The Central Bank of Nigeria (CBN) recently reviewed the financial base of Primary Mortgage Banks (PMBs). Under the new guidelines, the apex bank raised the capital requirements of PMBs to N13 billion. The new capital base represents 73.3 per cent increase over the previous one of N7.5 billion that came into effect in 2013.
According to the Director, Financial Policy and Regulation Department of the CBN, Mr. Ibrahim Tukur, operators of national category of PMBs are required under the new guidelines to increase their capital base to at least N8 billion. This is an increase of about 60 per from the former capital base of N5 billion.
Also, regional or state operators of primary mortgage banks are expected to recapitalise their financial base by 100 per cent or N5 billion from N2.5 billion. In addition, the PMBs are required to pay non-refundable application fee of N1 million, a non-refundable licensing fee of N2 million and change of name fee of N100,000. The last time the CBN issued revised guidelines for PMBs in the country was in November 2011.
Also, the new guidelines contain enhanced requirements for capital risk management, internal control and corporate governance. We welcome the plan to recapitalise the primary mortgage banks and hope that the exercise will enable the PMBs reduce the nation’s housing deficit put at about 17.5 million units by a recent World Bank report. Nigeria requires a minimum of one million housing units per annum to reduce the deficit. Undoubtedly, the delivery of adequate and affordable housing in the country remains daunting and successive governments’ efforts have not met the desired target.
Sadly, about 80 per cent or 130 million Nigerians are reported to live in indecent, informal housing structures with no basic amenities and in deplorable conditions. Only a few own the houses they live in, especially in commercial and urban centres. The right to housing is recognised as a human right in the Universal Declaration of Human Rights (Article 25(1) which states that “everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing, and medical care and necessary social services….”
Unfortunately, in Nigeria, mortgage finance as a share of Gross Domestic Product (GDP) is extremely low at 0.5 per cent, compared to 31 per cent in South Africa, 80 per cent in UK, 77 per cent in USA and 2 per cent in Ghana. This is due to lack of robust mortgage finance system. Statistics also show that Nigeria’s rate of home ownership is much lower than those of many African countries. For instance, Kenya is 75 per cent; Benin Republic (63 per cent); and South Africa (56 per cent). Besides, many Nigerians grapple with poverty, unemployment, little access to clean and potable water and lack of improved sanitation and constant power outages. Also, many Nigerians are “unbanked”, as only about 40 per cent of the adult population is financially included. A recent World Bank assessment of levels of financial inclusion around the world reveals that less than two per cent of income earners in Nigeria has loan to build their own homes.
It will be good if the new capital base of the primary mortgage banks will impact positively on the housing needs of Nigerians. When the Nigerian Mortgage Refinancing Company (NMRC) was established in 2013 with a capital base of $300 million, it was expected that PMBs would have access to liquidity and long-term funds.
There is no doubt that the NMRC can deepen the liquidity in the housing finance market and bridge the funding costs for residential mortgages. Nigeria needs a minimum of N2 trillion to solve its mortgage problems. With the real estate contributing just 8 per cent to the GDP, there is need to reform the sector.
Therefore, we urge the federal and state governments to address the problems of the housing sector urgently and unlock the full potential of the housing market. The state governments should take concrete steps to ensure that housing costs are proportionate to overall income levels. They should establish subsidies for those unable to acquire affordable housing and protect tenants against wicked landlords/landladies and their agents.
The Federal Government should put in place macroeconomic policies that will develop the sector. Let government improve access to long-term finance and provide policies that will enable more Nigerians have their own houses. We enjoin the mortgage bank operators to comply with the new guidelines so that affordable housing can be achieved.