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Seven-Year Wait for Mortgage Crushes Nigerian’s Dream for a Home

Pius Okebe has waited so long for a loan to build a house in Nigeria’s commercial hub of Lagos that he’s worried he may be getting too old to qualify for the amount needed to finance it.

Seven years after applying, the used-tire trader is now banking on the latest government attempt to kick-start the Nigerian mortgage market: President Muhammadu Buhari’s plan to inject $1.4 billion into a state-backed lender. The measure is part of efforts to boost home ownership in a country where only 50,000 people out of almost 200 million have housing finance.

“I’m hoping I will get the loan,” Okebe, 42, said as he packed up his supplies on a rainy afternoon in the commercial capital, Lagos. “Although I know as I mature in age, the amount they can give me reduces.”

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The challenges the government faces in addressing a shortage of 17 million houses are daunting. Gripped by poverty, Nigeria has no formalized title-deeds registry and most homes consist of informal structures on land passed down from one generation to the next. Rapid urbanization is also causing a proliferation of slums and shanty towns.

Not the First

Buhari’s drive to provide more affordable homes and clear a backlog of applications for mortgages comes as he faces a tough race in his re-election bid next year and contends with an economy struggling to recover from 2016’s contraction. The 75-year-old is counting on lawmakers to approve a proposal by the end of this year to pump 500 billion naira ($1.4 billion) into Federal Mortgage Bank of Nigeria, or FMBN, to increase its capacity to fund mortgage providers.

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He won’t be the first president to try rejuvenate Nigeria’s mortgage market since the country first started a building society in the mid-1950s. In the 1970s, the lender was renamed as FMBN as part of indigenization policy aimed at ending foreign dominance in the economy — a decade after gaining independence from Britain. But years of under-funding has seen FMBN achieve little success in its attempt to grow mortgages.

FMBN has recently stepped up its game after a meeting with mortgage lenders two months ago, according to Olayemi Rabiu, managing director of Lagos-based Resort Savings and Loans Plc, a mortgage lender started in 1993 and which is in talks over a recapitalization. The state-backed lender has stopped funding property developers after debts went unpaid and is dealing only with individual customers through mortgage lenders, he said.

Quicker Turnaround

“They are disbursing heavily now and regularly,” he said. “The time is now faster. Unlike before when you can wait for 5 to 10 years, now within 8 months you will know whether you can get it or not.”

FMBN, which has more than 18,200 mortgages, is confident the legislation needed for the lender’s recapitalization will be put in place before the next administration takes office in May, said Chief Executive Officer Ahmed Musa Dangiwa.

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The company also started a rent-to-own project that will eventually result in the development of 20,000 new homes, FMBN’s CEO said. A pilot program kicked off in August with 3,000 houses. The state-owned funder can lend at interest rates of as low as 4 percent, compared with the central bank’s benchmark rate of 14 percent.

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While the government’s renewed push is seeing some progress, more needs to be done to entice commercial banks, said Abiola Rasaq, head of investor relations at United Bank for Africa Plc, Nigeria’s third-largest lender by revenue.

Funding Mismatch

Most Nigerian banks raise their funding from short-term deposits, when mortgages require long-term financing. Delays with getting building plans approved or title deeds finalized also adds to the cost of the loan that most developers can’t afford, he said.

“We’re optimistic about the Nigerian mortgage sector and we’ve seen a few good things evolving particularly in some states such as Lagos and Ogun, which are making it easier to obtain title documents,” Rasaq said. “There is a mortgage gap and banks are willing to bridge that. We need to De-risk the segment and put incentives to encourage banks to properly lend to the sector.”

Buhari’s administration is trying to reduce the risk of non-payment by next year starting the Nigerian Mortgage Guarantee Co., which will cover up to 50 percent of any losses in the event of a default, to improve lending to low-income earners.

At the same time, Nigeria Mortgage Refinance Co., which mimics Fannie Mae in the U.S., is helping some of the country’s 35 real estate lenders to reorganize about 30,000 mortgages to free up capital with the goal of doubling its 40 billion naira in assets.

For a country that vies with South Africa as the continent’s biggest economy, Nigeria’s mortgage industry is small, with the equivalent of $260 million in loans, compared with more than $90 billion for its more industrialized southern peer.

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Okebe needs the programs to turn into reality if he is ever to build a home. Otherwise, it will be impossible without government support because he hasn’t been able to save enough.

“I still need the loan — if I have to take money from my business, the business will collapse,” he said. “The mortgage bank has told me that government is doing something about the situation and that I might smile next year. I’m praying for that to happen.”

Source: Elisha Bala-Gbogbo and Emele Onu

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