The Primary Mortgage Banks that are shareholders of the Nigeria Mortgage Refinance Company (NMRC) have approved an increase of its share capital from N1 million to N18 billion. Also, the chairman of the company and its chief Executive Officer, appraised the company’s performance at its 1st Annual General Meeting, which held in Lagos, recently, reports Bennett OghifoBusiness at the first annual general meeting of the Nigerian Mortgage Refinance Company (NMRC) was swift and decisive. Chief Executive Officers of the Mortgage Banks that are shareholders in the company took turns to comment on the resolutions brought before them.
The chairman read some special resolutions, including the increase of the company’s share capital. He said, “That the increase of the Share Capital of the Company from N1,000,000 (One Million Naira) comprising of 1,000,000 (One Million) Ordinary shares of N1:00 (One Naira) each to N8.500,000.000 (Eight Billion, Five Hundred Million Naira) comprising of 8,500,000,000 (Eight billion, Five Hundred Million) Ordinary shares of N1:00 (One Naira) each, be and is hereby ratified.
“That Clause 6 of the Memorandum of Association of the Company be and is hereby amended to reflect the new authorised Share Capital of N8,500,000,000 (Eight Billion, Five Hundred Million Naira) comprising of 8,500,000,000 (Eight Billion, Five Hundred Million) Ordinary shares of N1:00 (One Naira) each.”
They had earlier received the audited financial statements for the year ended December 2014 and the Reports of the Directors and Auditors of the company.
They also approved the appointment of KPMG Professional Services as the Auditors to the Company from the end of the Annual General Meeting until the end of the next year’s Annual General Meeting.
Mr. Herbert Wigwe, interim Chairman of NMRC, in a statement at the meeting said, “The future though challenging, remains very bright.” The Nigerian economy…
Wigwe elaborated on the nation’s economy, saying “According to Nigeria’s National Bureau of Statistics, the country’s Gross Domestic Product (GDP) growth rate in 2014 was estimated at 6.23%, a great improvement from the 5.49% recorded in 2013. The non-oil sector remained the major driver of growth in 2014, recording a peak 8.21% year on year growth.
“In 2014, Headline Inflation opened at 8.0% and remained consistent until June. The lowest points were recorded in February, where the headline rate was recorded at 7.7% and peaked in August 2014 to 8.5%. This Inflation rate remains lower than that recorded in 2013, where maximum Headline Inflation rate was as high as 9.5% in February 2013. With the decline in crude oil prices in the fourth quarter of 2014, the Nigerian economy has been on a downward slope in response to declining crude prices, The supply gap in the foreign exchange market also widened as the demand for US Dollars continues to overtake supply, resulting in the depreciation of the Nigerian Naira.
Under the period in review, the first tranche of equity raise of N7.05 billion was completed. NMRC is currently negotiating the terms of a subscription of its shares with the IFC and Shelter Afrique. NMRC is currently completing the outstanding condition precedents to the subscription, which are nearly fulfilled, with finalisation occurring soon.
NMRC is currently in discussions with the IFC on the term sheet. A Letter of Understanding (LoU) was executed on 15th of September 2014, between the NMRC and IFC setting out certain arrangements with respect to corporate governance and other incidental matters, which the NMRC and its Board of Directors have agreed to implement. This is to ensure the highest level of/ strictest level of compliance with Corporate Governance.
As part of its objective in achieving its mission statement, the NMRC has partnered with key stakeholders, both on an international and domestic level. NMRC has partnered with the US financial services firm Cantor Fitzgerald who are offering support along the real estate value chain – providing construction support to local institutions to develop affordable housing schemes to be financed by mortgage lenders and the NMRC with the ultimate goal of repackaging the loans into securities to be issued on the international market. NMRC is also in negotiations with state governments with respect to pushing for the adoption of the Model Mortgage and foreclosure law in all States in the Country.
He said, “As we reflect on the progress made thus far, we must note that there is a lot of work that lies ahead. We have dedicated our formative years to building a solid foundation for NMRC’s future and we strongly believe that NMRC is on the right track.
