Nigeria’s mortgage system under refinancing model

In Nigeria bridging the housing deficit may be the driving force. According housing industry sources there is an estimated 17 million housing deficit in Nigeria. Filling this gap needed a huge amount of liquidity, which only special intervention by any government of the day can guarantee. Having this in mine, the Goodluck Jonathan led administration came up with the country’s first mortgage refinancing institution-Nigeria Mortgage Refinancing Company (NMRC) based on public-private partnership model, and entrust it in the hands of no other person than a highly qualified industry expert, Professor Charles Inyangete.
In a rare privilege interaction, Professor Inyangete had this to say about the style of leadership he is bringing to this novel institution.
“I bring a style that is based on simplicity and a desire to achieve what we set out to do, not a leadership that is grandiose, not a leadership that sets out to say too much but a leadership that sets out to demonstrate by what we achieve. And so, mine will be a very simple approach to things but it will be hands-on approach to things. I will roll my sleeves and get the work done and get involved in getting the work done without forgetting the strategic role that I’m supposed to play. But I also will not ignore the operational role in ensuring that the best strategies don’t just remain strategies but they get realised.”
Asked what Nigerians will expect of the NMRC in the next five years, the NMRC CEO answered:
“In the next five years, we have projected that we will refinance close to the region of 400,000 to 450,000 mortgages for one segment of the market. When we go down to the lower segments of the market we expect to refinance proportion larger than that number. So Nigerians can expect to see mortgages refinanced in their hundreds of thousands perhaps close to a million in that period, depending on the buoyancy and vibrancy of the market and their activities in that period”
Like elsewhere in the world the NMRC is a private sector driven company with the singular purpose of developing the primary and secondary mortgage markets by raising long-term funds from the domestic capital market as well as foreign markets and thereby provide accessible and affordable housing in Nigeria.
Accessible and affordable housing stimulate growth of the economy in many key sectors-manufacturing, services and employment-but  more importantly it promotes welfare of the citizens as it addresses one of the most basic needs of mankind-shelter.  Little wonder that among the mortgage refinancing programs introduced by Obama administration is the Veteran’s Administration Loan Refinance programme that targeted the welfare of US Veterans-an important segment of the US citizenry. The programme offers Interest Rate Reduction Refinances (IRRR) for Veteran Home Owners who simply want to reduce their interest rate, with no appraisal. Apart from VA loan refinance there others such as the Home Affordable Refinance Program (HARP), USDA Home Loans and FHA Streamline Refinance all targeted at making home ownership easier for different categories of people.
In Nigeria the mandate given to the NMRC is to provide primary mortgage banks (PMBs) with access to long-term finance at an affordable interest rate, which in turn will enable mortgages to be issued by these institutions to Nigerians at longer tenors and affordable rates. Consequently, the provision of mortgage loans at longer tenors will provide the average working class Nigerian citizens an opportunity to buy a home and conveniently pay for it over a reasonable period of time without hassles.
Thus NMRC as novel idea, incorporated in 2013 can ill afford to fail. Nigerians have waited for long for this to come. Now that it is here, care must be taken to ensure success. With the World Bank approved concessional US$300 million 40-year interest free International Development Association (IDA) loan NMRC has financial wherewithal to make a difference in the Nigeria’s Housing sector. It is expected the lingering problems bedeviling the mortgage sector will disappear when NMRC take off fully. Lack of focus of some PMBs on mortgage due to their pursuit of other more profitable ventures should be a thing of the past. With NMRC PMBs can borrow, pay out their cash within short term and go back to borrow again and again thereby increasing their own lending capacity.
Lack of ability of PMBs to mobilize funds will no longer be a problem for the Housing sector because with NMRC guarantees the Housing sector will be awash with more funds such the N5 trillion or so of pension fund in the market. With the law interest rate NMRC is bringing into the market it is a win-win situation for both the PMBs and the consumers of mortgage.
NMRC is mandated to increase the efficiency of mortgage lending by taking a lead role in proposing changes to the enabling environment for mortgage lending as well as by standardizing mortgage lending practices of financial institutions. Standardization of lending practices is where NMRC may face some challenges. New legal frameworks, like foreclosure laws or the new underwriting policy just published by the NMRC will need to be develop and adapted which will take some time. The underwriting policy promised to allow any player in the mortgage industry that wants to be part of the refinancing to be able to know the exact process from origination right through to the servicing of every mortgage. What will help is a well-articulated industrial relations programme that will address the need for the players to comply. Such industrial relations will have to go beyond the confines of Business-to-Business communication. NMRC, as a new idea with the purpose of developing both the primary and secondary mortgage institutions, need to engage in massive public sensitization that will awaken Nigerians to the silver lining in the clouds.
Other areas to watch are the macroeconomic environment the issue of inflation, which has impact on the construction industry-a critical sector in the mortgage industry process, double digit interest rates, etc. This should not be difficult to monitor since the NMRC is a  key component of the Nigeria Housing Finance Programme which was initiated by all our fiscal policy drivers-the Federal Ministry of Finance (FMOF), the Central Bank of Nigeria (CBN), Federal Ministry of Lands & Urban Development & Housing and the World Bank/IFC.
Now that this laudable initiative commenced with high enthusiasm, the homeless Nigerians expect nothing less but affordable, accessible and quick result from the NMRC in order to justify its entrance into the housing sector.

Hassan contributed this piece from the Capital City, Abuja.