The Managing Director/Chief Executive, Federal Mortgage Bank of Nigeria, Mr. Gimba Ya’u Kumo, spoke to journalists in Abuja on the challenges of housing deliveryin the country among other issues.IFEANYI ONUBAwas there.
How viable is the real estate sector in Nigeria?
The total value of the real estate market in Nigeria is put at N59tn and that is potentially six times bigger than the local stock market, which is now valued at N12tn. On this basis, the sector cannot be ignored. Let me explain how we arrived at that figure. The housing deficit in the country, which is estimated to be 17 million units, when multiplied by N3.5m, which is the estimated cost of a single housing unit, will result in the amount.
I am, however, optimistic that with the coming on stream of the Mortgage Refinancing Company, the housing sector will experience a revival that will attract investments to the sector and boost the economy.
Why do you think it has taken the government this long to holistically address financing issues in the sector?
I think it has taken the government this long to decide to finance the sector because the government initially wanted to see if the funds would be well managed before doing so. Government initially wanted to see what we have done before they put their money there. This bank has been operating for 22 years and during that time, it was operating on deficit, we were able to break even last year and made profit.
Secondly, we did some reforms like full computerisation of the bank. From the only source of income, the NHF, we now collect through a portal and e-collection, which have tripled collections. We were able to pay more mortgages and fund more constructions. We did that to show transparency so that contributors can see their contributions.
We went ahead to start publishing the names of those who benefitted and those we have refunded because the law says if they retire, they ought to take their contributions and two per cent interest. We have refunded N1.2bn to about 78,000 people in the last two years.
What do you think the government can do to enhance FMBN operations?
As we have said, the major challenge is funding; the second challenge is recapitalisation, and the Federal Government is attending to this; so, apart from these, we have others like the issue of corporate governance; we are trying to get the bank to be focused and competitive. The FMBN was established 21 years ago and since then, it had not made profit; but when I came on board, we were able to break even and make profit for the first time.
At present, the National Housing Fund only has 3,772,031 contributors and it will require 50 contributors to contribute N500 monthly for 10 years before the bank will be able to provide a loan of N15m for one individual. So far, the bank has approved NHF loans of about N90bn, out of which only N39bn or about 22 per cent has been disbursed. It has also approved N110bn Estate Development Loans out of which only N62bn or 52 per cent has been disbursed.
The total disbursement we have made so far is N100.5bn and we have been able to deliver 56,000 houses, which are just a drop in the ocean when compared to the housing deficit we are confronted with
Since the NHF commenced, we have been able to collect N106bn and looking at our disbursements, we have disbursed more than that. This is because some of the funds we collected from contributors were put in investment instruments.
We will also urge the Federal Government to increase the share capital of the FMBN from its present N5bn to N200bn to enable the bank address the housing deficit in the country. The bank is grossly undercapitalised compared to those of other countries even in West Africa, but the government is currently working on ways to improve its capitalisation. For now, the only source of funding the bank has to meet the teeming demands of Nigerians is the National Housing Fund collection, which is minimal, compared to the housing needs of Nigeria.
The government can even loan us money to carry out our functions, which we can repay with interest so that we can build houses for Nigerians at cheap rates, because the current rates in the banking sector are quite high.
How would you describe the mortgage industry in Nigeria at the moment?
The mortgage industry in Nigeria is just starting; if you look at the size of its contribution to the GDP, it is less than one per cent; but my target before I leave here is that we should be able to contribute at least 15 per cent. That is why we are putting a lot of issues on ground to be able to drive this process.
Do you think single digit mortgage rates can be feasibly sustained given the current economic indices?
Yes, our rates have always been single digit; our estate development loan or construction loan is 10 per cent, our mortgages are at six per cent and we also intend to extend that same rate to the informal sector so that we can make the houses affordable to them. Nigerians cannot afford any anything above single digit because the average income is very low that’s why we are providing a buffer whereby they are able to pay.
Like we took the minimum wage of N18,000 as a base; with that, you can do a mortgage of N450 monthly; this is the minimum. The informal sector beneficiaries are expected to pay but this will be difficult for some of them. So, we are looking at a subsidy.
