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PMIs, developers differ on CBN’s proposed reforms

Primary Mortgage Institutions (PMIs) under the aegis of Mortgage Banking Association of Nigeria (MBAN) and developers under the umbrella of Real Estate Developers Association of Nigeria (REDAN) have reacted differently to the draft review of universal banking recently released by the Central Bank of Nigeria (CBN), as it affects activities allowable by the mortgage operators especially regarding property development.

While the PMI operators are against some of the propositions and in fact are lobbying the apex bank to
reconsider the proposal, the estate developers are backing most of the proposed measures.

The draft document, among other things, specifies permissible activities for PMIs as: mortgage finance; financial advisory services for mortgage customers; and taking  savings and term deposits, while they are barred from: demand deposits; equity investment in property development; estate agency/facilities management; project management for a real estate development; and management of pension funds/ schemes. They are also to have a minimum shareholders funds of N5 billion, from the current N100 million.

The proposal, according to developers who spoke with Vanguard, is in tandem with their long held view that PMIs should divest from property development to enable them focus on their primary responsibility of mortgage financing.
It would be recalled that the estate developers at a recent national stakeholders conference on housing held in Abuja resolved that, in order to advance the course of making houses affordable and accessible to Nigerians, mortgage institutions must restrict their operations to providing mortgage finance while the responsibility of housing delivery should be left on the shoulders of the estate developers.

According to the President of REDAN, Chief Olabode Afolayan, “for housing to be made readily available and affordable, mortgage banks must be made to squarely face their fundamental task of providing mortgage services, and stay clear of businesses that could constitute distractions to their core objectives”.

Asked for their reaction to the issue, an official of MBAN told Vanguard that the association has already made a formal presentation to the CBN reflecting their views. He noted, “since the CBN sent private circular to our members, we think it will be improper to start making public our submissions before allowing the apex bank to consider them.

“We are, however, monitoring the situation keenly and if we find that our views are not being given due consideration, then we can bring the whole issues into the public domain.”

“You know that we are not a pressure group, we are a voluntary self-regulating organisation and we have always had useful dialogue with the CBN and we do not want to jeopardise our goodwill with them at this time.”

A PMI chief whose organisation is deeply involved in estate development, visibly shaken with annoyance, said that the move is another indication of policy somersault bedevilling the Nigerian economy, in contrast with the CBN guidelines for PMIs released by the Other Financial Institutions Department (OFID) of the apex bank in August 2003, which expressly stipulated permissible activities of PMIs to include: offering of technical advisory services for the purchase or construction of a dwelling house; performing estate management duties; offering of project consultancy services for estate development; engaging in estate development through loan syndication, subject to the restriction imposed by the shareholders’ funds unimpaired by losses; and engaging in property trading including land acquisition and disposal, among others.

Also speaking with Vanguard, on condition of anonymity, the CEO of a PMI, said, “The CBN 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.

“Since the association is still in dialogue with the CBN on the matter, it will not be proper to go into specifics.  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 it”


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