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Published On: Fri, Aug 8th, 2014

We need funds to aggressively address housing deficits – Kumo

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Gimba Ya’u KumosGimba Ya’u Kumo is the MD/CEO of the Federal Mortgage Bank of Nigeria (FMBN), which mobilizes long-term funds for on-lending to Nigerians to build, buy or renovate their residential houses under the National Housing Fund (NHF) scheme.

Kumo, in this interview with our News Editor, Aminu Imam, sheds light on how far the bank has gone in achieving its objectives and its plans for the future among others. Excerpts:

What are the statutory functions of the Federal Mortgage Bank of Nigeria?

FMBN is an instrument created by the Federal Government to provide affordable low cost housing to low income earners and to add to providing solution to the housing needs of Nigerians.

It was established by the National Housing Fund (NHF) Act 3, of 1992. The Act stipulates that a Nigerian worker earning the minimum national wage and above per annum in either the public or private sectors of the economy, who is 18 years and above shall contribute 2.5 percent of his/her basic salary to the fund.

The idea is to have a common pool of funds where the total of this 2.5 per cent will accumulate and will be available to finance mortgages for low income earners.

Though this provision makes it compulsory for Nigerian workers to participate in the scheme, it should be seen as also offering them the opportunity to enjoy the numerous benefits of the scheme.

The NHF scheme is for Nigerians in all sectors of the economy, particularly those within the low and medium income levels who cannot afford commercial housing loans e.g. civil servants, traders, artisans, commercial drivers etc.

Any intending beneficiary must be a registered contributor and up to date with his/her contributions. With this in place, an average Nigerian can identify a house in any location in Nigeria and approach the FMBN to take a loan either for outright purchase of the house or to renovate an existing one.

Initially, the maximum any contributor can access as loan was N5million but was later increased to N15million.

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 our contribution to the GDP its less than 1% but my target before I leave here is that we should be able to contribute at least 15%.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 1% are the one contributing; so we said this is not good, how do we reach the other segment of the society that are not in formal employment.

Do you think a single digit mortgage rate can be feasibly sustained, given available economic indices?

Yes; our rate have always been single digit, our estate development loan or construction loan is 10%, our mortgages are at 6% 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.

We took the minimum wage of N18, 000 as a base; with that you can be able to do a mortgage of N450 monthly so 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.

Is there any way that PMIs can be prevailed upon to charge single digit interest rates?

If you say government, you are talking in terms of agencies that deliver mortgages. On the government side, for now, it is only FMBN that is really delivering mortgage. And our mortgage is single digit, at six percent. That is what President Goodluck Jonathan has told us and that is what we are doing. We charge our mortgage at the rate of 6 percent on a long tenure basis; 15, 20 and even up to 35 years.

There are concerns in some quarters that contributors to NHF fund have not been able to access loans in the last few months; is it true?

Contributors to the NHF have in the last six months been paid over N9 billion, either as refunds or as funds to assist them own their homes.

The information is in the public domain for anyone that wants to verify to do so. We have been paying contributors and in the last six months we have disbursed over N9billion to contributors. 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 through over 57 Primary Mortgage Institutions (PMIs). We are doing all we can within 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 to the shortest possible time.

Some Nigerians claim they don’t subscribe to NHF due to problems they encounter at maturity stage. How can these measures be corrected to restore confidence?

The issue of NHF loan is a transparent exercise and that is why we decided to be publishing the names of disbursements and refunds when we came on board. We published the names of refunds of those that 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 his or her account is credited or not. The essence of this is to make them inquire from their organizations why it is not done.

We have several strategies for implementation to provide houses to Nigerians. If you look at the minimum wage of 18, 000, the deduction is 2.5 per cent. If you run your numbers, it is about N450. We have 3, 777, 000 contributors. We have delivered only 56, 000 houses. It takes 250 contributors contributing N500 monthly for 10 years for one person to be able to access N15million. That is the statistics and that is why we are talking to 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.

What this means is that an average Nigerian can identify a house in any location in Nigeria and approach FMBN for a loan through a PMI for financing, for either outright purchase or for renovation.

How can Nigerians access NHF loans?

Those who want to access the loans need to have equity contribution of some per cent age of what they are asking for as loan. If for instance they require N5 to N10million from the bank, the equity contribution is 20 per cent, for N10 to N15million, the equity is 30 per cent while for N5million and below, the equity contribution is 10 percent.

The bank does not deal with individuals in its transactions as individuals wishing to buy a house or access the loans have to go through PMIs.

How viable do you think the real estate sector in Nigeria is presently?

The total value of the real estate market in Nigeria is put at N59trillion and that is potentially six times bigger than the local stock market, which is now valued at N12 trillion. 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 N3.5 million, 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 Utility Refinancing Company, the housing sector would experience a revival that would attract investments to the sector and boost the economy.

 

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