Three Years of Reforms to Deliver Affordable Housing Plan for Nigerians


By John Ikyaave

Recently, the Executive Management Team of the Federal Mortgage Bank of Nigeria (FMBN) under the leadership of Arc. Ahmed M. Dangiwa clocked three years in office.

Within this period and under the supervision of the Minister of Works & Housing, Babatunde Fashola, he team of experienced professionals have posted remarkable performance by pursuing bold, dynamic, and strategic Institutional reforms. From unprecedented levels of mortgage loan disbursements to stronger collaborations with industry stakeholders, innovative housing product designs, financial transparency, and broad institutional reforms, the FMBN Board and Management team have built and sustained a trajectory of strong corporate performance across key indicators.

Mortage Loan Disbursements

Between April 2017, when the Executive Management team took charge of the bank to March 2020 (a three-year period), FMBN leveraged funds accruing to the National Housing Fund (NHF) Scheme to record over N90billion in various loan disbursements. The figure comprises: NHF Mortgage Loans totalling N32.38 billion granted to 4,236 beneficiaries; Home Renovation Loans totalling N37 billion granted to 43,920 beneficiaries; Estate Development Loans totalling N8.71billion for the construction of 1,692 housing units. Others are Cooperative Housing Development Loans totalling N6.76 billion for the construction of 1,048 housing units; and Ministerial Pilot Housing Scheme loans totalling N4.77 billion for the construction of 793 housing units.

The size of mortgage loans disbursed within the three-year period is remarkable at many salient levels. First, it accounts for over 30 percent of the N249.5 billion loan portfolio that the Bank has recorded within the 25-year life span of the National NHF Scheme.
Secondly, the amount translates to over 60 per cent increase in the cumulative value of mortgage loans totalling N152.5 billion in April 2017 when the Management team came on board to N249.5 billion as at March 2020.
The speed of processing, size of the loan approvals and disbursements are all unprecedented in the history of the Bank.

Speedy Processing of Refunds to Retired NHF Contributors

The past three years have witnessed improved efficiency in the management of the National Housing Fund (NHF) Scheme that requires workers to contribute 2.5 per cent of their monthly income, which qualifies them to access all FMBN products and services. One notable area is the departure from the perennial problem of long delays in processing refunds to retired workers, who contribute to the NHF scheme.

In line with the policy of the current Board and Management of FMBN to prioritise these payments to retirees, the Bank recorded over N23.8 billion in NHF refunds in three years to 162,992 people. The figure represents a 220 percent increase from N10.8 billion recorded by previous managements over a 25-year period to 132,605.

Five-Year Strategic Plan

In a bid to reform and reposition the bank, FMBN engaged the services of a reputable International Consultancy Firm, Messrs. KPMG Ltd to produce a five-year Strategic Turnaround Plan for the Bank. The plan was approved for implementation at the 202nd meeting of the Board of Directors in May 2020.

A notable component of the strategy blueprint includes the financing of 100,000 housing units by year 2024. Second is growing the number of NHF contributors from the current five million to 31.6 Million and aggressively transforming the mixture of formal/ informal sector contribution from 8:20 to 50:50 by the year 2024 through widening informal sector participation, given that this sector comprises over 80 per cent of the working population in Nigeria. Furthermore, the plan projects to accelerate the growth of NHF contributions from annual collections of N48.8 billion in 2019 to N284.7 billion by the year 2024.

Review of Equity Requirement for Accessing Housing Loans

Relatedly, in a strategic move designed to lower the financial burden on potential home-owners within the low and medium income segment of the economy seeking FMBN housing loans, the FMBN within the period under review proposed and secured approval for a reduction of equity requirement for accessing mortgage loans. Notable aspects of the approval which has been in effect since 2018 are as follows: Mortgage loans of N5 million and below attract zero (0%) equity contribution, a downward review from the 10 per cent previously required as loan down payment; and Mortgage loans of over N5 million to the maximum amount of N15 million now attract a flat equity contribution rate of 10 per cent down from the 20 per cent and 30 per cent previously mandatory to access the loan facility.

The historic downward review of equity requirement for accessing the NHF mortgage loan has made it more accessible and affordable to Nigerian workers within the low- and medium-income brackets. This implies that workers who contribute to the National Housing Fund (NHF) consistently and are up-to-date are eligible for up to a N5 million loan without having to put down a single kobo as equity while those seeking for loans above N5 million to N15 million will only put down 10 per cent as equity.

Introduction Innovative Housing Products

After decades of pushing and promoting legacy housing loan products, the current Board and Management opened a new vista of innovative home loans designed to create a good fit between what the bank is offering and the income capacity of workers who subscribe to the NHF scheme. This new management thinking, and focus led to the creation of more worker-friendly home loan products with more flexible payment conditions.

