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CBN champions mortgage refinance company to aid PMIs

The Central Bank of Nigeria (CBN) has called for the establishment of a Mortgage Refinance/Liquidity Company (MRC) to revitalise the operations of the mortgage institutions in the country, and thus boost the housing finance sub-sector.

The proposed liquidity firm will be a special purpose vehicle (SPV) to serve specialized second-tier institutions and provide both short-term liquidity and long term funding to mortgage originators and housing finance lenders in the country.

Speaking at a recent retreat organized by the International Finance Corporation in collaboration with Mortgage Bankers Association of Nigeria (MBAN) for chief executive officers (CEOs) of primary mortgage institutions (PMIs), in Abuja, CBN Governor, Mallam Sanusi Lamido Sanusi, noted that the dearth of long term deposits, coupled with low level of capitalisation of the PMIs in the country are factors militating against the drive to consistently finance long term loans on a sustainable basis.

Sanusi noted that the proposed MRC would be private_sector driven, with its seed capital sourced mainly from deposit money banks and Primary Mortgage Institutions (PMIs), while the CBN will provide necessary support and not more than 10 per cent of the capital.

At the retreat with the theme: “Liquidity Facility as Strategic Tool For a Viable Housing Finance Sector in Nigeria”, the CBN Governor noted that PMIs in the country are confronted by serious challenges in fulfilling their mandate of providing housing finance due to the dearth of long-term funds, poorly designed National
Housing Fund (NHF), inadequate capitalisation of the Federal Mortgage Bank of Nigeria (FMBN), weak legal and land registration systems leading to difficulties in accessing lands, absence of a Mortgage Refinance/Liquidity facility or secondary mortgage market, and weak capital/inadequate branch network of PMIs for easy mobilisation of deposits and disbursement of loans from the NHF to contributors.

He disclosed that all the active PMIs in the country had a consolidated balance sheet size of N336.5 billion by the end of September, 2009, adding that only 33 PMIs met the Mortgage to Total Assets ratio of 30 percent, while 53 met the Mortgage to Loanable Funds ratio of 60 percent.

Sanusi stressed the need to safeguard the mortgage sector to enable it play its role as an engine for equitable economic growth, particularly in view of recent challenges from the global financial meltdown, noting that a stable and vibrant housing finance system has enormous potential for stimulating economic development.

Earlier in his address, President of MBAN, Mr. Olayinka Abimbola, blamed the difficulty in accessing mortgage in the country on the dearth of land that have adequate security in terms of collateral, noting that most lands don’t have certificate of ownership.

Olayinka observed that the association, in its presentation on the proposed land reform by government, had recommended that the Land Use Act be removed from the Constitution to be left on its own, while all inhibiting laws that affect the creation of mortgages should be reviewed.

“There is lack of long-term funds for the mortgage sector, which is why we want to create a liquidity window which we can use to offload existing mortgages and create a depth in the market.

Every Nigerian should have a home, we need to provide affordable housing to enable Nigerians have a decent home while government should provide social housing scheme to take care of those who are not economical buoyant,” he added.


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