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With NMRC, Mortgage Sector Will Witness Robust Players - Ogriki

September 3, 2014

Preye Ogriki, a former Finance Commissioner in Bayelsa State, is the Managing Director of Trans Atlantic Mortgages, a Bayelsa State-owned primary mortgage institution. In this interview with our Correspondent, Bamidele Ogunwusi, he bares his mind on the new Nigerian Mortgage Refinance Company (NMRC), the mortgage sector and the plans of his bank to face the future. Experts;

As CEO of a mortgage bank, how has industry players performed in the area of mortgage financing?

The performance of Primary Mortgage Banks (PMBs) in providing mortgage loans to Nigerians is very low indeed; the total deposits of mortgage banks nation-wide is less than 10 per cent of total deposits in the banking system.

Consequently, the ability of mortgage banks to make impact by providing mortgage loans is very limited. I think PMBs contribute less than 30 per cent of total mortgage loans in the country. In terms of number of loans, PMBs would dominate the market; but in terms of volume of loans, the commercial banks have the advantage of size.

After the completion of the recapitalization of PMBs in the country, what does the future hold for the sector?

After recapitalization, the future of PMBs and mortgage business generally is now more assured of continuity and sustainability. Indeed, the major benefit of the new policy changes by way of recapitalization of PMBs and the launch of the NMRC can be summarized in two words - sustainability and impactfulness. Before now, the going-concern status of most PMBs had been doubtfuland the mortgage sector had very little impact on society. The sector and all its operators were technically distressed as it were. This was most evident in the bottom line of most PMBs; very few PMBs were making profits. Even the ones which claim to make profits, the profit margins are way below the average rate of returns expected on their levels of capitalization. And to a large extent, this distress syndrome was rubbing off on the Government regulatory institutions in the sector, such as the FMBN and the CBN.

Going forward, the mortgage sector will witness more robust players with 'new capacities' to meet the needs of the market. The refinancing window which NMRC represents is another big opportunity for mortgage banks; the earlier phobia of running out of steam midway in the mortgage finance cycle which has an average life-span of 10-years is no longer there as a result of the availability of the NMRC and the FMBN which, between them, can take the market to the next level where we will be talking about housing bonds in the capital market with universal applications (ie open to all investors) for banks and the pension funds institutions. This promises enormous funds mobilization for the housing and mortgage sectors in the near future.

What in your opinion do you expect the NMRC to offer the sector?

The expectation of the public including myself is that the NMRC will offer the mortgage sector two sources of comfort. They are standardization of mortgage products and additional funding opportunities for mortgages and mortgage banks.

Standardization has the effect of making all mortgages look similar irrespective of the source or origin of the mortgage. It would make mortgage products look like shopping in an electronics shop where you have several brands of televisions but what you are sure of is that each of them will work satisfactorily when installed! It is really standardization that will act as the attraction and unlock the sources of investible funds from the pension funds and commercial banks into the housing and mortgage refinance sector in the future.

Another primary activity of the NMRC would be to use the bonds floated as a result of its standardization work to raise tier 2 long-term capital for mortgage banks. This will make it possible for PMBs to finance developers on the supply side as well as grant individual mortgage loans to customers on the demand side. And because this process is self-sustaining; it is assured of continuity and growth over time.

Can NMRC deliver in its promises of refinancing mortgages in the country?

In providing an informed answer to the above question, one would need to review the working model of the NMRC to see if the probability of its performance is self-evident. There are several reasons why it is most probable (about 90 percent in my opinion) that the NMRC will perform satisfactorily as a refinancing vehicle for mortgages in the country. The first reason is the fact that it is starting off with a sizeable long-term core capital, unlike commercial banks. Secondly, the NMRC enjoys the Sovereign Guarantee of the Federal Government of Nigeria. This implies that any debt note authorized by the NMRC is automatically of investment grade or what is commonly called 'prime investment grade' instrument. This implies that the NMRC will continue to attract funds from the capital market to fund its operations in the mortgage sector.

Thirdly, the composition of the NMRC is another strong factor that will ensure its longterm survival and continued operations. The institutions which have come together to set up the NMRC are in themselves, international benchmark champions of good corporate governance in action. The major reason for failure of Government financial institutions have been the lack of transparent good corporate governance in the administration of such institutions. The presence of international institutions in the Board of the NMRC such as the World Bank, the Central Bank of Nigeria, Shelter Afrique, ADB and other commercial banks and PMBs will definitely encourage the sustained practice of good corporate governance in the running of the NMRC.

In summary therefore, NMRC has access to funding options which is self-sustaining. Add to that the integrity and expertise of the Board Members and the practice of good corporate governance. Like I said earlier, what will come across as news is not that NMRC will perform creditably well in future, this outcome is very well expected by all stakeholders and public. What will be news indeed is really that NMRC is not able to perform? That will be news indeed and the world and Africa are watching to confirm which way it would be. I am however confident that NMRC will succeed and be a leading light for the mortgage sector in the years to come.

Do you intend to extend your branch network outside Yenegoa, Abuja, Calabar and Lagos?

As a company with strong Government interests, our immediate focus is the Niger Delta States. This is all the more so as the majority of mortgage banks are located in Lagos and Abuja, the two major cosmopolitan towns which account for about 80 per cent of the property business in Nigeria.

However, as part of the corporate goals of the company, we intend to set up offices in all the Geo-political zones in the country in the near future.

What is your advice to Nigerians who are not currently patronising PMIs?

The options to do business with PMBs will grow increasingly post-consolidation; it is only a matter of time (and it won't be more than 36-months from today) when the average Nigerian will have a home-ownership account with a mortgage bank. The reasons are: firstly, mortgage banks will be fully liquid after consolidation; they will snap-up a lot of the new mortgage opportunities in the market which will bring them closer to the banking public. Secondly, in terms of pricing, the commercial banks cannot match the mortgage banks; mortgage loans from PMBs will continue to be cheaper because of the lower overheads of PMBs. Thirdly, the PMBs will be having unmitigated access to long term funding provided by the NMRC and the FMBN. PMBs would not be 'running-dry' again after utilizing their new capital; they have the opportunity to 'reload' from the NMRC as it were. Finally, commercial bank deposits are short-term in nature; they cannot compete with PMBs to create long term mortgage loans with their deposits.

The result is that gradually, the public will become more reliant on PMBs as a source of funding for mortgage loans in Nigeria. If you situate this within the context of the up-coming housing boom in Nigeria, my advice to Nigerians is to get ready with their title documents because the scenario described above will surely come to pass.

What are those things your bank possesses that will make any Nigerian do business with you?

For Trans Atlantic, our most important resource is our staff and management. Our committed staff, supported by technology, gives us the edge in providing customized services to our customers. That is our winning edge.

Can you tell Nigerians your projections for the bank in next five years?

In the next three-years, Trans Atlantic will be holding a National License and will be a listed company in the Nigerian Stock Exchange. In three years, we should be very visible and constant in the National radar of both the CBN and the NDIC. In five years, we should have transformed to become a dominant mortgage player in the South-South and South Eastern States; and with greater visibility and presence in Lagos, Abuja and the North Central states.

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Source: AllAfrica

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