FMBN: Delivering Affordable Housing Mandate

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By John Ikyaave

On the 18th of April, the Executive Management Team of the Federal Mortgage Bank of Nigeria (FMBN) under the leadership of Ahmed Dangiwa clocked four years in office.

Within this period and under the supervision of the Minister of Works & Housing, Babatunde Fashola, the 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.

Historic Increase in Mortgage Loan Disbursements

First, consider the quantum of loans disbursed. Between April 2017, when the management team took charge of the bank to February 2021, FMBN leveraged funds accruing to the National Housing Fund (NHF) Scheme to record N130.460 billion in various loan disbursements.

The figure comprises NHF Mortgage Loans totalling N43.141 billion granted to 4,985 beneficiaries and Home Renovation Loans totalling N49.265billion granted to 60,500 beneficiaries.

The bank also deployed over N38 billion towards the development of 9,540 affordable housing units across the country through different construction product windows.

This includes Estate Development Loans totalling N20.195 billion, Cooperative Housing Development Loans totalling N10.985 billion and Ministerial Pilot Housing Scheme loans totalling N6.873 billion.

The size of mortgage loans disbursed within the four-year period is remarkable at many salient levels. First, it accounts for over 46 percent of the cumulative N282.914 billion that FMBN has disbursed since the NHF Scheme commenced operations 29 years ago in 1992.

Secondly, the amount translates to an 85 per cent increase in the cumulative value of mortgage loans totalling N152.453 billion in April 2017 when the Management team came on board to N282.914 billion as of February 2021.
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 four years have witnessed improved efficiency in the management of the 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. Over the past four years, FMBN made refunds totalling N29.905 billion to 201,304 retired contributors to the scheme.
The figure represents a 275 per cent increase from N10.836 billion recorded by previous managements over a 25-year period to N40.742 billion. The current management disbursed more to more people in four years than previous managements did in 25 years.

FMBN Strategic Turnaround Plan

In a bid to reform and reposition the bank, FMBN engaged the services of a reputable International Consultancy Firm, Messrs. KPMG Limited 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% 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.

Accessing FMBN Housing Loans

In a bid to lower the financial burden on potential homeowners 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 that 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.

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.
First 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 7 percent.

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 63,079 Nigerians have benefitted from this facility in the last four years.

FMBN has also revamped its legacy Cooperative Housing Development Loan (CHDL) in line with the initiative of the Minister of Housing, Babatunde Raji Fashola (SAN) 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%. 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.

Boosting Transparency in NHF Scheme

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 *219# USSD Short Code service via GSM mobile networks; NHF Mobile Apps available on android & iOS platforms; online Self-Service Kiosk via the Bank’s web portal (www.fmbn.gov.ng/nhfmobile) 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.

Housing Delivery Programme for Nigerian Workers

In a move aimed at strengthening 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.

The Housing Programme aims at a structured and sustainable approach to affordable housing delivery for Nigerian workers nationwide.

About 1,400 housing units are ready for commissioning in 12 sites across the six geopolitical zones of the country in addition to Lagos and Abuja, in batches of a minimum of 200 units per zone. The second phase has also commenced and is planned to deliver about 2,172 houses in another 14 locations. 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 Scheme

The FMBN Board and Management have worked hard in the past four years to rebuild stakeholder confidence in the National Housing Fund (NHF) Scheme. As a result, six states re-joined the NHF Scheme. This includes Borno, Niger, Edo, Ondo, Kebbi and Lagos bringing the total to 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 630,089 additional subscribers to the NHF scheme within the past four years alone, bringing the total to a record 5,169,173 Nigerian workers.

Updating the 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, accounts for years 2019 and 2020 are expected to be concluded within this quarter to bring the Bank’s financial records up to date.

Approval to Implement a Core Banking Software

Yet another important high point of FMBN achievement is the approval of the Federal Executive Council (FEC) for the nation’s apex bank to procure and deploy a Core Banking Software Application.

Once operational, the application would help the FMBN to tackle the many systemic challenges that it has had to contend with over the years due to the largely manual nature of its operations.

This includes fixing the longstanding inability of the Bank to update, in real-time, subscribers’ monthly contributions to the NHF Scheme by ensuring that NHF subscribers get real time alerts on all transactions on their NHF Accounts and stay informed on the status of their accounts.

The system would also help to reduce the time it takes for subscribers to access home loans from the bank from over twelve months to about a month and help FMBN to achieve efficient document management systems by enabling it work paperless in loan documentation, appraisal, disbursement, remediation, and loan recovery processes.

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