Realtors, expert urge FG to create infrastructure fund

After an initial effort by Buhari administration that eventually turned out to be a ‘false start’, a fresh call has been made for the creation of an infrastructure fund, which will lead to significant private sector investments and economic growth.
Figures obtained show that Nigeria is under investing in infrastructure. For instance, during the five years ended 2016, Ghana, Ivory Coast and Kenya invested 5.3 per cent, 6.5per cent and 7.5per cent of national income in infrastructure respective; Nigeria invested only 2.1per cent, despite its huge population, estimated to reach 550 million by 2070.

The Federal Government had two years ago, mooted plans to set up a $25 billion infrastructure fund to bridge the funding gap in infrastructure development and deepen the nation’s capital market. But till date, nothing has been heard of the arrangement.
However, experts in real estate sector and economy who met last week at the International Real Estate Federation (FIABCI) Prix de Excellence/ Dinner in Lagos believe that the government should explore non-traditional model of funding infrastructure that involves partners such as International Development Institutions (IDAs), local and foreign businesses.

Read: ABUJA INTERNATIONAL HOUSING SHOW – THE LARGEST HOUSING AND CONSTRUCTION EXPO IN WEST AFRICA

The purpose of this move is to identify important improvements and repairs to Nigeria’s infrastructure that will not only enhance the overall quality of life but will also create business opportunities for construction companies and jobs for construction workers.

In his submission at the annual forum, a former Director General/Adviser (Budget Matters) to President Olusegun Obasanjo, Mr. Bode Agusto advised that the Federal Government should create the fund, partner with the private sector for the development of projects with strong economics and huge social impact.

Under the proposed model, he wants the government to pay N0.5 trillion annually (about half of what is currently spends) into this fund, set up a strong governance process for managing this fund.

“The Fund will make, on average, an equity investment of 25per cent on each project, set up a company incorporated under the Companies Act to own the project – e.g. National Grid Plc. Others (local businesses, foreign businesses and IDAs) will own the remaining 75per cent equity and manage the company. This means that potentially, the government can invest N2 trillion annually from the infrastructure fund.

“Each company will pursue its own project, complete it and bill the public for the use of its services. They will prepare annual report and accounts, subject these to external audits, make these accounts public, hold annual meeting of shareholders, pay tax on their profit and pay dividends out of their profit after tax. The companies can also be listed on the NSE to improve their access to capital,” he said.

Speaking on theme: ‘Infrastructure Financing Options in a Challenging Economy’, Agusto said the plan will increase infrastructure spending by 250 per cent, as the World Bank estimates that a sustained 20 per cent growth in infrastructure, spending leads to a 1.8 per cent growth in the economy.

According to him, the NLNG is perhaps the best example of an infrastructure project that has employed this model. Nigeria sold 5per cent of its equity stake in the Shell JV to fund its 49 per cent equity contribution to Nigeria LNG. Three international oil companies own the remaining 51per cent. The business has thrived building six trains of LNG largely from internally generated profits and commercial loans.

“Even though this model has worked successfully in telecom and NLNG it is unlikely that we shall see it practiced on a large scale unless we provide incentives for the executive and legislature to give up some control,” he said.

Earlier, FIABCI Nigeria President, Mr. Joseph Akhigbe noted the development of infrastructure is one of the major drivers of sustainable economic development, and lack of its financing has been a major setback.

He explained that FIABCI serves as a melting pot for all professionals within the built industry; create a platform for them and provides a basis for business opportunities between real estate professionals across borders.

FIABCI Nigeria Vice President, Adele Adeniji posited that the main hindrance of infrastructure investment in Nigeria is the low rate of long-term interest from the users, even if there is adequate supply of long-term finance.

The programme chaired by Goodie Ibru attracted cream of the society.

23,000 civil servants jostle for government’s staff housing scheme

No fewer than 23,000 applications have been received from civil servants and being processed through the Federal housing Loans Board under the Federal Integrated Staff Housing Scheme (FISH).

Similarly, more than 20 developers have been selected and their 1,500 housing units of two, three and four bedrooms have been uploaded into the scheme for immediate purchase by civil servants.
This was made known by the Head of Service (HOS), Mrs. Winifred Ekanem Oyo-Ita, who also confirmed that the Federal Capital Territory has provided the land for the project in Abuja, said a home Renovation Scheme to provide funds for public servants to renovate their homes has been initiated.

