Private Mortgage Banks Recapitalisation: Panacea for adequate housing delivery
by Fagbamila Johnson
It is estimated that Nigeria is bedeviled with a 16 million units of housing shortfall. That is, 16 million housing units that are supposed to be in place that are not there. For a long time, government has been paying lip services to the provision of affordable houses.
In the 80s and early 90s, the slogan was “Housing for all by the year 2000”. Year 2000 has come and gone for over a decade now. Yet we have deficit of about 16 million housing units in Nigeria.
In other to tackle this this problem headlong, the Mortgage Banking Association which consists of all Primary Mortgage Banks operating in Nigeria combined together and took up an initiative.
The initiative is to establish a new National Mortgage Corporation. The National Mortgage Finance Corporation similar to the Federal Mortgage Bank, because the mortgage banks felt that the Federal Mortgage Bank has failed them.
To this effect, the World Bank is to commit about $300m towards the project. The Primary Mortgage Banks, on their parts have also committed about N25B to the establishment of that specialized bank which is to provide liquidity for the housing sector in Nigeria.
They deemed this very important because without liquidity the sector cannot move forward.” These were the words of the Managing Director, Chief Executive Officer, Trinity savings and Loans, Mr. Sam Daisi Olisa, while shedding light on Private Mortgage Banks Recapitalization programme recently announced by the government.
”If you create mortgage, that is, you spend your equity as a mortgage bank to fund equity and there is nowhere to refinance before you sell, that means you tie money down. There is every likehood that you may not sell at a very good price and the investment would go bad.”
He explained further that consequently, the Mortgage Banking Association of Nigeria now put the initiative to organize an institution, sort of a parallel organization to the Federal Mortgage Bank that would meet the needs and aspirations of Mortgage Banks particular in the provision of capital and provision of liquidity.
President Goodluck Ebele Jonathan laid it bare recently at the launching of the Eko Atlantic City, where he reiterated that there was a new Corporate Finance Institution which initiatives are those of Federal Mortgage Finance Institutions that would address the issue of the provision of liquidity to the housing sector in Nigeria so that the 16 million unit gap would be met.
Olisa said this sounded very simple as the member banks, the Private Mortgage Banks will be shareholders in the new Mortgage Finance Corporation where the World Bank had agreed to commit 300 million dollars, the Federal Government, through the Federal Ministries of Finance, and Housing and Urban Development, would also commit a lot of money. He explained further that that the Central Bank would also commit a lot of money to the new organization and that this would go a long way in solving the housing problem in Nigeria.
He explained further that the member banks, that is, the private mortgage banks were also taking up shares so it would go a long way in turning around the fortunes of the mortgage sector.
Olisa, while explaining further that the recapitalization of the Private Mortgage Bank said the Central Bank of Nigeria, (CBN) maintained that for Mortgage Banks to be able to do business in Nigeria, the equity capital most increase.
He said hither to, the equity capital used to be N100m but now it has been increased to N1.5b for those who are operating in one state or N5b for those who are national in outlook, that is, operating in more than one state and the Federal Capital Territory.
“This is a lot of money. But the reason for doing this is understandable because if you are going to borrow N2 or N3billion to complete a master piece estate, that will enhance your capacity to borrow. Your share capital must go up. That is the situation going on and the deadline for recapitalization as at today is 3oth April, 2013,” he said.
On what to expect from the mortgage sector from the arrangement being put in place, Olisa said with this new arrangement being put in place, there would be a formidable mortgage banks, that are adequately capitalized, and that there would also be the new corporation in place with the Government and World Bank and other stake holders putting money in there. This monies, he said, would be used for both capital and liquidity purposes.
“I think the future of the housing sector is bight,” he enthused.
He however cautioned that this would not be the first time the government would be promising to do one thing or the other only to renege on the promises, saying “again, we hope the government will follow it to the letter and this programme will not be jettisoned.”
He continued that although the country’s history was littered with good plans accompanied by bad implementation, this particular programme would work if proper things were put in place to make it a success.
“It is a general believe that implementation is a problem for us in Nigeria. We know how to articulate very well especially on paper but when it comes to implementation, because of our selfish end, we try not to make it properly. Somebody who has been made a Management Director will now look at it and say this is an avenue for him to make money and will not implement projects very well. It is very unfortunate. But this programme that is coming up now, if it properly implemented, and is supported by all and sundry, then we will succeed,” he said.
