The Federal Mortgage Bank of Nigeria (FMBN) occupies a strategic position as a proven institutional enabler of affordable housing delivery to Nigerian workers. The apex mortgage bank provides mortgage loans at single digit interest rates that are as low as per cent per annum. Open market interest rates range from 22-25 per cent.
Secondly, it is the only institution that accommodates long- term housing loan payback periods of over 30 years. This is quite significant. For a long time, maximum tenors for housing loans offered by private sector players capped at five years. In part, because financial institutions largely relied on short-term deposits.
In the last couple of years, however, the Nigeria Mortgage Refinance Company (NMRC) has bolstered the liquidity position of mortgage lenders with longer term funds sourced from the capital market. As a result, they have in the recent past started offering housing loans with tenors of up to 20 years.
Another distinctive feature of FMBN’s suite of affordable housing products is its ability to offer zero equity requirement for loans below N5 million, and a maximum of 10 per cent equity for loans ranging from N5 million to N15 million. These terms are, unarguably, without competition in the Nigerian housing market. Together, they have over time fortified the bank’s unique status as the leader in the delivery of affordable housing to Nigerian workers.
Beyond these unique housing offers, FMBN also accounts for majority of housing loans and real estate development projects. As at date, the bank has disbursed housing loans totaling over N265 billion. The N265 billion represents an increase by over N112 billion or 74 per cent over the N152.5 billion, which the current management met in early 2017.
Also, it has funded the construction of over 29,133 housing units in collaboration with reputable property development companies across the country since inception. Within the last three years alone, about 8,700 new homes have been added, representing a growth of 43 per cent.
The paradox of potential versus expectation
Of course, these numbers are quite small when weighed against the massive housing deficit that experts estimate to range between 17-22million units. However, this is not much of a surprise given the limitations, which the bank has faced over the years. Housing analysts and stakeholders familiar with the Act establishing the bank and trends in the housing industry opined that FMBN would have recorded greater achievements and impacted the housing deficit more if two key factors were addressed properly.
One is adequate capitalisation and two, a stronger National Housing Fund (NHF) scheme. At the core of these two pivotal factors is finance – the inadequacy of it. Catalysing housing development requires capital intensive.
This argument has strong merit at many levels. Take the size of the bank’s capital base for a start. Statutorily, the FMBN is supposed to have a total capitalisation of N5 billion – a sum that is still grossly inadequate given its mandate.
Some of the mortgage institutions that the bank on-lends to have even higher levels of financial capitalisation than it does. Even at that, it is only 50 per cent of the FMBN’s capitalisation that is actually paid up by its principal shareholders, which includes the Federal Government of Nigeria (FGN), the Central Bank of Nigeria (CBN) and the National Social Insurance Trust Fund (NSITF).
While the federal government has redeemed its portion of the shares amounting to N2.5 billion, the CBN and the NSITF are yet to put down the cash value of their 30 and 20 per cent shareholdings respectively. Several efforts over the decades to ensure redemption have failed.
This strengthens the premise that that the core of the bank’s growth drawback is inadequate empowerment. Expectedly, this longstanding systemic handicap has in great part constrained the FMBN’s capacity to leverage housing finance – locally and internationally – with consequential implications on its drive to boost housing development and counter the housing deficit.
The second plank of the argument bordering on the National Housing Fund (NHF) scheme is also quite vital. The NHF, which serves as a key financial pillar of the FMBN has a rather weak base. When the scheme was conceived and established in 1992, it was designed to have several strong self-sustaining avenues for mobilizing on a large scale, low-cost, long-term funds that will support the provision of affordable housing loans to low and medium income Nigerians that are payable over longer periods of time.
This includes the mandatory monthly contribution of 2.5 per cent of workers’ salaries, investments in the scheme by commercial and merchant banks of 10 per cent of their loans and advances. Likewise, insurance companies were required to invest in the scheme. As the owner of the bank, the federal government was also obliged to periodically inject funds into the scheme to bolster its ability to function as a more effective tool for housing development, a key state objective.
Unfortunately, gaps in the program’s legal enforcement framework compromised the potency for impact. Over the years, commercial and merchant banks have failed to comply with the provisions of the Act. The federal government too has also over these decades not lived up to its obligation to periodically inject massive capital into the scheme. The NHF has only relied basically on the 2.5 per cent monthly contributions from workers’ salaries to drive its operations. In the face of these clear violations of the NHF Act by principal players, there appears little that could be done to enforce compliance using existing laws. What is clear however is that given the resources pooled from contributions from workers under the NHF, the FMBN has indeed posted proportionally commensurate results.
source: thisdaylive.com
