By Ronke Badmus Monday, 12 Jul 2010 

 

The Chief Executive Officer , Intercontinental Homes, Mr. Adeniyi Akinlusi, has said that the recent step taken by the Central Bank of Nigeria to reform the banking sector, including the Primary Mortgage Institutions, will result in a couple of mergers and acquisitions.

 

CBN had increased the capital base for PMIs from N100m to N5bn.Akinlusi, in an interview with our correspondent on Friday, said the new capital base would lead to a reduction in the number of mortgage institutions currently operating in the country.

 

He added that it would also bring about more robust mortgage institutions that would be able to access long-term funds at considerable cheaper rates and offer mortgages to Nigerians for longer tenure.

 

He noted that for Intercontinental Homes, it would afford it the opportunity of expanding its branch network as well as investing more in human capital. He noted, however, that the organisation was already well above the new capital base requirement.

 

Adeniyi praised the various reforms in the banking sector, saying that the reform was impacting positively, as there was now greater emphasis on corporate governance. According to him, this is good for businesses as it has given rise to professionalism.He added that the new revised prudential guideline for banks, which talked about provisioning for non-performing loans, was more realistic as against the old requirement because it had enabled investors to be more realistic in terms of expectations.

 

Akinlusi said, ”We should not lose sight of the fact that there are issues affecting the mortgage industry such as perfection of property title and mortgages, which is cumbersome, time consuming and very expensive. Infrastructural deficit is also factored in to provide mortgage as the developer is responsible for providing the infrastructural amenities such as roads and electricity. This makes the property to be very expensive and most Nigerians cannot afford it.

 

“This, however, has led to the stringent rules in mortgage industry, which could also be traced to the cost of enormous funds because, funds are short term and mortgage banks are supposed to provide mortgages on long term.“As such, we have a high risk of mismatch, which has to be factored into the loan pricing.”

 

He said mortgage banks had to compete with commercial banks for the same deposits and had to be competitive, all of which were factored into the loan pricing. He added that the stringent rules had enabled the mortgage industry to survive.Akinlusi said the key limitation in the Nigerian mortgage industry was the unavailability of loanable funds for long-term mortgage.

 

”Millions of Nigerians are eager to take advantage of the services of mortgage banks, but the number far outweighs the available funds,” he added.

 

(Source:Punch)