Unhealthy Meddling with Housing Development

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The Federal Mortgage Bank of Nigeria (FMBN) is having its own savour of undue interference by the political class. Iyobosa Uwugiaren writes on the huge implication

Like some critical regulatory institutions in Nigeria that have recently witnessed excessive interference from the political class, without being mindful of the Acts establishing them and the long-term consequence, the Federal Mortgage Bank of Nigeria (FMBN) is currently having its own taste. And many stakeholders in the sector, including the Trade Union Congress, staff members, mortgage banks, housing developers and others are seriously concerned.

To be sure, one of the parastatals, the Minister of Works, Housing and Power, Mr. Babatunde Fashola, promised to rely on in delivering affordable housing to Nigerians when he assumed office was the FMBN. He promised in December 2016 that the apex mortgage bank would be recapitalised to open doors for those who have contributed to have access to the fund, promising to deliver 40 blocks of houses in each states of the federation and hoped it would ease the stress of owning houses in the country.

In line with his direction, the mortgage bank was to be strengthened in such a way that civil servant would have a better access to owning a home through mortgage. The minister also promised to promote local contents and standardisation of building materials to pave the way for building and construction of affordable houses.

In the estimation of Fashola, FMBN was to play a crucial role, and he was pleased that the regulatory agency for the mortgage bank under then Acting Managing Director, Mr. Richard Esin, had positioned the institution to help him deliver on his promise. But few months after that strategy roadmap was put together, Fashola is said not to be happy that his plans have been altered with the recent appointment of ‘politicians’ to run FMBN without his input.

President Muhammadu Buhari recently approved the appointments of new chief executives for 23 federal government agencies, with the former Chairman of Katsina State branch of the All Progressive Congress (APC), Ahmed Dangiwa, as the new Managing Director of FMBN. While Mr Melvin Eboh was appointed the Executive Director (Org. Resourcing); Hajiya Rahimatu Aliyu, Executive Director (Loans Department, Securities Issuance and Market Development), and Umaru Abdullahi Dankane, Executive Director (Policy and Strategy Loans Set-Up and Pay Off).

Many stakeholders believe that the appointments of ‘’people who know nothing’’ about critical financial institution like FMBN, would not help the system at this time of economic recession.

‘’How can non-professionals be appointed to run a sensitive regulatory agency like the Federal Mortgage Bank of Nigeria? For the first time in many years, politicians, who know nothing about finance institution were appointed by this government to run FMBN’’, a senior official in the housing section of Fashola-led Ministry told THISDAY in confidence.

The huge fear of the senior officer of the supervising ministry of the bank is that the present politician-led management may destroy the solid structures that were created in the past few months, and start using the bank for political patronage, as it was done before the former acting chief executive, Mr. Richard Esin – a professional banker – cleaned the stinking system.

Fashola attested to the professional proficiency of Esin-led former management when during the commissioning of 100 housing units in Ogbomoso, Oyo State earlier in the year, applauded the management of FMBN for returning the bank to profitability and disclosing that the mortgage institution returned a surplus of N2.7 billion for the first time in 20 years in 2016.

The FMBN had posted operating surplus of N2.7 billion for the year ended December 2016, marking the bank’s return to profitability for the first time in over two decades, as revealed during the bank’s 2016 Business Performance Review Session, which took place January this year in Abuja.

At that session, Fashola commended Esin-led management for their efforts and achievement in 2016, and was optimistic of the year ahead, expecting the bank’s efforts in the past years to evolve into significant results in 2017.

Other highlights of the performance in 2016 was the N9 billion approved by Fashola for the creation of 1,244 mortgage loans across the country, under the National Housing Fund (NHF) Scheme; the disbursement of N1.2billion to over 1,600 beneficiaries under the bank’s Home Renovation Loan Scheme, and the disbursement of N2.722 billion to 22,716 retired contributors as refunds, in line with the NHF Act.

THISDAY checks also showed that in September 2016, under the management of Esin, N472 million was recorded as third quarter profit, while N2.7 billion was recorded as profit by December 2016 full financial year. The bank also created 1,300 home owners through mortgages for National Housing Fund contributors to the tune of N10 billion in 2016, including housing estate projects funded by the bank and those not funded by the bank; disbursed N2billion to 2263 beneficiaries nationwide as Home Renovation Loans to enable them renovate and add value to their existing homes; completed and commissioned eight earlier abandoned/uncompleted estates funded by the bank, to inject about 1,300 housing units to the nation’s housing stock within 12 months.

‘’Before Esin-led team was sacked, without the knowledge of the supervising ministry, the bank was already focusing on completing 43 of such estates to inject about 15,000 housing units into the nation’s housing stock over the next two to three years’’, the source stated.

‘’There was consistent stakeholder engagement leading to the return of Zamfara and Ekiti states to the National Housing Fund scheme, while Lagos, Kano, Edo, Oyo, Ondo, Kebbi and Niger states were to return within the year; Edo State was to return within Q2 in 2017.’’