Oyo-Ita disclosed that the programme has not been abandoned because it is part of government’s improved and benefit carefully put in place for workers. ‘’Yes it suffered a set back for some time, there was economic stress, government agencies fails to provide the needed infrastructure we expected, developers were now bringing their equipment at a high cost rates, we remember that the initial cost was at commercial rates, there was also friction between developers, officers and the Office of the Head of Service, but in all, we have been able to address all these challenges’’.

The FISH programme was launched in 2016 under the Public Private Partnership (PPP) initiative so allow relevant bodies namely, Ministry of Finance, Federal Capital Territory and Ministry of Power, Works and Housing assist and provide required inputs to reduce the cost of housing, thereby making then affordable .

However, a few months into the scheme, disappointments and challenges crept in, which somehow stalled continuity.

READ: ABUJA INTERNATIONAL HOUSING SHOW – THE LARGEST HOUSING AND CONSTRUCTION EXPO IN WEST AFRICA

Oyo-Ita gave the assurances in Abuja while listing her achievements in the last one year, said: “The government is totally buying-into the Public Civil Service for full implementation of the executive orders recently outlined by Mr. president stressing that the executive orders are all geared towards enhancing the ease of doing business in the country.”

The Permanent Secretary, CSO in the Office of the The Head of Service, Mr Afolayan Ayodele said that the year 2017 was an eventful one as the HOS programmes were hinged on efficient, productive, innovative and citizen-centred civil servants.

TOWN PLANNERS IN THE PLANNING AND DEVELOPMENT OF ABUJA

Abuja’s design was by an international planning consortium, but the planning aspect of its implementation is wholly by Nigerian professionals. This is enough testimony that planning in Nigeria has come of age. The success story in the development of Abuja will never be complete without mentioning the contribution of Town Planners, by extension the Nigerian Institute of Town Planners, most especially the pioneer Town Planners at the helm of affairs during the planning and the initial stages of the FCT development.

The Nigerian Institute of Town Planners (NITP) was established by its founding fathers on the 6th of September 1966, hence the celebration of its Golden Jubilee anniversary in Abuja this year, 2016. Ten years after the Institute’s establishment, in 1976, the Decree heralding the creation of a new capital city for Nigeria was signed by the Murtala Mohammed Administration. That was the first time a complete whole city of such caliber would emerge out of modern planning in Nigeria, and in the whole of Africa in the recent years. The then ten years old Town and Country planning profession in the country was thus put to task.

Today, the Nigerian Institute of Town Planners is 50, and Abuja’s creation is 40. It is on record that the pioneer Director of Land, Planning and Survey in person of Tpl. Alhaji Usman Sabo Ago, was at the same time the National President of the Nigerian Institute of Town Planners during his tenure in the Federal Capital Development Authority. While one of his sub-ordinates Town Planner Saka A Olajide was for a long time, if not the longest serving Chairman of the Abuja Chapter of the NITP.

The FCT Minister Malam Muhammad Musa Bello at the opening ceremony of the Golden Anniversary ceremony in Abuja last week stated that, the Institute is part and parcel of the Federal Capital City, whatever is done in Abuja is based on planning, and that he will be the last person to go against professional advice from the Planners. At the same occasion, while delivering his key note address, the Minister of State Solid Minerals Alhaji Abubakar Bawa Bwari who himself is a veteran Town Planner stated that, The Town Planners are the first line of defence as protectors of orderly developments in our urban areas. If they fell our plans also fail. As such, the most hazardous aspect of Town Planning as a profession is the threat to the Professionals, by Chief executives that wants to engage in the development of our cities contrary to the approved land use plans.

Planning as a profession requires operational tools, and these tools must be backed by legislation. The NITP struggled to ensure that the relevant laws were provided, in order to protect and empower the profession and the professionals while discharging their duties for the benefits of the general public. The enabling law that kick stated the production of the Abuja Master Plan and the Development Standard Regulations was the FCT Act. Legislation is again required to control the developments, in order to adhere to the approved standards. This was provided, by the signing into law the Nigerian Urban and Regional Planning Law in 1992.

There are numerous instances which led to Town Planners losing their jobs over the years, while trying to protect cities’ plans against desecration. Facility like the War College which should be outside the City is now at the City Center contrary to planning advice. Many Town Planners in Abuja and other States across the country are victims of similar circumstances. For this reason, Town Planners are considered as the endangered species.

