate development, while the federal government will make adequate financial contributions to the fund for the purpose of granting of long term loans and advances for housing development.
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