Stakeholders raise alarm as CBN increases mortgage banks’ capital

Stakeholders in Nigeria’s housing sector have expressed worry over the fate of the nation’s Primary Mortgage Banks (PMBs) following the N13 billion new capital requirements set for them by the Central Bank of Nigeria (CBN).
Their anxiety stems from the fact that most of the primary mortgage institutions are still struggling to cope with the previous N2.5billion capital base, which had been in existence since 2013.

It was reported that the Central Bank of Nigeria (CBN) would be raising the capital requirements of the PMBs by 73.3 per cent to a total of N13 billion from N7.5 billion in 2013.

A breakdown of the financial requirements of the sub-sector shows that operators of national category of the PMBs are required to shore up their capital base to N8 billion, which is an increase of 60 per cent compared to N5 billion it stood in 2013.
For regional licence (formerly state), operators are expected to increase their financial base by 100 per cent to N5 billion from N2.5 billion six years ago.

The stakeholders that flayed the new capital requirement include Managing Director of OPIC, Mr. Jide Odusolu, President of Real Estate Developers Association of Nigeria (REDAN), Mr. Ugochukwu Chime and Lead Promoter of Abuja Housing Show, Festus Adebayo, who doubles as Managing Director, Fesadeb Communications.

President of Mortgage Bankers Association of Nigeria (MBAN), Mr. Niyi Akinlusi and the immediate past President, Mr. Femi Johnson, neither responded to phone calls nor text messages sent to them by our correspondent.
For instance, Affordable Housing Advocates, on their Social Media WhatsApp platform, have not stopped commenting on this issue.
Managing Director of OPIC, Mr. Jide Odusolu, stated that most PMBs had failed to raise the base to N2.5 billion, wondering what would happen now that CBN unilaterally wanted them to double it.
“We will probably end up with maximum of two or three PMIs,” he said.

Chime said that placing a very huge burden on an already risky and unprofitable sector such as the mortgage sector would be counterproductive.
“The day will come when you will look for PMBs to do your transactions and you may find none,” he warned.
He pointed out that policymakers have refused to work on the structural underpinnings of the housing industry, but chose the populist and cosmetic initiatives that compound the industries problems.”

According to him, major challenge was that the mortgage sector was risky and unprofitable; with undefined entry/exit and high regulation, among others.
“Why would any sane investor, after a comparative analysis of other investment outlets, choose the mortgage sector with all its problems overregulation and very low return on investments?” he asked.

“Until government collaborate fully and sincerely with the investors (private sector who take the risk with their lives, time and resources), to undertake a significant restructuring of the transaction dynamics, costs in the real estate sector, resources will continue to exit the sector, and we will continue to give lip service to a self-inflicted malady.”

Corroborating Chime, Odusolu said he realised that a large part of the problem centered on policymakers, who he said was “clueless when it comes to housing.”

Credit: New Telegraph