Don’t use pension funds for housing – Adeosun

The Minister of Finance, Kemi Adeosun, yesterday said pension funds must not be used to take direct developer risks in the housing sector.
She spoke  in Abuja yesterday at the Works and Housing Summit.
According to Adeosun  the potential role of pension funds in housing provision is much misunderstood.
She said: “The pension funds have been frequently touted as a funding solution to most needs in Nigeria, including housing. Pension funds do represent a pool of long term funds, they are not an ideal source for housing at the development stage due to the high level of risk associated with this phase. What pension funds need is predictable flow of annuity income to meet future pension payment obligations and this is provided at the mortgage phase rather than the development phase.”
She said the solution for the needs of  development phase was creative government intervention, particularly at the early stage in the development of the industry, where there is the need to provide proof on concept which will attract private capital.
Adeosun also said the government planned, with appropriate safeguards, to de-risk lending to approved housing developers in order to stimulate the growth of the sector.
“This de-risking process will make it easier for banks to extend credit and for the issuance of bonds by developers. That de-risking process will entail the government providing guarantees and other credit enhancements to make the sector attractive and viable. Issuing promissory notes for the cost of land will reduce initial outlay and reduce developer financing requirements whilst creating valuable assets for the state governments,” she added.
She described provision of affordable housing as an essential tool in the fight against corruption, saying, “An employee with a 35-year working life must have the reasonable expectation of being able to accumulate tangible assets without the need to compromise.”
She said the government had the mechanism in place for the refinancing of mortgages through the Nigerian Mortgage Refinancing Company (NMRC) which, she noted, had already raised over $350bn of capital via a series 15 year fixed rate bond and had refinanced over N1bn of mortgages.