Recent developments in the pension sector point to the fact that the National Pension Commission is determined to make mortgage financing for home ownership through Workers’ Retirement Savings Account a reality, writes Ebere Nwoji
When the former Director General National Pension Commission (PenCom), Mrs. Chinelo Anohu-Amazu, at the sideline of the 2015 edition of the “World Pension Summit Africa Special,” hinted journalists that the commission was working out modalities to ensure that Nigerian workers who contribute into the Contributory Pension Scheme (CPS) use part of their Retirement Savings Account (RSA) balance for payment of equity in mortgage for acquisition of homes, Nigerians hardly believed this is possible. But seven years after, it has become a reality.
A reality because PenCom, three months ago, precisely on September 23, 2022 released guidelines on assessment of RSA balance for acquisition of homes by RSA holders .The commission penultimate week published names of mortgage institutions approved by the Central Bank of Nigeria for the home mortgage financing for contributing workers.
This points to the fact that federal government through PenCom is really serious about making Nigerian workers solve their home ownership problem through mortgage financing of the housing deals, using their pension contributions.
Pension Reform Act 2014
Use of RSA balance for equity payment for home financing was one of the highpoints of the Pension Reform Act (PRA) 2014.
The 2014 Act, made a provision, which allows contributors to utilise part of their RSA balances towards payment of equity in a mortgage institutions for the acquisition of a primary home.
Although the development is for those RSA holders who have contributed into the scheme for minimum of five years (60months), analysts said it would go a long way to address housing deficit problem in Nigeria especially among workers.
Apparently, Nigeria has a big housing deficit problem. Placing the country side by side other countries, Nigeria is said to be one of the least in home ownership in the world.
Housing Problem in Nigeria
According to the Chief Executive officer, Pension Operators Association of Nigeria (PenOp), Mr. Oguche Agudah, whereas percentage of home ownership in Nigeria is 25, Kenya has 75 percent home ownership, South Africa 56 percent, Tunisia 77 per cent, Romania 96 percent, Ghana 48 percent.
He said it was against this backdrop that PenCom insisted on implementing the home ownership mortgage financing guideline so that every worker in Nigeria would own his own home.
Recent checks by THISDAY during the recent hike on transport fares especially in Lagos occassioned by rise in fuel price, showed that paid workers are the worst hit by the hike as some of them confided in THISDAY that on daily basis, they travel all the way from Badagry to Victoria Island where they are working.
Asked why they choose to subject themselves to such suffering, they said it was because of high cost of house rent and scarcity of affordable houses in their area of work.
Most of them living in those far and less developed parts of Lagos are not living in their own houses but still in rented apartments that are affordable.
Currently, they are lamenting that high cost of transport as a result of hike in fuel price has made nonesense of the entire thing because after high transport fare every week, it has become obvious that it is no longer economical living in those far places. This is because of inability of such workers to own their own houses, which is what government through PenCom and the mortgage-financing act are trying to address.
Section 89(2) of the Pension Reform Act 2014 provides that “Notwithstanding the provision of sub-section (1)(c) of this section, a Pension Fund Administrator may, subject to guidelines issued by the Commission, apply a percentage of the pension assets in the retirement savings account towards payment of equity contribution for payment of residential mortgage by the holder of Retirement Savings Account”.
PenCom’s Intervention and Guidelines
In order to give expression to this provision, PenCom on 23rd September 2022, approved Guidelines on Accessing Retirement Savings Account (RSA) balance for payment of equity contribution for residential mortgage by RSA holders. The highlights of the guidelines are as follows:
On eligibility for the financing, the PenCom guidelines covers pension contributors in active employment, either as a salaried employee or as a self-employed person. It also said interested RSA holders (applicants) must meet the following conditions: “Have an offer letter for the property duly signed by the property owner and verified by the Mortgage Lender: the RSA of the applicant shall have both the employer and employee’s mandatory contributions for a cumulative minimum period of 60 months (five years); a Contributor under the Micro Pension Plan (MPP) is also eligible, provided he/she has made contributions for at least 60 months (five years) prior to the date of his/her application; RSA Holders that have less than three years to retire are eligible.
Married couples, who are RSA holders, are eligible to make a joint application, subject to individual satisfying the eligibility requirements;
RSA holders, if registered before 1st July 2019, must have their records updated through the RSA data recapture exercise; and application for equity contribution for residential mortgage shall be in person and not by proxy.”
On maximum total mandatory RSA balance as at the date of application, the commission put it at 25 per cent irrespective of the value of equity contribution required by the mortgage lender.
“Where 25 per cent of a contributor’s RSA balance is not sufficient for payment as equity contribution, it said RSA holders might utilise the contingency portion of their voluntary contributions (if any).”
In addition to the guidelines, PenCom recently released names of 34 mortgage institutions approved by the CBN to finance the pension mortgage housing scheme.
Approved mortgage institutions
PenCom said out of the 34 banks, 19 were from Lagos, seven from Abuja and the remaining eight from other states of the federation.
