By BabajideÂ Komolafe & Yinka Kolawole]
Primary Mortgage Institutions (PMIs) are lobbying the Central Bank of Nigeria to retain current account services in the scope of business.
The CBN in the draft review of universal banking released two weeks ago increased the minimum capital base of PMIs to N5 billion from N100 million and also barred them from taking demand deposits or current accounts.
A PMI source told Vanguard that barring PMIs from taking demand deposits is like a sledge hammer which would drive all of them out of business. â€œIt would be difficult for any PMI to survive without current accountâ€, the source said. â€œThe Commission on Turnover (COT) charge we derive from current account is what we use to cover a significant portion of our overhead cost and to bar us from taking current accounts is to deny us of this income hence it would be difficult meeting overhead expensesâ€, the source explained.
It was gathered that the umbrella body ofÂ PMIs, Mortgage Banking Association of Nigeria (MBAN)Â has commence discussions with CBN officials, appealing for reconsideration of the excluding PMIs from demand deposits.
A top official of MBAN who spoke on condition of anonymity said, â€œCBN got it wrong on a number of issues. If the apex bank goes ahead with the proposal as is, it is like sounding the death knell for most PMIs in the country.â€
The official, who is the CEO of a PMI, said, â€œSince the association is still in dialogue with the CBN on the matter, it will not be proper to go into specifics.Â The CBN circular is still a working document and not a policy, requiring necessary input from stakeholders based on which MBAN is discussing with the CBN. In fact, the initial deadline for input was supposed to be Friday, but has now been extended by two weeks to allow exhaustive discussions on the matters raised.
We believe that by the time our views have been put across, a final document that will ensue will address the fears of all concerned. Operators have been awaiting the reform of the mortgage sector for long, but we believe the reform should strengthen it rather than weaken itâ€
It also gathered that the N5 billion capital base would drive private_owned PMIs from the sub_sector. At the end not more than seven privately_owned PMIs might remain from the about twenty of them in existence. The implication is that the sub_sector would be dominated by PMIs owned by bank holding companies and governments.
The draft review of universal banking license released by the CBN defines a PMI as, â€œAny
company that is licensed to carry out mortgage business in Nigeriaâ€, It stated, â€œPMIs are permitted to operate in all the states and the FCTâ€, whileÂ the â€œMinimum shareholders funds of N5 billionâ€ Key Prudential and other requirements for PMIs are:Â Capital adequacy ratio: Minimum 10% against risk assets;Â Minimum of 50% of mortgage assets to total assets;Â Minimum of 60% mortgage assets to loanable funds (total deposits);Â Single obligor limit of 50% of shareholdersâ€™ funds unimpaired by losses; }
Maintenance of statutory reserves of between 10% to 20% of net profit; Maximum equity investment holding of 25% of shareholdersâ€™ funds; unimpaired by losses Minimum of 75% of total mortgage assets should be for residential. Permissible activities for PMIs are:Â Mortgage finance; Financial advisory services for mortgage customers; andÂ TakingÂ savings and term deposits.
The CBN barred PMIs from:Â Demand deposits; Equity investment in property development; Estate agency/facilities management; Project management for a real estate development; Management of pension funds/ schemes.