Nigerian government has obtained a $25 million loan from the World Bank in order to orchestrate its plan of starting up a loan guarantee programme come 2019, with the hope of lending to low-income earners to boost home ownership.
According to Bloomberg reports, the Central Bank of Nigeria is currently planning a project that will see to the start of a firm by the end this year called Nigerian Mortgage Guarantee Co., which the Nigeria Mortgage Refinance Company (NMRC) will be the first shareholder in the company.
Speaking with BusinessDay, Dolapo Omidere, founder of Estate Intel, said, “NMRC just refinances loans that are being given by the mortgage firms, and people don’t go to them to get loan majorly because of the risk involved as well as interest rate. The introduction of the Nigerian Mortgage Guarantee co will make loan available and more accessible to an average Nigerian as they will act as a guarantor to the borrowers if they default.”
The NMRC is a private sector-driven mortgage refinancing company with the public purpose of promoting home ownership for Nigerians while deepening the primary and secondary mortgage markets.
The NMRC was basically established to redress the key barrier of lack of access to long term funding to catalyse growth in the market and promote home ownership.
Africa’s most populous nation has a housing deficit of about 17 million units and its mortgage rates ranging between 7-10 percent for the Federal Mortgage Bank 0f Nigeria (NHF) and between 15-25 percent for commercial mortgage institutions is considered by industry experts as one of the highest around the world.
Despite the various policies and strategies adopted by the FG aimed at combating the housing problems of the citizenry, not much as been accomplished.
Current mortgage to GDP ratio in Nigeria is estimated at 0.6%, as opposed to 2% in Ghana, 31% in South Africa, 32% in Malaysia, 77% in the United States and about 80% in the United Kingdom.
Despite this lingering problem, real estate experts are optimistic about the new development.
The plan of setting up this firm by the central bank is to establish a mortgage guarantee product, targeted at lower income borrowers that will be used to guarantee some of the credit risk for this special group of lenders.
Also, Hakeem Sadiq, founder of Zama, a real estate investment advisory firm, said, “Parameter that is being put in place makes it easier for an average Nigerian to walk up to the mortgage industry and apply within the scope given to them.
“Having a guarantor is basically a good step, but there is still room for more improvement.
“The said amount would not be enough to tackle the deficit in Nigeria but it is a start and a good one at that.
It is something that can help mortgage industry that is way out of reach for the average Nigerian more accessible.”
This initiative is set to be a life changing decision to the low-income earners thereby giving them the courage to seek for loans from mortgage banks without fear of the high interest rate.
Jonathan Aderoju & Oghogho Edosomwan