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Published On: Fri, Dec 19th, 2014

Assessing FMBN’s housing delivery scheme

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The present administration appears to be making efforts towards achieving its desire to provide affordable housing to Nigerians, Evelyn Okakwu, in this analysis, assesses several initiatives and achievements the current management of the Federal Mortgage Bank of Nigeria (FMBN) has recorded in the last three years.

The last three years has seen a drastic improvement in housing finance in Nigeria, as it has become the key driver of economic development, political stability and forming a substantial part of Nigeria’s Gross Domestic Product (GDP) especially in the last four years.

The record also shows that the demand for housing and housing finance in Nigeria is significant and growing steadily, with huge potential to launch the nation’s economy on the stride to fortune.

Key players in the sector, including Federal Mortgage Bank of Nigeria (FMBN)’s Managing Director, Mr. Gimba Ya’u Kumo, have attributed the progress to the ‘’Transformation Agenda’’ of President Goodluck Jonathan – a direct result of the Housing Retreat earlier organised by the President.

It was the retreat that kick-started the launch of the Nigeria Mortgage Finance Company (NMRC), which signalled the beginning of a process that is today increasing opportunities for Nigerians to own their homes at an affordable price.

Before now, the lack of healthy mortgage financing system in Nigeria had made the rate of home ownership in the country one of the lowest in Africa. Nigeria’s homeownership rate was put at about 25 percent, which is much lower than contemporary countries.

This is why the FMBN, under the present management, has embarked on drastic measures to ensure that the housing deficit is bridged and this has led to the introduction of mass housing schemes in various parts of the country.

Some of the mass housing schemes are done on a rent-and-own model, which allows low income participants to rent a home for 15 to 20 years and own the property at the end of that period. And expectedly, this new approach to the housing market has resulted in thousands of new mortgages at low, double to high interest rates. This is hinged on maintaining a stable macroeconomic environment with low single digit inflation, a feat which the country has shown over the past few months that it can achieve.

But notwithstanding its limitation, particularly that of the housing deficit, the apex mortgage bank initiated projects, which have delivered about 53,000 houses through the NHF, as well as launching of the housing scheme for the informal sector, and the Estate Development Guarantee (EDG) scheme, amongst others. These initiatives, coupled with its appeal to recapitalise, are set to place the industry on a new pedestal.

For instance, with the informal sector’s Cooperative Society Loan Scheme, Kumo explained that operators such as farmers, traders and artisans would be able to tap into the benefit from the National Housing Scheme, like those in the formal sector.

‘’The mortgage industry in Nigeria is just starting. If you look at the size of our 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.

“And how do you do that? If you look at the NHF that we are managing, out of the 170 million population, less than one per cent are the ones contributing. So, we said this is not good enough. How do we reach the other segments of the society that are not in formal employment?” he queried.

Explaining the reason for the establishment of the scheme, Kumo observed that people in the lowest strata of the society have not benefited from housing loans, because they have limited capacity to pay for houses, as the income they generate is very small.

This, he further said, led to the introduction of the Cooperative Loan Scheme, which according to him, was brought about to extend the bank’s services to people who can be deemed as “disadvantaged” in the society because of their low income level, which may be irregular and difficult to access under the NHF loan window.

Therefore, he said, the FMBN, under the scheme, is now using cooperative societies to benefit a certain group of people operating in the informal sector category, especially because of the nature and structure of their income, which is not definite or regular.

“The loan enables a cooperative society that has acquired a plot of land to develop houses for allocation to its members. The parcel of land would have title in the name of the society, which would act as facilitator on behalf of its members in the loan transaction and facilitate construction of the housing units. The root of the title of the estate land would be sublease to the beneficiaries,’’ Kumo explained.

While the various strides by the agency may not have met all the expectations of stakeholders, majority of stakeholders are of the view that going by the steps taken so far, a bright future lay ahead of the industry. They expressed confidence that the FMBN has done well with its schemes and only needs some propping to deliver greater benefits to the people.

Earlier in the year, President Dr. Goodluck Jonathan launched the NHF e-Card and commissioned the FMBN-financed ‘Aviation Village’ Housing Estate.

The commissioning ceremony, which took place at the premises of the estate along the Airport Road, Abuja, was attended by some members of the Federal Executive Council, National Assembly members, Business men and women as well as actors in the real estate business.

The ‘FMBN Aviation Village’ Housing Estate was developed by Suntrust Real Estate Investment Limited, a private developer, based on funding for both construction and infrastructure financing provided by FMBN to the tune of N2.4 billion.

In his speech, Kumo commended the President on his commitment in ensuring that the current housing deficit, which now stands at 17million, is reduced drastically in the nearest possible time.

Kumo announced that since the introduction of the NHF, collection to the fund has improved by more than 500 per cent and has also assisted to ensure transparency and accountability.

He said, “The NHF e-Card being launched today is a huge step forward in delivering the advantages of speed, accuracy, transparency, accountability and superior customer experiences to NHF contributors.

‘We have begun to harvest the benefits of the NHF e-Collection Platform, especially in the volume of NHF collections. For instance, the rate of NHF collections rose significantly from about N700 million to over N2.2 billion per month. We estimate a further 100% increase in monthly collections to achieve about N4 billion per month before the end of year 2014.

Alh. Kumo also said the FMBN is advancing concessionary mortgages to NHF contributors at 6% interest rate, in line with Government’s directive for a single-digit interest rate regime under Mr. President’s programme of easy access and cheap housing finance to low-income earners.

“As a further step, FMBN is advancing concessionary mortgages to NHF contributors at 6% interest rate in line with Government’s directive for a single-digit interest rate regime under Mr. President’s programme of easy access and cheap housing finance to low-income earners.

NHF e-Collection Platform is just one of several initiatives and achievements the current management of FMBN has recorded. Other notable ones are: a 65% growth in cumulative NHF collections and a 42% growth in total loan disbursements within just 32 months; a 196% increase in NHF refunds to qualifying contributors; and the introduction of the ‘Informal Sector Housing Cooperative Scheme’, to provide mortgage services to non-salaried workers who constitute over 85% of the Nigerian working population;

Others are attracting offshore investments in the housing sector from international financial institutions such as ICBC of China, Shelter Afrique, Globus Financial Services of USA, to mention a few; partnership with the Nigerian Employers Consultative Association (NECA), the TUC and NLC for the delivery of 4 million housing units to workers nationwide; and introduction of the NHF Diaspora Mortgage Loan Scheme, designed to provide housing opportunities in Nigeria to over 15 million Nigerians living in the Diaspora.

The FMBN must be commended on his remarkable achievements in recent times, despite the challenges of land acquisition and absence of long-term funding, which the present administration is effectively addressing.

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