The mortgage lenders from Lagos, according to the commission are Abbey Mortgage Bank Plc; Brent Mortgage Bank ltd, AG Mortgage Bank Plc; Centage Savings & Loans; City Code Savings & Loans; First Trust Mortgage Bank; Global Trust Mortgage; Haggai Mortgage; Homes-Base Mortgage; Imperial Homes; Jubilee-Life Mortgage Bank; Lagos Building & Investment; Prudential Mortgage Bank and Refuge Homes Savings & Loans.
Others from Lagos include Resort Savings & Loans; Safetrust Mortgage Bank; STB Building Society; Union Homes, Mayfresh Mortgage Bank and Resort Savings & Loans
Those from Abuja are Aso Savings & Loans; FHA Homes Ltd; First Generation Homes; Infinity Trust Mortgage Bank; MDSL Mortgage Bank LTD; Nigeria Police Mortgage Bank and Platinum Mortgage Bank
The remaining are from other states which include Akwa Savings & Loans Ltd and Mutual Alliance both from Akwa Ibom; Coop Savings & Loans from Oyo State; Delta Trust Mortgage Bank; Gateway Mortgage Bank, Ogun State; Jigawa Savings & Loans, Jigawa state; Kebbi Stare Homes, Kebbi State and Living trust formally Omoluabi, Osun State
The mortgage firms were divided into two: national with minimum capital requirement of N5bn and state with N2.5bn minimum capital. In all, there are 13 categorised under national while the remaining 21 are under state.
The Guidelines
Speaking at the 2022 Media seminar organised by the Pension Operators Association of Nigeria (PenOp) for pension journalists in Lagos with the theme, “Pension: An Opportunity to Own Your Own Home, An X-Ray of the New RSA Plan On Home Ownership,” the Head of Investment Department PenCom, Ibrahim Kangiwa, gave highlights of the Guidelines.
In his presentation entitled, “Highlights Of Guidelines On Accessing RSA Balance Towards Payment Of Equity Contribution For Residential Mortgage By RSA Holders,” he listed eligibility for mortgage lenders.
He said Mortgage lender must be Licensed by the Central Bank of Nigeria (CBN), “to provide residential mortgage; meet the minimum capital requirement as prescribed by the CBN from time to time; have good financial standing at all times and satisfy the minimum requirements of the CBN; have valid Pension Clearance Certificate issued by the Commission in line with the Pension Reform Act (PRA) 2014 and comply with the provisions of Sections 2 and 4 (1) and (5) of PRA, 2014.”
According to Kangiwa, the roles of the Mortgage lenders include to provide application mortgage form for the applicant; open an account for the applicant; verify the genuineness of the property offer; due diligence to ensure that the property has a valuation report.
Other roles are; “verify if the 25 percent of the applicant’s RSA balance will be sufficient as equity contribution; where 25 percent of the RSA balance(s) is not sufficient, the Mortgage Lender shall request for the payment of supplementary equity contribution from the applicant(s) and issue a mortgage offer letter to the applicant.”
He said the objective was to provide access to equity finance for RSA holders in the Contributory Pension Scheme (CPS).
He said, “Improve the standard of living of RSA holders under the CPS by facilitating their ownership of residential homes during their working life. Improve enrolment in the CPS by providing incentives to employees who are yet to open RSAs. Provide a sustainable source of long-term finance to the mortgage sector and spur development in the housing sector.”
On modalities to ensure the successful implementation of the initiative, Kangiwa said that all hands must be on deck for a successful implementation of the guidelines and that, “stakeholders must work together to ensure effective implementation of the guidelines. Employers should ensure that contributions are deducted and remitted on time as required by law Parties should ensure due diligence checks to preserve the integrity of the process.”
Contributors’ View
From the contributing workers’ view, Mr Ahmed AdekunLe, a teacher in Lagos said it was a good development because it would help workers own their homes, which ordinarily they might not be able to achieve.
He said some workers have in the past tried to achieve this through cooperative societies but that the success has been questionable.
He said government should maintain its word by ensuring that only a certain percentage of the worker’s savings would be taken and not all his savings because of some unforeseen circumstance that might arise in future.
He said his reason for saying this is to prevent sinking all the savings of a particular worker in home financing and when he retires, he retires hopelessly.
He said that government should realise that home or shelter is not all a worker needed, especially at old age therefore something must be left for the worker for his retirement age .
Another contributor under Lagos State Teaching Commission said this is a good development, which if implemented as stated would help many workers own their own houses.
She however noted that what would scare people from attempting to enjoy this is unnecessary bottlenecks in the application processes and final approval of the housing finances.
She said government should as much as possible make the processes a little easy while following its due process to avoid scaring the workers away.
PenCom had said that the period of loan application would last between 11 to 14 days but that other circumstances may lengthen the processing and final approval period.
Before the implementation of the mortgage financing guidelines PenCom had told THISDAY that the main rationale for the implementation of the guidelines stemmed from what was obviously a critical aspiration of most workers.
It said since the CPS was designed to be responsive to the needs of contributors, the PRA now allows contributors with sufficient RSA balances to own their homes through mortgages, while still in active service.
The commission emphasised that the guidelines was clear that access to the funds was to secure mortgages through appropriate institutions and after necessary due diligence.
This, according to the commission, is to ensure that the funds were utilised as intended.
