MONDAY, 05 JULY 2010 01:13 CHUKA UROKO  

A new phase is fast evolving in the Nigerian mortgage industry as the Central Bank of Nigeria (CBN) perfects recapitlisation of the primary mortgage institutions (PMIs) to N5 billion.Presently, the capital base of the PMIs stands at N100 million and this, analysts say, explains the ever fledging nature of the mortgage industry in the country several years after. With almost 100 PMIs operating in the country, access to mortgage loans is still a big issue because most of these institutions are having challenges with this low capital base, which have seriously worked against their ability to deliver basic mortgage services to Nigerians.

 

 

A recent media report had it that the decision to raise the capital base of the PMIs, “which is backed by a draft guideline already communicated to mortgage operators through a circular signed by the Acting Director of Banking Supervision, Joseph Ajewole, is part of CBN’s strategic initiatives for reforming the Nigerian financial system to enhance the quality of banks, ensure financial system stability and promote the evolution of a healthy financial sector”.

 

 

Analysts say the review of the capital base of these PMIs had been long overdue following the dismal performance of most of them, especially those created as mere ‘mortgage desks’ by the commercial banks. According to the media report, about 65 PMIs are currently in operation, revealing that by December 2006, the total assets of the 36 mortgage firms that rendered returns to Nigerian Deposit Insurance Corporation (NDIC) was N91 billion.

 

 

It added that N50 billion, representing 70 percent of the figure, was invested in placements and other investments while only N21 billion or 30 percent of the total sum was in loans and advances.The report continued: “The total assets of the PMIs increased from N55 billion to N91 billion over the last five years. About 292 PMIs were licensed between 1990 and 1998. In July 1997, the Federal Mortgage Bank of Nigeria (FMBN), which later handed over 195 firms to CBN in 1998, revoked the licences of 97 of the firms. The initial minimum share capital for PMIs was N5 million, rising first to N20 million and later N100 million.

 

 

“CBN records also show that by June 2003, only 59 of the PMIs with N32.44 billion in cash and balances, loans and advances worth N12.28 billion and aggregate assets of N55.20 billion rendered periodic statutory returns. Total liability stood at N36.45 billion during the period and shareholders’ funds amounted to N7.64 billion”. It is in the light of this that finance experts say the only way out for most of these PMIs is either to go into mergers or outright acquisition by ‘the big brothers’ in the industry.

 

 

Abimbola Olayinka, national president, Mortgage Bankers Association of Nigeria (MBAN) had in an exclusive interview with BusinessDay, noted that most of the mortgage institutions were having challenges with low capital base which, he said, had seriously worked against their ability to deliver basic mortgage services to Nigerians. According to him, the need to raise capital base is “to enable the mortgage banks to be well capitalised to fund mortgages and estate development, hoping that “when the guideline is introduced, we expect mortgage banks to merge and raise their capital base to the appropriate level”.

 

 

Olayinka, who is also the managing director and chief executive of Resort Savings and Loans plc (mortgage bankers), admitted that like in every other sector, the mortgage sector had some operators that had not lived up to expectations, pointing out however, that such operators were few and “since we are all regulated by the CBN, appropriate sanctions will be applied on erring mortgage banks”.

 

 

While some operators in the industry see the new capital base as a sledge-hammer on an industry struggling to survive a hash operating environment, others say it is the best thing to happen in the industry. To this later group, the new capital base would afford operators the opportunity/ability to engage in long-term lending to customers and explore viable options in mortgage financing.

 

 

To them, many benefits would accrue from the new development, explaining that the benefits are not only to the mortgage sector, but also the nation in general, as this would create a much more vibrant and robust mortgage sector.Nigeria’s huge housing deficit burden is blamed on lack of efficient mortgage system that would have made available housing loan at affordable rate and longer tenure for average Nigerians, especially the working class.

 

 

It is therefore hoped that the new capital base for the PMIs would pave the way for increased access to mortgage loans and, by extension, improved housing delivery.

 

(Source:BusinessDay)