“However, our journey is a long one and will require persistence and pro-activeness in achieving the purpose for which we were established. We know that with our values and continued support from all stakeholders, NMRC will achieve its goals and surpass the expectations of all stakeholders.
“As NMRC enters the new financial year with confidence, we will focus on building capacity and the completion of any outstanding operational activities including, an aggressive drive towards the adoption of the Model Mortgage & Foreclosure Law by our Pilot States, the procurement of an ICT Infrastructure for the Mortgage Industry, the completion of our second tranche Equity Capital raise, and most importantly the completion of our first round of mortgage refinancing. We will work hard to meet our mandate to revolutionize the Nigerian mortgage landscape. We are very conscious of the demands and obligations inherent in our environment and we will continue to anchor all our services on global best practices, good corporate governance and strict risk management practices.”
Nigerian real estate industry…
The Nigerian real estate sector, he said has recorded steady and consistent growth over the last four years, becoming one of the largest contributors to the Nation’s rebased GDP from the non-oil sector – contributing 8.03% and 11% in 2013 and 2014 respectively. The major growth drivers in the sector are: increased inflow of foreign investment; increased institutional investment from local companies including PFAs and Mutual Funds; the growing population of high net worth individual; and the targeted intervention of the Federal Government in the housing. “The market, which is currently valued at approximately N6.5 trillion, is estimated to grow at an avenge of 10% over the next few years.”
Challenges in real estate sector…
Wigwe said in spite of these positive outlooks, the Nigerian real estate sector remains fraught with multiple challenges, including lack of access to long term funding, high interest rates, regulatory bottlenecks and an underdeveloped real estate capital market. “According to the Ministry of Labour and Productivity, Nigeria requires an additional 720,000 housing units per annum to meet its estimated 17 million housing deficit.”
NMRC Debt Issuance Programme…
To provide liquidity for its refinancing operations, NMRC has commenced the filing process with the Securities and Exchange Commission (SEC) for the Shelf Registration of its Debt Issuance Programme, which has an initial Programme size of N140 Billion. In order to engender confidence in the credit standing of NMRC as a bond issuing entity, NMRC has obtained credit enhancement from the Federal Government of Nigeria for the Debt Issuance Programme by way of a sovereign guarantee. This confidence is critical in ensuring NMRC’s ability to raise bond financing at just above the level of sovereign debt cost.
Professor Charles Inyangete, Managing Director and Chief Executive Officer of the NMRC in his presentation said, following the procurement of its license on the 18th of February 2015, several critical activities have been undertaken to enable the company fully achieve its purpose of providing long-term funds to refinance the eligible loan portfolios of mortgage originators (MOs) that conform to NMRC’s Uniform Underwriting Standards. NMRC will function as a member user liquidity facility; accordingly, only its shareholders can access its refinancing facility.
This report provides a summary of the different activities and processes (completed and ongoing) embarked upon since the launch of the NMRC.
Uniform Underwriting Standards
NMRC’s Uniform Underwriting Standards for Eligible Mortgage Loans was published in January 2015. All mortgages to be refinanced by NMRC are required to conform to the Uniform Underwriting Standards as published or amended from time to time.
The standardization of the following areas of primary mortgage lending process is ongoing: Mortgage Lending Processes: Origination, Underwriting, Closing, and Foreclosure; Adoption and utilisation of Uniform and Standardised Mortgage Loan File Documents.
The continuing effort at standardization is important for consumer protection, fairness and disclosure across all participating mortgage lenders.
Model Mortgage and Foreclosure Law
A critical developmental role set for NMRC at its establishment, was the promotion of legislative reform through the development of a Model Mortgage and Foreclosure Law for adaptation by Pilot States to fast track the process of creating legal mortgages, ensuring timely resolution of mortgage related disputes and creating efficient foreclosure processes.
NMRC’s Refinancing Model…
NMRC as a mortgage liquidity facility is not designed to take on certain core business risks (i) credit risk, and (ii) interest rate risk.
NMRC has been established as a liquidity provider serving Nigeria’s peculiar mortgage market where credit risk is at an all-time high and its evolving primary mortgage market. The current macroeconomic condition (high inflation, unpredictable and high interest rates) adversely impacts on the availability and affordability of conventional mortgages in Nigeria.