CONSOLIDATION/REFORMS OF THE MORTGAGE BANKING SECTOR IN NIGERIA
Mortgage Banking Association of Nigeria (MBAN)
By April 30, 2013, the Primary Mortgage Banks are expected to be fully recapitalised according to the new CBN Revised Guidelines for Primary Mortgage Banks in Nigeria that had categorised Mortgage Banks into National and State Authorisation Licences. The National PMBs must have Paid-Up Capital/Shareholders’ Funds (Unimpaired By Losses) of N5 billion and can operate in all the 36 States of the Federation, while the State PMBs are required to have a minimum of N2.5 billion and can operate in only One (1) State.
The Mortgage Banking Sector Consolidation/Reforms were initiated by the Central Bank of Nigeria (CBN) to stimulate the growth and sustainability of the Sector and is the last pillar in the Financial Services Industry. The recapitalisation would address some of the issues that have plagued the Sector such as; dearth of long-term funds, short tenure, high cost of funds, lack of standardisation and more. It would also boost the Nigerian Citizens’ confidence in the Sector and its players, as well as provide a good basis for the pursuit and attainment of affordable housing for Nigerians by Year 2020.
The Mortgage Banking Sector Consolidation would also enable the PMBs with improved Capital Base to be suitably poised to finance home ownership delivery, facilitated and supported by an enhanced ability to create mortgages through post-consolidation access to refinancing through the Mortgage Refinancing Company i.e. The Liquidity Facility Vehicle, and perform optimally towards satisfaction of their numerous customers.
Some other benefits would be the entry of Professional Mortgage Brokers who would be operating within a newly recapitalised and rejuvenated Sector, thus creating more/better mortgage products. The introduction of Mortgage Default Insurance as Credit Enhancer would also catalyse a downward slide in interest rates at longer tenures and enhance accessibility of the lower/informal income group to housing finance products as well as bring about increased inflow of Foreign Direct Investments (FDIs).
Governments around the World and more importantly in Emerging Economies have come to the realisation of the importance of housing finance as a veritable tool that can unleash exponential growth in their economies once properly harnessed. Hence the Central Bank of Nigeria (CBN), Ministry of Finance and the Ministry of Lands, Housing and Urban Development are working in close consultation with MBAN to create the Policies that would foster an enabling environment for the Mortgage Banking Sector in Nigeria to thrive with a view to creating employment, wealth and sustainable development.
The CBN recently stated that, “if the reform initiatives are as successful as expected, loans sizes and tenures would increase tremendously, interest rates would become lower and eventually at single digit, housing stock would increase exponentially, and mortgage insurance would become a key product for insurance companies”.
Consolidation would increase Mortgage Loan Portfolio as a percentage of the Gross Domestic Product (GDP) from the present 0.5% to about 15%, making it comparable to what obtains in other emerging economies. Mortgage Loans would also rise from the existing 20,000 to 200,000 within the next Five (5) years.
The Mortgage Banking Sector Consolidation/ Reform is bound to create an enormous chain of benefits within the Sector, but Mortgage Banks must do their part by addressing internal challenges such as: mortgage products, capital inadequacy and human capacity building to ensure that they can meet their core objectives and remain sustainable.
Following above therefore, the Mortgage Banking Association of Nigeria (MBAN) in close counsel with the Primary Mortgage Banks (PMBs) are working assiduously to address those internal issues, in our collective bid to be the arrowheads for sustained development of the budding Mortgage Banking/Housing Finance Sector in Nigeria. It is our strong conviction that in no distant future, our sector would prove its worth to the Nigerian Public.