By YINKA KOLAWOLE, with agency reports

The recent extension of the deadline by the Central Bank of Nigeria (CBN), from April 30 to December 31, 2013, for primary mortgage banks (PMBs) in Nigeria to shore up their shareholders’ funds is eliciting mixed reactions from stakeholders.

CBN extended the deadline by eight months to afford all affected PMBs sufficient time to exercise any of the options for capital raising, business combination and downscaling. The move, according to the apex bank, is to allow more time for operators to raise fresh capital, and engage in business combination options towards meeting the capital requirements for each category and for rationalising the existing branches/cash centres, among others, where necessary.

Mortgage Banking Association of Nigeria (MBAN), the umbrella body of mortgage banks in Nigeria, said although most of its members have been gearing up to meet the initial deadline, the move is a welcome development. Executive Secretary of MBAN, Mr. Kayode Omotosho, told Vanguard that the extension will enable some of their members not based in Lagos more time to conclude their consolidation arrangements.

“The statement credited to our former President, Mr. Abimbola Olayinka, in a recent interview that sufficient time had been given for PMBs to recapitalise and that MBAN was not expecting an extension reflects the view of the association. However, we are in support of any move that will enable as many of our members as possible to meet the capital requirements,” he stated.

Omotosho noted that operators are anticipating a smooth take off of the Nigerian Mortgage Refinance Corporation expected to come onboard in the third quarter of this year, adding that it is the more reason why more PMBs should be sufficiently capitalised to achieve better impact on the mortgage sector.

Asked in an earlier interview with Vanguard if there was any need for extension of deadline by the CBN, Olayinka had stated: “We’ve been on this for the past two, three years, so they’ve given the mortgage sector enough time for us to know what to do. And a lot of my colleagues are either going through mergers right now to meet up with the requirement with those who have scaled through.

CBN governor, Sanusi

“Some will like to stay as a State mortgage bank which is at N2.5 billion. So I strongly believe that between March and April, we would have sorted these out. So we will not talk about extension, it’s a done deal and we need to be well capitalised to move the sector forward. All things being equal, at the end of the day, we’ll probably just have maybe about 25 mortgage banks from the current number in excess of 70. We will have about 25 banks that will be well capitalised.”

An operator who spoke with Vanguard on condition of anonymity said the extension may not lead to any significant change in the sector between now and December, adding that most of those who were not poised to meet the April deadline are not likely to meet with the new date.

He however conceded that it would afford a few players in the sector an opportunity for more time to look for investors who may be interested in their banks. But he noted that the extension may not provide the needed impetus to drive a strong mortgage sector desired by Nigerians, if other necessary factors are not in place.

Managing Director of Trans Atlantic Mortgages Limited, Mr. Preye Ogriki, said the extension may not be beneficial on the long run if germane issues affecting the sector are not properly addressed. “The extension is good and the CBN needs to be commended for that, but in my own opinion, there are issues in the sector that needed to be sorted out if we are serious about building a strong mortgage sector,” he said.

According to him, the major problem facing the sector is liquidity strain, even as he added that the only solution to it is for the Federal Government to create an intervention fund of N250 billion on an annual basis which will serve as a pool of fund that mortgage banks will draw from to be able to meet the housing needs of Nigerians.

“Intervention fund is the key to the development of this sector. Though, the Federal Government and CBN are currently planning a mortgage refinancing company, but what will make this work is if there is a concerted effort on the part of the Federal Government to make cheap funds constantly available.

“What Nigerians need to know is that even if we have over 20 mortgage banks with N5 billion capital, it may not be able to solve the problem, because that is just a drop in the ocean of what is needed to reduce the housing stock deficit, put variously at between 16 and 17 billion units. We, as operators, need to look for ways of providing financial services to our customers,” he stated.

In a circular signed by Director, Other Financial Institutions Supervision Department, CBN, Mr Olufemi Fabamwo, to all directors and shareholders of primary mortgage banks titled “Extension of the Deadline for Compliance with the Revised Guidelines for Primary Mortgage Banks”, the CBN stated: “Further to the CBN Circulars Ref: FPR/DIR/CIR/GEN/01/021 of February 15, 2012 and OFI/DIR/CIR/GEN/01/08 of December 14, 2012 titled “Circular to Primary Mortgage Banks on the Revised Guidelines for Primary Mortgage Banks”, this is to convey the decision of the Management of the Central Bank of Nigeria to extend the deadline for compliance with the Revised Guidelines for Primary Mortgage Banks (PMBs) from April 30, 2013, to December 31, 2013. This is to afford all affected PMBs sufficient time to exercise any of the options for capital raising, business combination and downscaling highlighted in the earlier circular dated 14th December, 2012.

“All PMBs are once again strongly advised to conduct due diligence and seek professional advice in exercising any of the options and to conclude the processes before the new deadline in order to allow sufficient time for capital verification and necessary regulatory approvals. All directors, particularly the Managing Directors/CEOs of all PMBs are again reminded that prior approval of the CBN is required before the disposal of assets of the bank, as they will be held jointly and severally liable for any asset stripping.”

The apex bank had initially granted the mortgage firms a 14-month deadline from November 1, 2011, which would have terminated by December 1, 2012, but extended it to April 30, 2013.

Under the new guidelines, mortgage companies have been categorised into National and State primary mortgage banks (PMBs). While the national PMBs are allowed to operate in any and all parts of the federation with minimum paid-up capital of N5 billion, the State PMBs are restricted to only one state and would have a minimum capital of N2.5 billion.

The decision to extend the deadline again was likely informed by the fact that only about 25 companies have met the new capital requirement barely one month to the expiration of the deadline.

Currently, the minimum capital requirement for mortgage firms stands at N100 million, which is contained in the 2003 guidelines that allows granting of loans or advances for the purchase or building, improvement or extension of a dwelling/commercial house, acceptance of savings and deposits, management of pension funds/schemes, performing estate management duties as well as offering of project consultancy services for estate development and engaging in estate development through loan syndication.

Under the new guidelines, PMBs would only be allowed to perform duties such as mortgage finance, real estate construction finance, acceptance of savings and time/term deposits, acceptance of mortgage-focused demand deposits. It clearly streamlines the activities of a PMB to the provision of mortgage finance and excludes other related activities, such as the provision of estate management duties.

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