There are concerns in some quarters that contributors to National Housing Fund have not been able to access loans in the last few months, how true is this?
Contributors to the National Housing Fund have in the last six months been paid over N9bn, either as refunds or as loans to assist them own their homes. We have been paying contributors, and in the last six months, we have disbursed over N9bn to the contributors. The publication of the list may not have been regular as before, but that does not mean that disbursement has not been going on. We have disbursed to over 57 Primary Mortgage Institutions.
We are doing all we can at the bank to ensure that our facilities are up to date so as to reduce the waiting time in the disbursement of loans to recipients in the shortest possible time.
Some Nigerians claim they don’t subscribe to the NHF because of problems they encounter at the maturity stage. How can these challenges be corrected to restore confidence in the scheme?
The issue of NHF loan is a transparent exercise and that is why we decided to be publishing the names list of disbursements and refunds when we came on board. We published the names of those who got refunds who have left service. It is because of our desire to address these discrepancies that we came up with the e-collection platform so that each individual contributing to the scheme will be able to, on a monthly basis, know whether their account is credited or not.
The essence of this is to make them inquire from their organisations why remittance is not being done. These are the issues and we will be able to address them as we move on. We have several strategies for implementation to provide houses to Nigerians. If you look at the minimum wage of N18, 000 and the deduction is 2.5 per cent for the NHF; you run your numbers, it is about N450.
We have 3,777,000 contributors. We have delivered only 56,000 houses. It takes 250 people contributing N500 monthly for 10 years for one person to be able to access N15m. That is the statistics and that is why we are talking to the government to fund us, even if it is a low interest loan for a long tenure. By the time you run a mortgage for five years, it is not a mortgage. A mortgage should run for 15 years or more.
The FMBN recently inaugurated the e-collection platform. What is it meant to achieve?
It is a platform that will revolutionise the NHF collection system. The e-collection platform became necessary in order to ensure payment compliance by employers and allow for transparent transactions as well as build an interactive customer base. One of the problems that we faced in the past was that of non-remittance of contributions by the employers, but we are assuring contributors that with the new platform in place, the bank will be able to access contributions almost immediately as they are being made.
We had a problem of non-remittance with people contributing and their contributions are not remitted. That is why we started the new e-payment system so that you pay directly to us. Some ministries collect but they don’t remit to the FMBN, so the money does not get to us; now, we are doing e-collection and we know that things will improve
Over N100bn has been lost to the NHF scheme due to loopholes in the collection process that encouraged flagrant violation of the NHF Act by employers. Some of these challenges include failure to effect statutory deductions, failure to remit deductions and failure to provide remittance schedules by which unscrupulous employers use the opportunity to misappropriate such money.
The e-collection platform is an effective solution to resolve these challenges and provide that the NHF not only provided the desired confidence to the contributors, but also superior customer service using the best modern technology available.
Has the bank had problems with loans given to property developers?
Up until now, we don’t have any problem with the loans that we have given to the developers, but for the ones issued before we came on board, there are problems and we are trying to resolve them. But generally, Nigeria has an issue that has to do with titling; mortgage business is based on title and getting title in Nigeria is difficult.
For example, you are given a land in Abuja under the development lease agreement to build 500 houses, for you to be able to create mortgages for these houses; you need an individual certificate for each of the houses. If you apply to the Federal Capital Territory Administration to get these, it takes you not less than two years. That of Lagos is worse.
But on our own, what we have done is to create a buffer zone, which we call the internal record office whereby you will sign our legal mortgage documents and we will give you your mortgage and you will leave us with the responsibility of getting the title; by this, we are trying to reduce the burden of the beneficiaries.
What is the rate of repayment of the mortgage loans?
For the ones issued before we came in, it has not been encouraging and that is why we have embarked on an aggressive drive to recover loans in order to meet our obligations to our shareholders. The move is in line with the resolution of the last management meeting held in Abuja, where the Board of Directors of the bank mandated the management to go all out to recover loans given through the NHF. It was also resolved that the PMIs would be included in the loan recovery exercise.
Credit: PUNCH NIGERIA LIMITED