Read more: 13 Reasons Why you Should Exhibit at the 12th Abuja International Housing & Construction Show 2018

The change agenda of this administration should support those Town Planners that are committed to the protection of our plans. The above statement by the FCT Minister is one of the most encouraging on the protection of planner’s professional ethics and practice in recent years. What remains now is for the Town Planners to play the game strictly according to the rule and never to initiate, assist or be part of any dishonourable act of the desecration of plans, even if it means losing their jobs. The opportunities outside is more than what is inside according to the statement by the FCT Minister.

It is most honourable to die while rendering service to humanity by defending our plans, than to stand while committing destruction by desecrating our beautiful plans designed for the benefits of our community for some filthy pecuniary benefits.

By  Umar Shuaibu

Landlords feel the pinch as Nigeria’s economic slump deepens

There is still no respite for property owners in Nigeria. The sluggish economic growth for the last few months does not bode well for rental market.

The West African largest economy, slipped into recession, with the latest growth figures showing the economy contracted 2.06% between April and June.

The country has been hammered after a plunge in oil revenues, which make up 70% of national income, eroded public finances and currency reserves needed to fund imports.

Perhaps the two most important risks facing Nigeria’s property market sector, this year are an inflationary environment, forex shortages and currency depreciation, said Ortneil Kutama, Africa Property News Media Director.

Nigeria has been trying for months to borrow abroad to fund a record budget to get the economy back on track.

The country had agreed on several reforms, such as increasing its value-added and corporation taxes to offset a loss of oil revenues, he said, adding that the tax-to-GDP ratio was 4% -5 %, less than other countries in the region at around 15 %.

Nigeria abandoned its currency peg in June hoping to attract more inflows. But with hard currency curbs still in place, few foreign investors are willing to put their money to work there, and those who need hard currency have to pay a 40 % premium on the black market.

“There is evidence that tables have turned, and the rental market has decidedly in the tenant’s favour,” says Kutama.

Retail landlords have been offering rental concessions like rent free periods, fit out allowances and pegged exchange rates in order to retain tenants, according to Bolaji Edu, Broll Nigeria CEO.

“Local developers are taking more flexible approaches such as accepting naira based rentals as opposed to dollar,” said Edu.

Read More: 13 Reasons Why you Should Exhibit at the 12th Abuja International Housing & Construction Show 2018

He points out that local retail brands are starting to take-up space at shopping centres outside prime locations in Lagos. These retailers require smaller spaces and often struggle to pay the high rents being charged in malls located within prime nodes.

Despite economic challenges, a total of 19,000m2 of retail space was added to the core and secondary markets during the second quarter with the opening of centres including Onitsha Mall and Maryland Mall.

Other investors continue to see opportunities in the Nigerian retail sector with South African retailer Pick n Pay announcing their entry into the market through a joint venture with Lagos-based AG Leventis, an established local retailer.

Although risks are still abundant with barriers to entry remaining high, Edu says it is fair to say that Nigeria still has specific political and economic risks and outside of Lagos it is difficult to develop without the support of the State Government.

The economy needs to gain momentum in order to help a struggling retailers and return the sector to its former glory days, concluded Kutama.

Renewed confidence in investment market seen attracting FDI into real estate

Renewed investor-confidence in Nigeria’s investment market will be attracting foreign direct investment (FDI) into the country’s real estate sector, particularly in the commercial segment, a Q3 2017 report by EMC-Real Estate on market research has shown.

This is expected to inject more life and create more opportunities for developers in a sector that is still smarting from the crippling impact of the country’s worst economic recession so far.

According to the report, Nigeria’s non-oil tax revenue in 2017-2018 is expected to increase in step with the recovering non-oil sectors represented chiefly by the agriculture and manufacturing. This expectation is also buoyed by government’s efforts at widening the tax base, though it will be from a relatively low base, as oil will continue to be the dominant revenue source for the government.

The report notes that, as a result of this positive development in the non-oil sector of the economy, the flow of FDI  into the country has increased marginally through 2017 above the low levels seen throughout 2015 and 2016.

“Interest in commercial real estate is growing once more with the domestic and international equity investors, once again, considering the development commercial property in the Lagos region”, says Edward Osammor, director at EMC Real Estate.

The hope of a consolidated, single foreign exchange system being in place once again by 2019-2020, according to him, supports the realistic belief that considerable volume of FDI will flow into the real estate sector once again.

