By EMEKA EZEKIEL

Monday, 14 Feb 2011

For the World Bank-aided N200bn intervention fund approved for the housing sector by the Central Bank of Nigeria to achieve its purpose, experts say the mortgage sub-sector must be reformed, EMEKA EZEKIEL writes

 

The recent approval by the Central Bank of Nigeria of a World Bank- assisted N200bn stimulus package for the Nigerian mortgage cum real estate industry is exciting operators, who are also canvassing a restructuring of the sector to make it utilise the fresh funding window properly.

The operators had, since last year, put pressure on the Federal Government and the CBN to set aside a similar package and embark on a comprehensive reform of the primary mortgage sector.

However, the CBN announced last week that it had set aside N200bn as a special intervention fund for Primary Mortgage Institutions operating in the country.

According to the Director of Other Financial Institutions Department, CBN, Mr. Kola Durojaiye, the PMIs will, however, not have access to the fund until the apex bank has completed its planned reforms of the mortgage sector.

Specifically, Durojaiye said that only PMIs that met the CBN’s post reform requirements would be allowed to benefit from the fund.

He said, “The CBN has a programme of N200bn intervention fund for the mortgage industry. This will come into effect after the completion of the mortgage banking reforms, which will be carried out by the CBN.

“Already, the CBN has discovered that most of the PMIs have problems as regards meeting the prudential guidelines as stipulated by the law.”

The Real Estate Developers Association of Nigeria, which last year championed the establishment of the stimulus package on behalf of its members, said the move was necessary in order to bridge the nation’s housing deficit, currently estimated at about 16 million units.

The problems facing the housing construction industry in Nigeria include dearth of capital for development, absence of a virile mortgage system, inability of target subscribers to come up with the needed funds to make purchases and escalating cost of building materials, among others.

The recession in the global economy has slowed down the rate at which new houses are being picked up by the target buyers. The situation has been further compounded by the credit crunch in the banking sector as a result of ongoing reforms and the refusal of the banks to lend to the sector.

According to the REDAN President, Chief Olabode Afolanya, there is an urgent need to increase the capital base of the PMIs to enable them meet the mortgage challenges facing the country’s growing population.

Afolanyan urged the CBN to come up with structures that would help tackle the current economic challenges facing the country.

He said, “First of all, we want to commend the N200bn World Bank assistance, which is a new initiative for the housing sector in Nigeria. The fund will not only stimulate the sector, but will also go a long way in reducing the huge housing deficit across the country.

“The reason is that the current capital base of about N100m for the Primary Mortgage Institutions is grossly inadequate for them to meet the current mortgage challenges in the country. So, there is an urgent need to increase the capital base to about N5bn in order to cater for the mortgage needs of Nigerians.”

Afolayan added, “But before this is done, there is the need for comprehensive reforms in the primary mortgage sector. What we have at the moment as PMIs cannot really be compared with the PMIs in other countries. The CBN has done well in reforming the nation’s financial sector, starting with the commercial banks and the microfinance banks. The next thing we expect from the CBN is a thorough reform of the PMIs to enable them compete favourably and also be in a position to provide adequate mortgage for Nigerians.

“There is a N200bn World Bank-Assisted Intervention Fund, aimed at stimulating the Nigerian housing sector, and presently, the PMIs are struggling for it to be given to them. Though the PMIs should be part of it, the fund should be domiciled with the Federal Mortgage Bank of Nigeria. The most important thing to do now is to reform the PMIs; then other things should follow.”

Afolayan also called on the Federal Government to reconstitute the National Housing Council, in addition to setting up a presidential commission of enquiry to look into the issue of non-compliance of banks and insurance companies with the provisions of the National Housing Fund.

He said, “The proposed presidential commission should ensure compliance by defaulting establishments with the said provisions and immediate remittance of the NHF contributions as prescribed in the Act. It should ensure the full implementation of the Prof. Akin Mabogunje committee’s recommendations on the National Housing Policy.

“Also, the Federal Government should set a date for the National Housing Programme to provide an average of 1,000 housing units in each local government area over the next four years. Obtaining presidential approval for a housing sector intervention fund will energise the sector, thereby providing jobs for at least 10 million Nigerians.”

Such a package, it said, must be given as loans to genuine developers on soft terms instead of them sourcing money from the open market for housing development, and should be managed by REDAN.

The President, Nigerian Institution of Estate Surveyors and Valuers, Mr. Bode Adediji, had last week in Kaduna, said that only a reform of the operations of the FMBN and NHF would enable Nigerians have access to affordable housing.

He said that the FMBN and NHF had rather compounded the housing problems of Nigerians through their operations, which it said had left so much to be desired.

Adediji, who said this at the end of the institution’s council meeting, noted that only a reform of the real estate sector, including the FMBN and NHF, as well as competition could ameliorate the nation’s housing problems.

Source: Punch