By Yinka Kolawole, with agency report

Nigeria Mortgage Refinance Company (NMRC) has concluded arrangement to seek approval from members to raise additional equity capital of N28.5 billion via a shelf registration programme by the end of the month.

NMRC said in a notice that the debut general meeting will hold on August 31, to approve the capital plans. It added that further equity tranches will be approved by members. It set a price range of N4.50 to N7 per share for the first tranche of equity to be raised under the programme worth N6 billion.

The company was set up with the aim of lowering mortgage lending rates in the country – currently around 20 percent for a 10-year loan or up to 30 percent for households with lower credit ratings. The company was incorporated on June 24, 2013 and obtained an Approval-in-principle from the CBN on June 20, 2013.

The company is driven by substantial private sector participation consisting of commercial banks, primary mortgage banks, insurance companies, private equity investors and international financial institutions through the Ministry of Finance. The purpose is for developing primary and secondary mortgage markets, raising long-term funds from both domestic capital market and foreign markets to provide accessible and affordable housing in Nigeria.

Nigeria obtained a concessional $300 million 40 year International Development Association (IDA) loan at 0.75 percent to facilitate the execution of the Housing Finance Programme in the country. The aid money was put into a mortgage-backed guarantee last year in a bid to boost lending through the creation of a secondary housing market, which is virtually non-existent in the country. $250 million of the IDA loan would be disbursed in instalments to NMRC as Tier 2 Capital based on key performance indicators – it will be retained on NMRCs balance sheet to provide credit support for NMRC’s bond issuances. The balance of $50 million will be allocated to other components of the Housing Finance Programme – $25 million for the establishment of a Mortgage Guarantee Facility for lower income borrowers and $25 million to support the development and piloting of Housing Microfinance Products.

One of the roles of NMRC is to provide liquidity to financial institutions, allowing them to refinance illiquid mortgage assets. This allows a liquidity facility such as NMRC to make direct provision of long term funding into the mortgage market. In addition, given that the $250 million IDA loan is being used as Tier 2 capital, it allows NMRC to raise its own funds through the issuance of long term bonds to Nigerian institutional investors.

Mortgage lending is a small portion of the overall property market in Nigeria. There are about 20,000 mortgages open in Nigeria, none of which is tradable because of a lack of liquidity.

It would be recalled that NMRC recently announced plan to refinance 577 mortgages with the sale of N10 billion bonds, while targeting 400,000 mortgages refinancing in the next five years.