NMRC’s 13.80% Series 2 Bond issuance means lower mortgage rate for Nigerians — Experts
It seems the end is in sight for Nigeria’s housing challenges as experts in the Nigerian mortgage industry, going forward, expect a low mortgage rate for those who will be funding their home acquisition through mortgage loans.
This is on the basis of NMRC’s Series 2 Bond issuance which was at a lower cost compared to the initial issue in 2015. “Going forward, NMRC should be able to lend at a cheaper cost because, if they borrow at a cheaper cost, it means they will be able to refinance mortgage lenders at a cheaper cost, which the ultimate beneficiaries are the individuals that are taking the mortgages,” an industry expert, who did not want to be named, said.
The opinion of another expert was not different as he reasoned that, in generally, the impact of the issuance would mean that the cost of mortgage lending will come down.
“This means that people that are trying to get mortgage will be able to access the loan at a lower interest rate,” the expert who also asked not to be named said on phone.
Meanwhile, the mortgage interest rates in Nigeria range between 6-10 percent for the Federal Mortgage Bank of Nigeria (FMBN) supervised National Housing Fund (NHF) and between 15- 25 percent for commercial mortgage institutions which, analysts say, is one of the highest in the world.
However, NMRC says it has completed its N11billion 13.80 per cent Series 2 Bond Issuance under its N440 billion Medium Term Note Programme, adding that this is part of its primary mandate of providing liquidity mortgage system.
The net proceeds of the exercise will be used to refinance eligible mortgage loans originated by the participating primary mortgage banks (PMBs) and other mortgage lending institutions.
This is coming after its inaugural N8 billion 14.9 per cent Series 1 Bond issue in July 2015 which was fully deployed towards refinancing legacy mortgage loan portfolios of the participating and eligible mortgage lending banks.
The Series 2 Bonds are unconditionally and irrevocably guaranteed by the Federal Government of Nigeria (FGN) and thus ascribed an ‘AAA’ rating by both Global Credit Rating Co. and Agusto & Co.
The order book was subscribed by over 200 percent. The bonds were subscribed to by domestic investors with the Pension Fund Administrators (PFAs) representing over 70 per cent of the investors.
The federal government has, however, disclosed plans to inject N500 billion ($1.4 billion) into FMBN over the next five years in an effort to spur home ownership that has failed to take off in the country.
When experts in the mortgage industry were asked the overall impacts the NMRC Series 2 bond issuance and the federal government plans to inject N100billion will have on the entire industry, they said it was in two different angles but overall it means more fund for the sector.
Kehinde Ogundimu, the Managing Director of NMRC, said in a statement that the bond issuance reinforces NMRC’s commitment to encouraging and promoting homeownership in Nigeria by linking the capital markets with the housing sector and establishing an operating and viable secondary mortgage market to support the primary mortgage market.