In spite of the slow down which the economy has passed through in recent time, there remains significant interest in Nigeria from foreign investors, especially those from European, South African and Middle East countries.

This renewed confidence in the country’s investment market, Osammor says, is underscored by the International Finance Corporation’s (IFC’s) decision to acquire 1,500 square metres office space within the African Capital Alliance’s (ACA’s) flagship Alliance Place office building expected to be completed and delivered by the first quarter of this year on Kingsway Road, Ikoyi, Lagos.

“This deal is believed to be the first ‘condominium’ purchases structure of office space in the Nigerian market and was brokered by EMC-RE”, he enthused.

Read More: 13 Reasons Why you Should Exhibit at the 12th Abuja International Housing & Construction Show 2018

An innovative Grade A office building located in the prime commercial centre of Ikoyi, Alliance Place is a project promoted by Edimara Properties Limited—a joint venture between ACA Holdings Limited and Samges Investment Limited.

 The 12-floor office complex had already recorded 50 percent occupancy rate and Obi Nwogugu, a Principal at ACA, who confirmed the IFC deal to BusinessDay, had assured that they were working hard on the remaining 50 percent.  “A good number of people are coming to us about the building and we are excited about that”, he said.

On completion, the building will boast eight floors of flexible office space and meeting rooms; four floors of multi-level parking, a light and airy reception area and a ground floor café. Expectation is that contemporary and international elements along with select African accents will be incorporated into the style of the complex.

The acquisition of space in this building shows that there is always market for a good product, no matter the slowdown in the economy and the challenge in the real estate market. The commercial office segment of this has, in the past 18 months, seen some downsides reflected in oversupply and high vacancy rate.

But with the exit from recession, rising oil price, stability in the foreign exchange market, increased liquidity in the economy, among other factors, analysts say the real estate sector as a whole presents a bright outlook in the new year. 

Increase in foreign reserve on the back of a stable foreign exchange rate and increased oil production are supporting the naira and leading to naira appreciation at the import and export (I&E) window. It is expected that an appreciating naira will be attractive for international investors as it will give them the comfort that their dollar denominated investments will not be negatively impacted by falling assets values denominated in naira

The analysts also predict that in 2018, a stable foreign exchange rate and a gradual exit from recession will lead to an improvement in real estate growth. They expect this improvement to cut across the local market where stable and increased consumer income will lead to greater support for the market while stable foreign exchange and exit from recession will bring international investors back to the market.

Damola Akindolire, ED, Real Estate Development at Alpha Mead Group, says that, among other factors, increased government spending will also support growth of the real estate sector.

He explains that the  FG intends to borrow additional $5 billion to finance the budget deficit which would be a positive sign for the economy, leading to increase in economic activities and disposable income. “Hopefully they should have the budget approved for implementation by Q1 2018, otherwise this will put the fragile recovery in jeopardy”, he posits.

By CHUKA UROKO

Investment in mortgage will help reduce housing deficit – Ayere

Sonnie Ayere is the Founder of Dunn Loren Merrifield, an investment firm, and Chairman of Mortgage Warehouse Funding Limited. In this interview with MAUREEN IHUA-MADUENYI, he says stakeholders are doing everything possible to open up the mortgage market 

Why do you think Nigerians still buy houses with cash despite all the efforts put into the development of mortgage in the country?

It is the issue of interest rate on mortgage; it is very high and makes the process very expensive.  So that even with a tenor of about 20 to 25 years, people are reluctant and those who take mortgages pay it up as quickly as they can.

In other words, any little money they get, they put it into paying up their mortgage loan, because it is just so expensive at about 22 to 25 per cent interest rate. Secondly, when you calculate the payment with the income ratio, it is also very high; a lot of people cannot afford it.

When you look at the percentage you have to pay to the banks and the percentage of the income you have, it becomes difficult. Let’s say you earn N1, 000, under normal circumstance, your mortgage should not be more than N300; but when you calculate the interest rate of these mortgages, they take up about 60 to 65 per cent of your income, and you can’t use that much to repay mortgage loans.

So, that is one of the reasons why people still use cash; the real issue is the interest rate. But we are working on solving the problem now. For instance, the Nigerian Mortgage Refinance Company has been set up to provide long-term financing to mortgage banks with 20-year tenor.

