New Face of National Housing Fund Scheme

Muhammadu Buhari

Terungwa Isaac

Couple of months after Adamu G. Hassan, a 27-year-old graduate of Economics joined a leading financial services institution in Abuja in 2010 as an accounts officer, he noticed that every month, his pay was less by a 2.5 per cent deduction for housing.

When he sought for clarification, he was informed that the amount is, in fact, a mandatory contribution by workers that is remitted to the National Housing Fund (NHF), a government housing program that is managed by the Federal Mortgage Bank of Nigeria (FMBN). He also learned that as a contributor to the scheme, he could qualify to apply and get a housing loan of up to N15 million to build or purchase his dream home after six-months of continuous contribution.

Another interesting benefit was that he will have a 35-year period within which to pay back the loan in monthly instalments from his salary. Additionally, the loan would only attract an interest rate of a maximum six per cent per annum!

Clearly, this was a great value proposition and Mr. Hassan was excited. Interest rates on housing loans from commercial banks were as high as 22 per cent and loan payback periods less than 4 years. Besides, a potential homeowner was required to pay up to 50 per cent of the value of the house as equity before he could qualify for a mortgage loan.

For Hassan, the N5000 monthly deductions from his salary for the NHF scheme totalled a mere N30,000 in six months – a rather small amount when compared with the fantastic benefits. On the back of this logic, Hassan really didn’t mind the deductions.

Today, Hassan and his young family live in a 3-bedroom apartment on the outskirts of Abuja that he bought with a housing loan secured from the NHF scheme last year. He no longer pays rent, the deductions from his pay are minimal and he has a valuable property that he can call his own. Above all, he has peace of mind.
The back story, however, is that Hassan had to wait for over two years for his loan application to be processed and the loan disbursed. Over the decades, a combination of institutional challenges, liquidity constraints caused delays in the processing of NHF housing loans.

Turnaround Time in Processing NHF Loans Improving
The good news is that in the last two years of the Arc. Ahmed Musa Dangiwa-led management of the FMBN, a lot has changed for good in the operations of the NHF scheme. Consider the significant improvements in the turnaround time for processing NHF mortgage loan applications. From 2015 to date statistics show that turnaround time on NHF loans has improved significantly by about 30% percent. While it is not still good enough, it marks the beginning of a process to make it better over time.

Commenting recently on this development recently, the FMBN MD/CEO, Arc. Ahmed M. Dangiwa, said: “I am pleased to note that we have recorded unprecedented improvement in the turnaround time of NHF loan applications. While before now it used to take an average of two years to process an NHF loan, we have been able to bring this down to 8 months. This is a significant improvement. Of course, we are still not where we want to be, but at least we are now moving in the right direction and recording positive milestones.”

Dangiwa, stated that this improvement is evident in FMBN’s performance statistics regarding service delivery in the last two years of his management team’s stewardship of the bank.

“From 2017 when we came on board to date, we have been able to successfully process and disburse loans totaling N70.5billion. This includes 3,300 mortgages and 22,635 home renovation loans. We have also financed the construction of over 7,000 housing units within this period,” he added.
These figures represent a marked improvement in the performance of the scheme since it was established 27 years ago.

To achieve this, the FMBN boss stated that his management was quick to identify delays in processing NHF housing loans as a major corporate weakness of the FMBN when they assumed office and have aggressively pursued several strategic initiatives to tackle it. This includes ongoing efforts to automate FMBN’s manual business processes to eliminate duplication of efforts, timewasting, and inefficiencies.

Other strategies are the building stronger collaborations between the FMBN, and its partner mortgage banks as well as the mapping out of smarter ways of carrying out due diligence on loan applications.

He also attributed the improvements to the priority that the FMBN management has given to promoting and building a business-driven culture that emphasizes staff commitment to enhanced service delivery and stronger commitment to deliver on the bank’s mandate as a provider of affordable housing to Nigerian workers.

New Era of Transparency in Operations of NHF Scheme
For a long time, a disturbing veil of secrecy hung over the financial operations of the NHF scheme. Industry analysts and stakeholders that have over time criticized the scheme cited this lack of transparency as a key point in their argument against the FMBN’s management of the scheme.

