How Nigerian mortgage guarantee programme will impact property market

All hands seem to be on deck in bridging the housing deficit in Nigeria, as industry experts polled in a  Business Day survey see the Central Bank of Nigeria’s plan to setup  the Nigerian Mortgage Guarantee Company (NMGC) as a move in the right direction.

 

This is following the plans by the government of Nigeria to start a mortgage-loan guarantee programme next year in an effort to improve lending to low-income earners and boost home ownership.

This was disclosed by Tokunbo Martins, Director of Banking Supervision at CBN, who said the nation’s government, through the apex bank, is working on a project that will see the start of a firm this year called NMGC, which will be owned by the government and private investors.

To this effect the government has obtained a $25 million loan from the World Bank to run the company, pending equity investments by the owners.

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On how NMGC will impact on the property market in a country with a housing deficit of about 17 million units, industry experts consulted by BusinessDay said the company will make it easier for an average Nigerian to access a mortgage, considering there is now a guarantor.

“Putting a guarantor in place will enable an average Nigerian to access mortgage, and this is going to go a long way in making home ownership in the country much easier,” a property analyst who pleaded anonymity told BusinessDay on phone.

Meanwhile, 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, as a way of boosting home ownership in Nigeria.

Meanwhile, the guarantor is expected to pay a mortgage-loan provider of about 40-50 percent of its losses if a customer defaults.

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Nigeria Mortgage Refinance Company (NMRC), a public limited company whose aim is to refinance mortgages from the capital raised in the market, will probably be the first shareholder of the company, as disclosed by CBN.

Dolapo Omidire, Founder of Estate Intel, a real estate research firm, said it is a start and a good one at that but the amount would not be enough to tackle the deficit in Nigeria. “It is something that can help the mortgage industry, it will make mortgage that is way out of reach for the average Nigerian more accessible,” Dolapo added.

Meanwhile, in February 2018, ‘My Own Home’ scheme targeted at providing improved access to housing finance to aspiring homeowners was unveiled by stakeholders in Nigeria’s property  market and it was domiciled with CBN.

This was also expected to, among other things, provide awareness, education and practical tips to assist prospective homeowners in need of long-term housing finance.

The public-private partnership scheme, according to the stakeholders, has the support of the World Bank, the Federal Ministry of Finance, the Federal Ministry of Power, Works and Housing, Federal Ministry of Justice, Mortgage Banking Association of Nigeria (MBAN), as well as primary mortgage banks through equity stake in NMRC.

Despite the various policies and strategies adopted by the FG aimed at combating the housing problems faced by its citizens, it seems not much has been accomplished, as the current mortgage to GDP ratio in Nigeria is estimated at 0.5 percent, as opposed to 2 percent in Ghana, 31 percent in South Africa, 32 percent in Malaysia, 7o percent in the United States and about 80 percent in the United Kingdom.

As to why Africa’s largest producer of crude oil lags other countries in providing housing for its citizens, CBN linked it to record high interest rates, poverty and lack of proper land deeds, as home loans total about 50,000 in an economy which vies with South Africa as the continent’s largest.

However, stakeholders are optimistic that the end is near for the housing deficit in the country, as they see the various efforts by the government and its various institutions at closing the gap in the long run.

Endurance Okafor

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