News Column

Tackling Deficit in Housing Sector

January 27, 2014

Festus Akanbi

The launch of the Nigeria Mortgage Refinance Company last week will not only bring about effective mortgage financing in the country but will also raise activities in other sectors of the economy. Afortnight ago, President Goodluck Jonathan administration promised to tackle problems militating against a regime of a functional housing delivery in the country. To show its seriousness in the new housing policy, the vehicle for an efficient housing delivery-the Nigeria Mortgage Refinancing Company -was launched. In order to get the fund needed for the project, the company will sell bonds in capital markets and provide long-term financing to lenders that will help them extend more home loans. According to plans, the company will help extend maturities for Nigerian home-buyers to as much as 20 years, encouraging the building of 75,000 new homes a year and creating at least 300,000 jobs, a statement from the government said. Actual commencement of operations is expected in the second quarter of the year. The problem of housing in our urban centres is not only restricted to thequantity of housing stock, but also to the quality of available housing units,infrastructure and the environment. The result is manifested in growingovercrowding in homes, neighbourhoods, communities and increasingpressure on infrastructural facilities such as roads, drainages, power supply and rapidly deteriorating environment. The scenario is slightly different in the rural areas where the problems are primarily, not just that of inadequate quantity of housing units, but also that of inadequate and poor infrastructural facilities, such as roads, drainages, water, power supply and basic social amenities (schools, healthcare facilities, etc). Housing Policy In February 1991 , the first National Housing Policy was launched. The document stated that the ultimate goal of the National Housing Policy was to ensure that all Nigerians owned or had access to decent, safe and sanitary housing accommodation at affordable cost by the year 2000. The overriding consideration of this policy is the revitalisation of the housing sector to enable it serve as a catalytic instrument for ensuring rapid and effective socio-economic development. Of immediate and crucial need are the creation of job opportunities and the reduction of poverty. Unfortunately, nothing much could be seen as far as the growth of mortgage sector is concerned. According to the Interim Managing Director of the Nigeria Mortgage Refinance Company Limited , Mr. SonnieAyere, Nigeria had about 200,000 mortgages in a country of about 170 million people, which obviously is less much than 1% of GDP, a very poor statistic when compared to other frontier or emerging market depending on where you see Nigeria . The deficit, according to him, gave birth to the NMRC, which he said is here to help reposition the financing structure of the industry and hopefully be a centerpiece for assisting with solutions to solving the two other pillars of the industry which are prolonged periods to effect title registration and the inability to foreclose in the event of default. Finance Minister's Optimism The prime mover of NRMR and the Coordinating Minister for the Economy and Minister of Finance, Dr. NgoziOkonjo-Iweala had allayed fears that the emerging mortgage firm would not replicate the negative experiences of customers of the Federal Mortgage Bank of Nigeria whose contributions did not derive commensurate returns. At a meeting with some governors recently, she had assured that strong measures are being put in place to ensure that the bad experiences of the past are not repeated in the NMRC. At a special interactive session with THISDAY editors sometimes last year, Okonjo-Iweala, who incidentally is the brain behind the initiative, had expressed the determination of the current administration to address the deficiency in the housing sector, an action which the minister said would unleash development in virtually all the other sectors of the economy. Governors' Commitment It was gathered that discussions at a recent meeting held focused around getting the governors committed to providing the necessary infrastructure critical to driving the new mortgage policy and particularly easing the current difficult process of land ownership at the state level. The state governors are also expected to willingly enter into some kind of arbitration or foreclosure agreement so that for the people in their states who get the mortgage but fail in their payment obligations, the bank can foreclose. Okonjo-Iweala had earlier informed that the volunteer states met certain criteria like showing readiness to comply on the issue of land title and to ease the time it takes to fully own a land from the present months or years to say weeks. Creating Market Efficiency Managing Director, Financial Derivatives Company , Mr. Bismarck Rewane , explained that the government measure would "help establish a long-term yield curve for pricing financial assets, which has been lacking. "The new company will create "initial market efficiency followed by market sophistication," he said. The Federal Government has, over the years, made attempts to expand financing to help address a housing deficit in the country. For instance, the Federal Mortgage Bank of Nigeria said last month it was in talks with two Chinese lenders for credit of as much as $6 billion . In November, the government accepted a $300 million loan from the World Bank's housing unit. Job Creation When the housing and construction industry booms, it creates additional jobs for architects and masons, for electricians and plumbers, for painters and interior decorators, and for those in the cement and furniture industries. The minister therefore sees the launch of MRC as a sure way of invigorating the housing and construction sector. NMRC is expected to increase liquidity in the housing sector, provide a secondary market for mortgages, and thereby increase the number of people able to purchase or build homes at an affordable price in the country. According to the blueprint, the programme will begin in 14 pilot states where the state governors have agreed to provide fast-track land titles, foreclosure arrangements, and serviced plots and if things go according to plan, NMRC will help create over 200,000 mortgages over the next five years at affordable interest rates. In order to provide for those at the lower end of the economic ladder, there will be an expansion of mass housing schemes through a re-structured Federal Mortgage Bank and other institutions to provide rent-to-own and lease-to-own options. This will help ensure more hardworking Nigerian families will be able to realisetheir dream of owning a home. According to the finance minister, the World Bank is assisting the federal government to set up the company with a financial support of $300 million (N48billion) soft credit, which has zero rate interest, 10 years of grace and 40 years repayment period. She noted that the new institution would enable Primary Mortgage Institutions (PMIs) have access to more liquidity and create more mortgages for Nigerians to access and own their houses at cheaper rates.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: AllAfrica

Story Tools