Prospects in the nationâ€™s mortgage industry in the years ahead are huge, regardless of the trying times Nigerians contend with, says the President, Mortgage Banking Association of Nigeria (MBAN), Adeniyi Akinlusi. He believes home ownership will be made easier through the Myownhome Scheme, an aspect of theÂ Nigeria Housing Finance Programme (NHFP), a Federal Government initiative coordinated by the Central Bank of Nigeria (CBN)with the support of World Bankâ€™s $300 million loan.Bennett OghifoÂ reports
The mindset of Nigerians that it is â€˜honourableâ€™ or â€˜manlyâ€™ for home ownership to be achieved through equity alone (savings and sweat) is being redirected to the use of equity and debt. Financial experts say debt (mortgage, loan) is not a bad thing, if used for wealth creation.
This is a reason for low mortgage penetration, according to the President of Mortgage Banking Association of Nigeria (MBAN), Mr. Adeniyi Akinlusi, during a chat with journalists in Lagos, recently.
Quoting available statistics, Akinlusi, accompanied by the Executive Secretary of MBAN, Kayode Omotoso said,Â â€œOnly about 5% of the 13.7million housing units in Nigeria are currently financed with Mortgages.
â€œThe mortgage industry generated less than 100,000 transactionsÂ Â Â Â Â Â from 1960 to 2009. Now, there were 181,519 transactionsÂ Â Â from 2010 to 2016; contribution of mortgage finance to Nigeriaâ€™s Gross Domestic Product (GDP) is about 1%.â€
He said the low penetration of mortgage was due to, â€œDearth of titled properties: Creation of mortgages is hinged on the certainty of title to land as mortgage was a creation of secured title.Â Difficulty in registration/transfer of title: could take from six months to two years; has too many processesÂ which areÂ slow, cumbersome, unreliable, and inefficient; high cost of title registration/transfer: usually 15% of property value but as high as 22% in some states; non-automation of government process in registration and land titling; inadequate cadastral system; difficult foreclosure and eviction.â€
He also said there was â€œDifficulty in accessing NHF by majority of Nigerians due to inadequacy of funds to support the scheme as some key stakeholders are not making any contribution into the scheme as stipulated by the NHF Act; affordability gap; low income; market forces of demand and supply; lack of affordable houses; land is too expensive; building materials are expensive (a lot of them are imported); lack of physical infrastructure to support mass housing production; few eligible borrowersÂ (due to high cost of funds) which results into low affordability; Informal Sector Exclusion; lack of adequate information on borrowers: This makes Mortgage Underwriting difficult; absence of adequate information on the housing market e.g. house prices, house values, liens, portfolio history etc.; inefficient property/housing market infrastructures; absent/inefficient mortgage market infrastructure; information infrastructure:Â Public registries, credit bureaus and rating agencies;Â Risk-pricing infrastructure:Government securities markets, sub-national bond markets and private sector bond markets.â€
Another drawback, he said was low Savings Culture: â€œSome people can actually afford to repay a mortgage, but they donâ€™t have enough down payment as Equity Contribution.â€
Studies show that most Nigerians will not take loan, and some will not pay their debt when they take. According to Akinlusi, there is â€œLack of credit utilisation culture: A lot of Nigerians have the mindset that credit is bad, so even when funds are available, they still would prefer to self-build their houses rather than take a mortgage.â€
There is also â€œLack of debt repayment culture: Some people have the capacity to repay but are unwilling to, and are also plagued by â€œLack of Awareness/Public Apathy towards mortgage financing.â€
Unfavorable Investment Climate, Akinlusi said was another constraint. â€œHigh (and sometimes erratic) exchange rate; traditionally stringent operational guidelines for mortgage banks (although it is under review) and becoming better due to constructive advocacy with CBN; and General difficulty in doing business in Nigeria.
He said there were other challenges due to inhibitive/prohibitive laws, lack of Foreclosure Law; inhibitions from the Land Use Act 1978, which entrusts land ownership on the governors.
These constraints are being addressed to ensure the MyOwnHome scheme comes to play.Â The scheme, â€˜My Own Homeâ€™ is a Public-private Partnership (PPP) offshoot of theÂ Nigeria Housing Finance Programme (NHFP), a Federal Government initiative coordinated by the Central Bank of Nigeria (CBN)Â with the support of World Bankâ€™s $300 million loan. The objective of NHFP is to catalyse the growth of the housing sector through de-risking the housing finance value chain and improving access to finance.
The scheme, â€˜My Own Homeâ€™ is a Public-private Partnership (PPP) offshoot of the NHFP. Its objective isincrease access to housing finance and housing in Nigeria andÂ to inspire young Nigerians on the need to key into mortgage process and startÂ owning homes Technical assistance for â€˜My own Homeâ€™ Scheme would be provided.
It has broad-based Stakeholders and Partnerships Profile that include; the Federal Government of Nigeria, Federal Ministry of Finance, Central Bank of Nigeria, the World Bank, Federal Ministry of Power, Works & Housing, the Federal Ministry of Justice and Mortgage Banking Association of Nigeria (MBAN). Mortgage Originating Institutions i.e Mortgage Lending Banks (MLBs) that are participating in the Scheme through Equity/Investment in Nigeria Mortgage Refinance Company (NMRC).
Under the â€˜My Own Home Scheme, 34 Primary Mortgage Banks, 4 Commercial banks, and 9 Micro finance Banks have been selected to stimulate housing finance for low-income earners in the formal and informal sectors. They would benefit from US$15 million Housing Micro-finance Fund and US$10Million Technical Assistance Fund, with LAPO Microfinance Bank as pivot of the Pilot Scheme in the housing sector.
The Scheme has set up a framework that will revamp the housing finance sector and also make access to housing finance a lot easier through the following components: Nigeria Mortgage Refinance Company (NMRC): Providing long-term refinancing of mortgages and standardizing mortgage procedures; Mortgage Guarantee: Through this scheme, borrowers with insufficient or no equity contribution (initial down payment) can access mortgage for home ownership; Housing Microfinance Scheme: Would stimulate increased lending to low-income earners in the formal and informal sectors in Nigeria through Microfinance Banks for incremental housing construction or housing improvement.
Unlike the conventional mortgage, the Scheme allows beneficiaries to use the loan for purchase of land, incremental building or renovation.
Akinlusi also discussed the would-be impact and sustainability of the public-private sector driven â€œmyownhomeschemeâ€ relative to a disposition to social housing programmes.
He said, â€œFrom the experience in Nigeria, most initiatives that are solely funded and run by the Government(s) as Social housing programmes were usually not successful and are usually not sustainable. My own Homesâ€™ being a PPP is highly likely to succeed going by our experience with other PPP programmes such as NMRC, Infrastructure provision and even the Pension Scheme Reform which also had the Private Sector Stakeholders.â€
Regardless, for the scheme to work fluidly, the processes and cost of land title documentation must be made easy and the time it takes to perfect these titles must be reduced drastically from what it is today in most states, and the Federal Capital Territory.
Interestingly, according to Akinlusi, two states, Kaduna and Lagos have been convinced to ease land/property documentation. Kaduna state Governor Nasir Elâ€™ rufai, because of his education as a Quantity Surveyor, did not need much prodding to drastically reduce the period of land documentation, while the Lagos state government needed to be convinced that it was more profitable to gather little money from many people than getting a few people to pay a lot of money. Governor Akinwumi Ambode saw the logic as sensible and now property documentation period and cost has been cut down in Lagos.