The second is the setting up of the Mortgage Warehouse Funding Limited, which is there to provide short-term local currency, competitively-priced funding to mortgage banks in a bid to enhance their mortgage origination. Most people do not have mortgage bank accounts and therefore it is difficult for mortgage banks to sort out mortgage funds. In commercial banks, people always deposit money so it is easy to get funds, but mortgage banks do not have that kind of privilege to provide short-term funding to investors.

So, the MWFL goes to the market, raises money and gives to the mortgage banks to create mortgages, which will work for about six months before the NMRC will do a refinancing by then giving the mortgage bank 20-year money. We are also creating a very comprehensive mortgage and foreclosure law and some states are beginning to pass these laws. The Managing Director of the NMRC, Prof. Charles Inyangete and his team got Kaduna State to pass the law, so when people don’t pay their mortgages by defaulting, the bank can retrieve the property and put it back in the market to get back their funds.

What we intend to do with the mortgage warehouse is also to qualify developers and ensure that they can get off-take letters to enable them obtain financing from commercial or merchant banks to build houses. The MWFL now has eight mortgage bank members that are willing to provide mortgages to all buyers of the developers to give comfort to the commercial or merchants to provide construction finance.

The most important thing that will now help the market to open up is to get the interest rate down.

How can that be done?

It is difficult, in the sense that basically it is all based on economic realities. But, again the government is looking for offshore funding and this is now helping to drive down interest rates. It also depends on the Central Bank of Nigeria. These are some of the things that are being done but again, we have to look at some other ways to resolve the matter such as coming up with innovative ways of encouraging pension funds to support the sector on a win-win basis. That way, mortgage banks can get liquidity.

Stakeholders are doing everything possible to open up this market so that people can pay for houses on a pay-as-you-earn basis and not with cash because it is difficult to buy a house for N30m when you earn N7m a year. We are trying to move the country away from that. Mortgages should be able to help people to create wealth.

 There appears to be low awareness on how mortgage works. What are stakeholders doing about this?

Most people are aware of how it works; the thing is that just like the way banks are able to advertise regularly about their products, mortgage banks are not able to do the same thing. The reason for that is because the industry itself has not been boisterous. When mortgage banks start making good money and growing, I am sure there will be lots more educative messages because it is in their interest for people to know about mortgages.

It is because they don’t have the funding capacity to create mortgages and when people hear of the interest rate, they run away. We need to find a way to make it attractive to people. Imagine if someone advertises 20-year mortgages at 8.5 per cent in the newspaper, most people would jump at it. It is about having a package to sell to the people. It is not like people don’t want the mortgages but they have to have something that is attractive; 20 to 25 per cent interest rate is not exactly attractive.

Read More: The man behind Dubai’s affordable Housing boom

 How effective have the initiatives you talked about been in addressing these issues?

NMRC has done its first refinancing, it is about to do another refinancing and the whole idea is that once MWFL launches and begins to do its first funding, then it becomes a continuous thing. What will happen is that mortgages will then have a one-month funding period. For instance, mortgage generated in January will be funded at the end of the month or say first week of February and those mortgages will remain on the bank’s balance sheet for a minimum of a six-month period, or say till the end of June after which it will then be refinanced by the NMRC. Then the next batch again in February will be refinanced in July, March will be refinanced in August and so on. It will create a situation where mortgage banks will feel confident to go out and market their products knowing that they have the wherewithal to provide the funding.

It will be good to add that by the end of 2018, we will be able to say this is what we have been able to achieve and as interest rates go down, mortgages will grow even more.

Going by all the initiatives, have there been any significant increases in the volume of mortgage origination?

The NMRC is designed to provide long-term financing to mortgage banks, so the reason it hasn’t had much impact is that it is waiting for the mortgages to come through. So, what is being done through the MWFL is help to create the mortgages; that is what it is there for. The impact of the initiatives will begin to show with the strength of the MWFL. As MWFL begins to seal mortgage origination, it will create the pool for the NMRC to refinance.

So the NMRC has begun to do its bit by refinancing the legacy mortgages that existed in the member mortgage at the time. So what they need is really consistent funding for the banks to be able to continue to create those mortgages. MWFL will do its first funding in January (This month) and will on monthly basis provide money to mortgage banks.

Hopefully, whether on semi-annual or quarterly basis, the NMRC will then refinance the mortgages long-term. I think at the beginning of 2019, there will be a much stronger impact in the mortgage sector than we have ever seen before.