Within the period, the bank also recorded an incremental growth in the National Housing Fund balance through ‘’efficient collection methods’’ from less than N10 billion to N43 billion, representing an increase of over 300 per cent.

Out of 54,000 outstanding refund beneficiaries, who are entitled to N7billion, the Esin-led former management paid 39,000 beneficiaries (representing 72 per cent) N5.2billion accounting for 75 per cent of the N7billion earmarked for those payments. The management also signed a $2billion ($200million annually) credit line as Housing Construction Finance facility with Shelter Afrique (an International Housing Bank based in Kenya), and the Real Estate Developers Association of Nigeria (REDAN) for the construction of 10,000 low-cost housing units per annum in Nigeria. As designed, the programme is expected to create about 150,000 jobs nationwide.

‘’Contrary to the former system of converting debts to political patronages, the bank recovered N1.6 billion in 2016, issuing a formal public warning notice to all FMBN debtors to pay up or face unpleasant consequences,’’ THISDAY was told.

‘’Indeed, it had engaged the Economic and Financial Crimes Commission (EFCC) for assistance, while the bank also recovered N200 million from a state housing corporation on a failed estate development project.’’

For a bank that was enmeshed in huge corruption in the past, the insider said, the former management had introduced Bank Verification Number (BVN) in the payment of NHF refunds to retirees to promote transparency and increased accountability in the payment process.

‘’Upon introduction, cash-out dropped by 30 per cent within two months and the BVN requirement in mortgage loans application was to be extended, while appraisal and disbursement were to be carried out in partnership with the Nigerian Interbank Settlement Systems Plc (NIBSS)’’, the insider added.

‘’The bank had commenced massive automation of all aspects of the bank’s operations for operational effectiveness in the provision of all our services to customers, in partnership with global IT firms like Oracle, Microsoft, Hewlett Packard (HP), Apple, Main One Ltd., Galaxy Backbone, etc, with the bank now linked nationwide in a Wide Area Network with 99.8% recorded uptime.’’

Other reforms that were carried out before now included: introduction of the monthly stakeholders meeting of the bank with the Real Estate Developers Association of Nigeria (REDAN), Mortgage Bankers Association of Nigeria (MBAN), Building Producers and Manufacturers Association of Nigeria (BUMPAN) and others to critically review key issues and challenges hindering the progress of the housing sector, and develop workable solutions for implementation with timelines, etc. The forum serves as a clearing house on most housing sector issues; and full implementation of the 2014 Central Bank of Nigeria’s examination report – a recent snap check by CBN examiners was positive; establishment of a functional Procurement Group and staff training of about 150 staff on procurement practices and policies to promote a high level of compliance in the bank.

Apparently to exhibit a high level of ethical practice in the workers’ business dealing with stakeholders, the bank had before now, partnered with the Independent Corrupt Practices and Other Related Matters Commission (ICPC) for the training of 150 staff on anti-corruption programmes. This, according to document available to THISDAY, had earned the bank a written commendation from the supervising ministry.

While expressing worry over the sack of the Esin-led management and replacing it with politicians, the senior federal government official attested to the creation/promotion of industrial harmony and maintenance of a cordial relationship with FMBN pensioners by the Esin-led former team, especially when the bank paid all outstanding arrears of the Harmonised Pension Entitlements of FMBN pensioners with the total sum of N230million from the N2.7bn profit of 2016.

Under the former management, some ‘’important programmes’’ were being implemented and others were at various stages of implementation, including the implementation of the bank’s core banking application; implementation of the bank’s Wide Area Network (Secondary link); wholesale process audit of the bank leading to the attainment of ISO90001 and development/ implementation of a 5–year corporate strategic plan for the bank.

The fear that the bank’s administration may return to the era of civil service’s rule is huge among the FMBN’s workers and other stakeholders in the sector, and this may encumber the promise by the federal government to deliver on housing across the country.

The FMBN that was created in 1956, formerly known as the Nigerian Building Society (NBS) – a joint venture of the Commonwealth Development Corporation and the Federal and Eastern Governments of Nigeria, is saddled with the huge duty of tackling some issues in-built in the Nigerian housing sector in the area of housing finance. According to the Act that created FMBN, the bank operates as operative vehicle for increasing the mobilisation of long-term funds, lending volume and expansion of mortgage lending services to all sectors of the Nigerian population.

The bank commenced the management/administration of the contributory savings scheme known as the National Housing Fund (NHF) established by Act 3 of 1992. The NHF is a pool that rallies long-term funds from Nigerian workers, money market, insurance companies and the federal government to advance loans at soft interest rates to its contributors.

In line with the reform of the housing sector based on the federal government’s 2002/2006 National Policy on Housing and Urban Development, the FMBN was restructured into a federal government-sponsored enterprise with more focus on secondary mortgage and capital market functions.

Experts say the bank is expected to play the critical role of developing a robust mortgage finance system for the country, and shift its operational emphasis in order to expand its functions from only social housing on-lending under the NHF to include commercial on lending for housing, commercial mortgages refinancing, mortgage purchasing and warehousing and mortgage-backed securitisation.