Under the Dangiwa-led management of the bank, the perennial cloud of secrecy has been lifted. FMBN has in recent time demonstrated a commendable commitment to keeping the public and stakeholders regularly informed about the financial status of the NHF scheme. This includes revealing in clear terms how much money the scheme has generated over time, the number of affordable housing loans it has funded, along with housing stock development projects, which have been financed using proceeds from the scheme.

In the latest edition of the bank’s newsletter, FMBN News, the bank published full details about the NHF for the period 1992 to March 2019. Updated figures show that as at June 2019 the Bank had disbursed N222.9 to 45,615 beneficiaries; about N101.1 billion was deployed to the financing of various housing projects totalling over 27,500 units, while a total if N29.305 billion was paid out as refund to retired contributors to the scheme.

“The lack of transparency argument concerning the financial state of the NHF scheme no longer holds water” remarked John T. Ikyaave, a housing policy analyst based in Abuja. “The current management of the FMBN has been very proactive and open regarding the financial status of the scheme. We have noted the willingness of the MD, Arc. Dangiwa to freely dole out statistics on the NHF in his presentations at public fora. This gives confidence to the public and industry stakeholders and is commendable. They should keep it up”

Just a Click Away!
It is noteworthy that the transparency gap in the management of the NHF scheme did not only apply to stakeholders and the public alone. Internally, many contributors to the program were also in the dark on the status of their NHF accounts. In Hassan’s case, for instance, as time passed, having access to information on his account became a big challenge. Although he found perfect sense in the NHF scheme and understood that it would over time help him own his dream house at a relatively affordable rate, he could not tell for sure whether his employer was as faithful in remitting the monthly deductions from his payslip to his NHF account as they were in taking it out.

Since all processes were basically manual, the idea of going to an FMBN area office to wait on long queues for staff to run through piles of documents in a bid to update him on status of his NHF account discouraged him from trying. So, for a long time, he remained in total in the dark. Of course, the manual system and the culture of opacity, which it created and sustained, encouraged many dubious employers to withhold remitting NHF deductions of their employees to the scheme as stipulated.

Not anymore. On this aspect of the NHF operations too, there has been a substantial positive shift in the past two years of the Dangiwa-led management of the bank. As part of the reforms being pursued by the Arc. Dangiwa led Management of the FMBN, the bank began the process of migrating key NHF operations from manual to digital platforms with the launch of the FMBN Digital Platforms. Today, Hassan, like other contributors to the scheme can access information on his NHF account on his smartphone anywhere he is. By simply dialling *219# USSD Short Code on a smartphone, contributors to the scheme can easily check records of their contributions to the NHF scheme, update their personal records, check account balance and confirm if their employers remit deductions from their salaries on time.

“The series of innovative initiatives that we see coming from the current team running the FMBN regarding the operations of the NHF scheme is remarkable” commented John Michael Agbo, a housing industry professional in Abuja. ”

“Arc. Ahmed Dangiwa and his team have recorded an impressive performance by opening the scheme to technology and lifting the shroud of secrecy on its operations so people can see and know how it is being run. This has helped to silence many critics of the scheme. If they can sustain this momentum of reform by achieving higher levels of business and operational automation increased speed of processing housing loan applications, seamless integration with relevant partners in the operations of the NHF scheme, it will help boost public and stakeholder confidence”.

Indeed, the NHF scheme is undergoing a remarkable moment of transformation. This is a good thing for the Nigerian housing industry. The reforms are not only necessary but also timely given the need to expand its capacity to pool long term funds to power FMBN’s affordable housing delivery mandate.

A properly run NHF that is business-driven, transparent to stakeholders and contributors, managed in line with global standards and delivering clear and measurable results is critical to rallying the support necessary to review the Act that established it by the President, Muhammadu Buhari. Despite the scheme’s modest achievements in the last 27 years, it is unrivalled as a proven government, institutional tool for promoting and delivering affordable housing to Nigerian workers. No other government housing program comes close in terms of practical impact in housing loan provisioning and housing stock construction financing.

Isaac is a housing policy analyst based in Abuja