The first to consider is the FMBN Rent-To-Own’ Homeownership Product. The rent to own product offers a cost-friendly housing loan which ensures a convenient re-payment arrangement for Nigerians. The product makes it possible for a Nigerian worker that contributes to the National Housing Fund (NHF) Scheme to move into an FMBN-owned housing property as a tenant and conveniently pay towards ownership of the property in monthly or annual instalments over as long as 30 years at an interest rate of just 9%!

The second is the Individual Home Construction Loan. The loan enables NHF contributors with unencumbered land, appropriate land titles and approved building plans to undertake self-construction. The loan provides up to N15 million to contributors to the National Housing Fund (NHF) scheme at 7 percent interest rate. Beneficiaries can pay back over a period of up to 15-years depending on their age and number of years left in service.

Another equally worker-centric affordable home ownership product that FMBN has upscaled is the Home Renovation Loan. The loan provides up to N1million to enable beneficiaries who already own their homes to carry out improvements. About 43,000 Nigerians have benefitted from this facility in the last three years.

FMBN has also revamped its legacy Cooperative Housing Development Loan (CHDL) in line with the initiative of Fashola to adopt cooperative societies as the channel for the aggregation and delivery of houses to members of cooperative societies.

The FMBN Cooperative Housing Development Loan (CHDL) enables a cooperative society that has acquired a plot of land to develop houses for allocation to its members. Key features include tenors of up to 24 months with a moratorium of 12 months and interest rate of 10 per cent. Up to N500 million is accessible by qualified cooperative societies under the facility subject to review upon judicious assessment of utilization of funds earlier disbursed.

Leveraging Technology

Another notable achievement of the FMBN within the past three years is the launch of FMBN Digital Platforms.

Key components of the FMBN Digital Platform Solutions Suite of services include the following: The *219# USSD Short Code service via GSM mobile networks; the NHF Mobile Apps available on android & iOS platforms; The online Self-Service Kiosk via the Bank’s web portal and SMS and email notification services to NHF customers.

The platforms enable contributors to receive instant notifications, check records of NHF contributions on the go, update NHF personal records, check NHF balance of contributions, register and retrieve NHF numbers, request for statements of account, calculate home affordability and mortgage payments, and obtain latest NHF-related information from the FMBN Bulletin Board online service.

Implementation of National Affordable Housing Delivery Programme

To strengthen stakeholder participation and confidence in the operations of the National Housing Fund (NHF), the FMBN in conjunction with the Nigeria Labour Congress (NLC), Trade Union Congress (TUC) and the Nigeria Employers’ Consultative Association (NECA) embarked on the National Affordable Housing Delivery Programme for Nigerian Workers.

In the first phase of the programme, about 2,600 housing units are being delivered in thirteen (13) states across the six geopolitical zones of the country in addition to Lagos and Abuja, in batches of a minimum of 200 units per zone. House types include finished semi-detached bungalows as well as 1-, 2- and 3-bedrooms in blocks of flats.

Resumption of Defaulting States in NHF

The FMBN Board and Management have worked hard in the past three years to rebuild stakeholder confidence in the National Housing Fund (NHF) Scheme. As a result, six (6) States re-joined the NHF Scheme. This includes Borno, Niger, Edo, Ondo, Kebbi and Lagos bringing the total to thirty-four (34) States and the FCT. The Management is sustaining efforts for two remaining states (Kano and Oyo) to resume their workers’ contributions within the current year. The Bank added over 513,416 additional subscribers to the NHF scheme within the past three years alone, bringing the total to a record 5,052,500.

Updating Financial Accounts of the Bank

It is important to note that when the current Management assumed office, four years of corporate financial statements were in arrears for the period 2013 – 2016. Within the past three years, the Management team has worked hard to update the accounts. Currently the 2013, 2014 and 2015 FMBN audited financial accounts have been approved by the Central Bank of Nigeria (CBN) in accordance with the banking regulations. Those for the year 2016, 2017 have been prepared and submitted to the CBN for approval while the 2018 accounts have also been approved by the Board and are being signed off for submission to CBN. In the same vein, audit field work for the 2019 account is set to commence in July 2020 while the accounts (2019) will be concluded before the end of the year (2020).

Improvement in Process Turnaround Time

The Bank observed annual management retreats in years 2017, 2018 and 2019 to review business processes. The retreats identified process bottlenecks and streamlined business processes leading to reduction in turnaround time by as much as 40-60 per cent. For instance, the NHF refund process reduced from an average of 6-12 months to the mandatory 90 days and less in some cases. FMBN’s remarkable turnaround is significant for the growth of the housing industry and rapid delivery of affordable housing in the country. Given the urgent need to address the huge housing deficit, estimated to range between 17 million and 22 million, the repositioning of the FMBN to better play its role as a catalyst for affordable housing delivery inspires optimism.

Ikyaave is a public policy researcher/analyst based in Abuja