Even as the Central Bank of Nigeria (CBN) has taken some steps towards boosting housing provision, Nigerians are gaining momentum. The 1978 Land Use Act, however, remains a major impediment towards achieving the target.
In mid-2017, the CBN launched its Nigerian Housing Finance Programme (NHFP), popularly known as “My Own Home. The scheme, a Public-Private Partnership (PPP) arrangement, is targeted at providing mortgages, mortgage guarantee and insurance as well as housing microfinance to the Nigerian populace.
Stakeholders backing the scheme include Federal Ministry of Finance, World Bank, Federal Ministry of Power, Works and Housing, the Federal Ministry of Justice and Mortgage Banking Association of Nigeria (MBAN). MBAN is participating in the scheme through equity stake in Nigeria Mortgage Refinance Company (NMRC).
Expectedly, the scheme would scale up mortgage and housing finance awareness through mortgage literacy, customers’ rights, responsibilities and education.
Every Nigerian from age 21, irrespective of trade or occupation that meets the borrowing requirements of a mortgage or housing microfinance bank are eligible for the scheme.
Then, few weeks ago, the CBN got $300m credit line of financial aid from the World Bank World Bank, to enhancement mortgage activities in the country.
Specifically, the $300 million lifeline credit to the country secured for the Nigerian Housing Finance Programme (NHFP) is targeted at boosting mortgage finance and refinancing.
The credit line, announced by CBN recently, will provide a guarantee to allay the fears of the mortgage institutions about non-repayment by the beneficiaries.
But how can these initiatives go to make appreciable impacts in reducing the nation’s housing deficit to about 17 million, particularly, with the current Land Use Act regime that has been a source of concern to industry players?
Admitting Land Use Act as an impediment, the CBN beside given a guarantee for the loan facility, in partnership with the World Bank and the Nigerian Mortgage Refinancing Company (NMRC), the Federal Mortgage Bank of Nigeria (FMBN) as well as the Federal Ministry of Justice, flagged off the review of the Nigerian Land Use Act.
The step is geared towards removing obnoxious clauses that impede investment in mortgages and create a fertile ground for growth, as is the case in other climes.
Essentially, the review is seeking a new model mortgage that will also address the knotty issues of foreclosure.
The brainstorming was examined under the theme: “Creating an enabling environment for the growth of the housing and mortgage sector: The need for land and law reform”.
Tokunbo Martins, the Director of Banks and Other Financial Institutions Supervision Department of CBN, said that the apex bank “is underwriting part of the $300 million risk of the NHFP.”
According to her, “CBN is the project implementing entity of the NHFP and the NHFP is meant to re-fund the primary and secondary markets for mortgages. It is a public-private partnership and we have a loan from the World Bank. So, CBN itself is not putting anything indirectly.”
Similarly, Adedeji Jones Adesemoye, the Head, Nigeria Housing Finance Programme domiciled in CBN and Head of the Implementation Team, revealed that “the major driver of the programme, NMRC, funds (N8.2 billion and N11.1 billion) from the Nigerian capital market to refinance the mortgages that have been financed by Primary Mortgage Institutions.”
Also, Mrs. Chii Akporji, a Director at NMRC, said modern mortgage basically requires certain steps that state governments need to take in order to create the enabling environment for mortgages and housing investment to thrive.
According to her, “there are number of steps, essentially looking at issues of land titling, property registration, instituting a foreclosure mechanism, that are the key things that state governments are asked to look into with a view to reforming it.”
Meanwhile, the apex bank is considering a pilot feasibility study, which will lead to the establishment of a mortgage guarantee scheme that provides credit loss protection to lenders in case of borrower default.
Tentatively christened Nigeria Mortgage Guarantee Company (NMGC), Central Bank of Nigeria (CBN) is promoting the scheme in collaboration with World Bank and other stakeholder partners under the Nigeria Housing Finance Program (NHFP).
The scheme guarantee products by incentivising lenders to accept loans with lower down payments; thus increasing affordability; ensures robust primary mortgage market to affect affordability and access for intending buyers.
The products exist in various forms and are administered by different agencies.
CBN’s Director, Other Financial Institutions Supervision Department, Mrs. Tokunbo Martins explained “mortgage guarantee is a product of great value to any housing market because it is a tool of opportunity for both the supply and the demand sides of the mortgage market.
“It provides potential opportunity of lower down-payment for borrowers while opening up a larger market for lenders who make the decision to finance the target population for the programme.”
Martins said that the NHFP is working with its consultants to complete feasibility studies and generate a business plan,“The business plan is in finalization stages, and we expect to present it to the industry/public in the last quarter of 2018.”
She revealed that the consultants, while cautiously optimistic about the viability of the project, have identified multiple constraints to its success, several of which we are already familiar with.
According to her, the biggest constraint is, of course, the 1978 Land Use Act.
“While we all understand that it would take a constitutional amendment to update the Act, certain administrative options have been identified to soften its draconian impact, especially at state levels.
The benefits of passage far outweigh the constraints so it makes financial and administrative sense for the programme to be tested for suitability and viability.