Due to increasing housing problems in Nigeria, experts have called for a review of the capital base of mortgage banks, saying there is need for the capital base of the mortgage banks to be increased.

The experts at a training organised by the Central Bank of Nigeria said the review would make the institutions stronger.

Partner, Perchstone & Graeys, Mr. Osaro Eghobamien, said, “In every other country that securitisation and other methods of funding the secondary market have been used, you have a higher rate of mortgage facilities to Gross Domestic Product. For example, in Nigeria, the ratio of residential mortgages to GDP is 0.012 per cent, whereas in America it is 64 per cent, Ghana five per cent.

“You will find out that the standard of living generally is enhanced where you have a greater ratio and the only way to do it is to find a system that will allow you to loan out mortgages for a longer period of time so that the average Nigerian can have shelter over their head instead of paying rent. Raising the capital base for mortgage institutions will make them solid.”

He pointed out that a mortgage should be anything between 15 and 20 years.

Eghobamien said, “What we have today are shorter mortgages which make it very high to borrow. In other words, if you have a mortgage facility of about five to eight years, what you will find out is that the mortgage repayment is too high for the borrower to satisfy.”

He, however, said the banks were not in a position to increase the period of mortgage facilities because they were funding mortgages from short-term deposits which were in their books for six months to one year.

“The best way to do that is either to provide a mortgage liquidity facility, which the World Bank is considering doing or the higher end of the market which is to securitise and that is what we are talking about. Securitisation is a bit more complex, but it has been beneficial round the world and we hope that it will be introduced into Nigeria very soon,” he added.

Also speaking, Prof. Graham Penn of Sidley Austin LLP, said there was still a dearth of mortgage feedstock owing largely to the inability of primary mortgage institutions to create long- term credit.

He added that the non-existence of a comprehensive credit data base detailing the credit history of potential lenders on the one hand and the high interest rate in the inter-bank market on the other, had removed mortgage loans from the reach of middle income earners.

Source: Punch/Ademola Alawiye