 What plans are in place to get back the trust of property buyers who have lost faith in the system?

Even if this government doesn’t bother to bring down the interest rates, stakeholders are looking for other ways to see that this happens and it will be a collaborative effort between the mortgage banks, CBN,  National Pension Commission, Mortgage Banking Association of Nigeria, the Ministry of Finance and others. Even though the economy may not be right, they could say let us use these pool of funds to create mortgages and begin to get Nigerians on the housing ladder and on the road to wealth creation.

I agree a lot still needs to be done on enlightenment. When the system takes off properly, there will be literacy campaigns for the people to properly understand how it works and the repayment responsibilities.

The system is one I would love to see change and that is why we stakeholders are working to create a system of pay-as-you-earn. Except we are able to create something like this, it will be difficult to help people out of the pressure that they feel and how expensive it is for people to buy their homes which is why we are not getting the mortgage-GDP ratio that we require.

With the housing deficit we talk about in Nigeria, even if we are building a million houses a year, it will take 20 years to reduce is. So, it gives an idea of how enormous the issue is and how it is important that we get people unto the mortgage ladder and I believe that the process will begin this year.

Abia Governor stresses need for good urban planning

Governor Okezie Ikpeazu of Abia State has harped on the need for good urban planning and responsible implementation of such plans, if city residents intend to enjoy the benefits of metropolitan dwelling.
Ikpeazu, who stated this during a three-day interactive workshop of the United Nations – Habitat tagged “Urban Thinkers Campus” organised by Vicar Hope Foundation in collaboration with some line MDAs, noted that the meeting was most timely because of the way people abuse their environment.
“I believe if you don’t take care of your environment, your environment will kill you. We need to care for our environment for the sake of the future generation,” the governor said.
He said the cities of Aba, Ohafia and Umuahia had no master plan and wondered how previous administrations carried out physical development, and charged the Urban Thinkers Campus to think about how to achieve better, affordable housing in the cities and cleaner, safer environment.
Nkechi Ikpeazu, wife of the governor earlier in her speech, urged participants to evolve ideas and realizable action plans that would help turn around the conditions of the cities and make the cities better, cleaner, safer, functional and more profitable to dwellers and visitors.
She described “The City We need” as beautiful, habitable, and runs the entire gamut from affordable and qualitative housing, to functional sanitation, infrastructure, security and emergency services.”
 The wife of the governor, who is the founder of Vicar Hope Foundation, thanked the UN Habitat, the World Urban Campaign, the International Women Communication Centre and the Huairou Commission for collaborating to host the Urban Thinkers Campus in Abia.
UN-HABITAT programme manager in Nigeria, Kabir Yari, said the essence of the event was to promote sustainable urbanization.
Yari was represented by Steve Onu, a member of the UN Steering Committee on making cities resilient, expressed the hope that the meeting would come out with a road-map on how to tackle the challenges posed by rapid population growth in the urban centres.
In her speech, the Executive Director, International Women Communication Centre, Limota Goroso Giwa, said that the meeting provided an opportunity for the cross-fertilization of ideas on how to achieve the UN objective for the new urban agenda.
Giwa commended the governor’s wife for her passion and commitment toward achieving sustainable urbanization in Abia. She said that her initiative had given Abia visibility on the global map.
Osita Igbe the chairman of the meeting, said Abia State was aspiring to have one of its cities as part of the 74 cities that would enjoy intervention and support from the United Nations Human Settlements Programme – UN Habitat, and buttressed the need for a report that would be in congruence with the desires of the habitants.
The event featured lectures from renowned urban planners Chibuzo Odimuko and Lekwa Ezuta who discussed City resilience, and the role sections of the society could play in realizing The City We Need project.
Among stakeholders that attended the meeting were community development associations, Civil Society Organizations, members of the state legislature, clergy, security administrators, grass-root groups, women, youth, labour Unions, workers in the mass transit sector, Farmers, pensioners, Media, Persons with Disabilities, professionals in the built environment such as town planners, civil engineers and architects, and others including lawyers, doctors.
UDOKA AGWU, Umuahia

Another look at mortgage sector slow growth

As time ticks towards the end of 2017, individuals and institutions are taking stocks and reflecting on issues, especially those that border on the various sectors of the economy including households, and how they have impacted on lives in the past 12 months.

The mortgage system is a critical component of the financial system which, arguably, forms the nucleus of any economy. This perhaps explains the concerns about its operations and the interventionist measures so far introduced by supervising authorities with the aim of making it grow and develop.

