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FG-backed N100bn mortgage bond in jeopardy

By Emma Ujah, Abuja Bureau Chief & Gabriel Ewepu

ABUJA—THE paucity of funds facing the Federal Government has placed the N100 billion mortgage backed Federal Government of Nigeria bond in jeopardy.

The bond was floated in 2007 to raise funds with which civil servants were assisted to buy Federal Government houses under the monetisation programme of the then Olusegun Obasanjo administration.

An outstanding N24. 564 billion would mature on May 24, 2015, but rather than providing the funds, to avoid its crystallising, agencies of the Federal Government have been engaged in buck-passing on which of them should provide the funds.

The failure to redeem the maturing obligation could cause the Nigerian capital market and the Federal Government reputational problems.

The fireworks have been among the Federal Mortgage Bank of Nigeria, FMBN, The Debt Management Office, DMO, the Federal Ministry of Finance and the Presidency.

The Federal Government of Nigeria was identified as guarantor and initiator of N100 billion bond in an agreement reached between it and UBA Trustees Limited which acted as the Notes Trustees in an effort to give the FMBN the support to facilitate the bond programme.

Financing the mortgage ran into hitches due to several factors including, non-remittance of collections by mortgage loans originators, negative carry (Interest rate subsidy), tenor mismatch, non-performing loans.

For instance, Aso Savings & Loans which is a major player in the housing programme was said to have failed to remit about N4.54 billion to the Federal Mortgage Bank.

The DMO Director-General, Mr. Abraham Nwankwo, in an April 24, 20015 letter to the MD of the FMBN urged him to compel Aso Savings to remit the said amount as part of the immediate steps towards raising the N24.564 billion that will mature in less than two weeks from now.

Investigations showed that public servants who were political appointees and are no more in government simply stopped paying, while some civil servants who were transferred from the ministries simply changed their salary accounts to other banks, thereby frustrating deductions based on the monthly repayment plan.

The DMO in its recommendations made on the issue stated that, “FMBN should be directed through its supervising Ministry (of Housing and Urban Development)  to provide a credible solution for the redemption of N24.564bn due on May, 2015.

“We observed from the documents submitted by FMBN that they have some low hanging fruits, some of which include unremitted collections of N4.54bn owed by even very prominent Mortgage Loans Originator (MLO) like Aso Savings and Loans Limited, and Non-Performing (NPLs) in the sum of N3.64bn.

 


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