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CBN raises capital requirements for Primary Mortgage Banks by 73.3%

The Central Bank of Nigeria (CBN) on Friday raised the capital requirements of the Primary Mortgage Banks (PMBs) by 73.3 percent to a total of N13 billion as a whole, from N7.5 billion in 2013.

A breakdown of the financial requirements of the sub-sector shows that operators of national category of the PMBs are required to shore up their capital base to N8 billion, which is an increase of 60 percent compared to N5 billion it stood in 2013.

For regional licence (formerly state), operators are expected to increase their financial base by 100 percent to N5 billion from N2.5 billion six years ago.

Kola Abdul, managing director/CEO, Brent Mortgage Bank, could not give his opinion on this when contacted by BusinessDay as he said he was busy.

The PMBs are required to pay non-refundable application fee of N1 million, non-refundable licensing fee of N2 million, and change of name fee of N100,000.

These were contained in the exposure draft for revised PMB guidelines released by the CBN on Friday. The last time the regulator issued revised guidelines for Primary Mortgage Banks in Nigeria was in November 2011.

The new guidelines introduced enhanced requirements for capital, risk management, internal control, and corporate governance, according to a circular signed by Ibrahim Tukur, director, financial policy and regulation department, CBN.

According to Tukur, notwithstanding the measures put in place, the mortgage sub-sector continued to struggle against the headwinds occasioned by unfavourable macroeconomic and other developments.

The CBN’s draft half-year 2018 report indicated that there were 34 licensed PMBs in operation at end-June 2018, comprising 11 national and 23 state PMBs, same as at the end of December 2017.

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Total assets of the PMBs decreased marginally by 1.0 percent to N384.37 billion at the end of June 2018, from N388.58 billion at the end of December 2017, due largely to losses from loan impairments in the review period.

Shareholders’ funds amounted to N109.74 billion at end-June 2018, compared with N132.35 billion at the end of December 2017, indicating 17.1 percent decrease due mainly to operating losses.

Total loans and advances, placement with banks and deposit liabilities decreased by 0.4 percent, 0.4 percent and 0.8 percent, respectively, to N177.17 billion, N36.52 billion and N108.83 billion at the end of June 2018, while other liabilities rose by 10.6 percent to N98.17 billion.

Investible funds available to the sub-sector amounted to N31.49 billion at the end of June 2018.

The funds were sourced mainly from mobilisation of other liabilities (N9.44 billion); long-term loans (N4.33 billion); and increased paid-up capital (N1.03 billion). Additional funds were also sourced from reduction in placement with banks (N5.73 billion), disposal of non-current asset held for sale (N7.63 billion) and sale of quoted investment in equities (N2.67 billion).
The funds were utilised for accretion to reserves (N23.6 billion), increase in bank balances (N3.60 billion) and acquisition of other assets (N2.65 billion).

Tukur said the guidelines have been reviewed to strengthen the PMBs as well as complement other on-going reforms in the mortgage sub-sector.

Source: By Hope Moses-Ashike

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