The Central Bank of Nigeria (CBN) on Friday removed the cap on interest rates for mortgage finance by the Primary Mortgage Banks (PMBs), effective September 9, 2019.
In a circular to all other financial institutions in the country, dated September 5 and signed by Kevin Amugo, director, financial policy and regulation department, the CBN said the “subject to a maximum of MPR + 5%” is no longer applicable.
The CBN in 2017, issued the guide to banks and other financial institutions, to moderate charges on various products and services offered by banks and other financial institutions in Nigeria.
Consequently, the CBN said it’s attention has been drawn to some implementation challenges in respect of part 2 section 2.1.3 (mortgage finance) in respect of the maximum cap of MPR +5% placed on mortgage finance rates.
The CBN after due consideration of the concerns of stakeholders, amended the part 2(A and B): interest rate and lending fees subsection 2.1.3 mortgage finance to read “negotiable”.
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.
The government faces a daunting challenge to close a shortage of 17 million houses.
Nigeria has no formalized title-deeds registry and most homes consist of informal structures on land passed down through generations. Rapid urbanization is also causing a proliferation of slums and shanty towns.
Nigeria’s mortgage industry is small, with the equivalent of $260 million in loans, compared with more than $90 billion for South Africa.
Nigeria’s total mortgage debt to gross domestic product is estimated at 0.6 percent versus 2 percent in Ghana, according to the Nigeria Mortgage Refinance Corporation NMRC. In South Africa, that ratio is 20 percent, according to Moody’s Investors Service.