A major feature of the mortgage system in Nigeria is its slow growth. The frequently cited reason for this is low capital base. The primary mortgage institutions (PMIs) recapitalization and consolidation of the past nine years (2008) was aimed to address this problem.

From the statutory N100 million capital base, the PMIs were asked to recapitalize to the tune of N2.5 billion and N5 billion for regional and national operators respectively. This exercise which swept aside many of the operators following mergers, acquisitions and outright transmutation to other financial portfolios, was hailed by many as a sure path to growth.

But with the reduction in the number of operators from over 100 to below 40 at the moment, the narrative has hardly changed. Not even the revised operational guidelines by the Central Bank of Nigeria (CBN) which stripped them of other business concerns and compelled them to face their core business of providing mortgages and housing finance for home ownership and other forms of property acquisition, has helped matters.

There is, therefore, a missing link which necessitates the need to take another look at the slow growth which this sector has suffered over the years. “The problems of mortgage banks revolve around their small capital base and so there isn’t much they can do. For all the money I have, unless I raise additional capital, I don’t think I can do 1,000 mortgages”, says Ayodele Olowookere, the CEO, Omoluabi Mortgage Bank Plc.

But there is more to the slow growth. “I think mortgage banks need to do self-enlightenment and education to grow the industry”, Olowookere notes, explaining that, over time, there has been wrong perception of the mortgage industry which, he thinks, is understandable because a lot of mortgage banks have also done what is not right like collecting money from people and not giving back.

A lot of people say they will never go near mortgage banks because of some unethical conducts like this. Though Rose Okwechime, CEO, Abbey Mortgage Bank Plc, would attribute some people’s apathy to mortgage banks to the “newness” of the mortgage system, Olowookere insists it is as a result of lack of self-education by the operators.

Undoubtedly, the mortgage banks have their challenges. Part of these challenges comes from allied operators in the financial system. For instance, the deposit banks are seen to be usurping their functions. These deposit banks own everything in the property industry from funding development to providing mortgages.

A mortgage bank like Union Homes was a very strong player in the market and was also focused, but there was a bit of a gap. The 2008 restructuring programme in the sector and the need for all the banks to strip themselves of their non-core businesses, led to specialized mortgage banks standing up, but they lack all it takes to do so.

Elsewhere, the mortgage sector is a huge contributor to economic growth. Here it remains a sad story that the sector’s contribution to GDP is less than 1 percent. At a time like this when the government needs all it can get to grow the economy, the mortgage sector is a strong possibility.

If there is a particular way, therefore, government can call all the mortgage banks together, it will be quite beneficial for the economy. “This is one sector that can grow the economy more than any other sector because if people take mortgages to build houses, the multiplier effect is unimaginable. A lot of jobs will be created for professionals, skilled and unskilled labour, artisans, manufacturers, etc”, Olowookere says.

According to him, government needs to sit down with the mortgage banks and discuss because they are the ones that meet property off-takers and so they understand the market more than the government.

Mortgage operators also understand the market more than the federal mortgage bank of Nigeria (FMBN) and that is why the FMBN says anybody who wants to take a mortgage should go through a primary mortgage bank.

Government needs to know that if the mortgage industry is well run and there is a good policy thrust to support its operations, it will diversify the economy with job creation. The focus on other non0oil sectors, especially agriculture is good because Nigerians need to feed themselves, but everybody also needs shelter and this can only be possible if the mortgage sector is made functional.

The operators have been pointing out, since 2005, that there’s need to change the Land Use Act of 1978 to no avail. This is the time for government to give that accelerated action.

There is also need to quicken processes leading to title transfer and building approval. Cost and time of perfecting titles need to change. The FMBN needs to be restructured to meet the demands of today. The national housing fund (NHF) also needs to be restructured for same purpose. There should be special focus on the sector and how they are funded.

National Housing Project: FG pledges fund disbursement to hasten completion

Federal Government has pledged quick disbursement of funds to hasten ongoing construction of houses under the National Housing Programme (NHP). The Minister of State 1 for Power, Works and Housing, Alhaji Mustapha Shehuri, made the pledge while briefing Newsmen in Enugu on at the end of his inspection tour of NHP sites in Southeast zone of the country.

Shehuri promised to facilitate payment of contractors once they raised certificate to enable quick completion of the housing projects nationwide.

He said that “regarding the issue of funding, I will personally take the issue up and make sure that funds are made available when due to round up the project.

“I am sure that funds are available and payment will be made when due to complete the projects.

“The programme is in line with the President’s campaign promise to provide infrastructure to Nigerians. Federal Government is doggedly determined to bridging the national housing gap.”

He appealed to state governments to settle NHP land owners to enable them to access the site for successful project.

The minister noted that in all the states he visited in the zone, none of the housing construction reached near completion like that of Enugu.

Earlier, Mrs Tina Ene, the Deputy Director, Department of Public Building and Housing of the ministry, had briefed the minister of the reports at the NHP site of Enugu, located at Ugwuogonike in Enugu East Local Government Area.

Ene said 12 contractors were mobilised at the project site, some of the houses had gone beyond lintel level, while some had been roofed.

She added that “we were given a couple of sites and this is one of the best; we have a lot of schools and estates coming up around here.

“We also have the cooperation of indigenes of this place, as no one ever harassed us, instead, they protect us and our property.”

The deputy director noted that from the inception of the programme, they relied on local materials as directed by the ministry to promote made in Nigeria products.

She said “the doors, water cistern, tiles, windows, marble, kitchen sinks, including the roofing sheets are all locally made.

“There are no locks that are manufactured in Nigeria, they are the only imported products we use, that is the challenge we have and an opportunity to investors because they are not produced in Nigeria.”

Mr Keneth Onyekaba, a representative of the contractors of NHP in Enugu, said the housing construction of 72 units of one, two and three bedroom bungalows started in April 2017.

Onyekaba said that at the beginning of the project, the terrain was difficult, adding that the foundation stage was difficult and took a lot of time and money.

He urged Federal Government to release funds for the project, adding that if funds would be provided, the houses would be completed early 2018.

The NHP is one of the programmes of Federal Government to provide affordable and functional housing units to Nigerians

FMBN Disburses N7bn loan to Beneficiaries in 2017

The Federal Mortgage Bank of Nigeria (FMBN) on Wednesday said it disbursed more than N7 billion loan to beneficiaries in 2017.

Its Managing Director, Ahmed Dangiwa, disclosed this at the FMBN 2017 Management Retreat in Abuja, with the theme “Towards Improving FMBN Transaction Turnaround Time“.

Dangiwa noted that the focus of the bank’s loan was to ensure completion of ongoing projects and recover FMBN financial outlay presently tied.

He said that the bank recovered N2.4 billion in 2017 against a cumulative figure of N8.3 billion as at 2016.

According to him, the retreat will underscore the intention of the new management for a quick positive turn-around in all facets of the bank’s operations.

Dangiwa said that the bank was micro-managing some of the housing estates to forestall diversion of funds and ensure recovery of loans.

“The new management has also made a total refund payment of N6.6 billion to 44,370 beneficiaries in 2017 against a cumulative figure of N7.4 billion as at 2016.

“Our backlog of unaudited accounts is expected to be cleared before the end of the year,’’ he said.

The FMBN boss said the bank’s effort to implementing risk management framework was ongoing, while it was being assisted by the Institute of Directors to make the bank an institute of sound cooperate governance culture.

He said the mortgage market was subject to myriad of legislative requirements including the requirement for governor’s consent before a mortgage transaction could be legal.

In order to address this, he said, the bank created the Internal Records Office as an interim measure to secure its loans and provide some form of equity to cover loan facilities.

He said that the National Housing Fund (NHF) collection was growing steadily, adding that as a result of its strategic engagements, several non-contributing states had indicated readiness to re-join the scheme.

In a keynote address, the Minister of State II for Power, Works and Housing, Suleiman Zarma, tasked the bank to ensure adequate liquidity, develop secondary mortgage market and promote home ownership.

He said the challenges of a significant national housing deficit, the dearth of long-term funding and the high cost of housing delivery also placed enormous responsibility on the bank.

The minister challenged the bank to look into the NHF registration, collection and loan processes and initiate possible review towards reducing the current transaction turnaround time.

“These services are critical as they form the bulk of areas of the service needs of the public, and the manner the bank delivers on these services form most important indicators of the quality of services provided,’’ he said.

The retreat was attended by FMBN staff nationwide as well as delegates of Real Estate Development Association of Nigeria (REDAN) and Mortgage Banking Association of Nigeria.

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