Dissecting FG’s N3bn Mortgage Facility

-By Danlami Nasir Isah

With an estimated population of over 200 million people, Nigeria is estimated to have a housing deficit projected at between 17 and 22 million housing units, according to the World Bank.

Worried by the development, the Federal Government, through the Federal Mortgage Bank of Nigeria (FMBN), has unveiled a N3 billion facility, which will fund 30 per cent equity contribution under the National Housing Fund (NHF).

The fund, known as Mutual Alliance Mortgage Fund (MAMF), is targeted at bridging the housing deficit, and offering hope of realising the dreams of becoming homeowners, particularly for staff of the federal parastatals, ministries, departments and agencies (MDAs) from the capital market.

Essentially, the facility will be funding the equity contribution of the beneficiaries or off-takers under the FMBN’s NHF to the tune of 30 per cent. It was gathered that the MDAs staff find it difficult to pay their equity as a single upfront and lump-sum due to their moderate earnings.

The fund, sponsored by Mutual Alliance Mortgage Bank Limited, has already been approved and registered as a close-ended unit trust scheme. Goldbanc Management Associates Limited (GMA) and GTI Asset Management and Trust Limited are the issuing house and fund manager, respectively, while the United Bank for Africa (UBA) is the custodian of the Fund.

According to the Managing Director, Mutual Alliance Mortgage Bank Limited, Dr. Okon Amasi, mortgage-backed by the money market is expensive, stressing that the instrument will reduce the cost of housing in Nigeria.

“It is the beginning of the capital market taking over a mortgage from the money market,” he said.

However, there are numerous concerns raised by authorities, especially as it relates to funding the real estate and stimulating the sub-sector towards sustainable development.

For instance, they called on the Central Bank of Nigeria (CBN) to fast-track implementation of the Mortgage Interest Draw-Back Programme (MIDP), together with other policy measures that would moderate the cost of funds to single digit, on a consistent and sustainable basis.

The operators, under the aegis of the Mortgage Banking Association of Nigeria (MBAN), in a communiqué, recently, stated that 17 million deficit, with a basic housing unit estimated at N5 million/unit, is about N85 trillion market.

“Despite the massive opportunities, the mortgage market remains small, underdeveloped and costly, the ratio of outstanding mortgages to gross domestic product (GDP) stands at 0.6 per cent, compared to 50 per cent in Europe. Returns on Investment (ROI) remains good and positive, ranging from 18 to 30per cent, and tenors is around one to six years, qualifying to be called housing finance and not mortgage,” they added.

Government efforts in driving growth

Meanwhile, in its quest to drive growth, using the instrumentality of the technology, the federal mortgage bank recently announced a technology-driven system that would help optimise its operations.

The Federal Executive Council (FEC) had approved for the FMBN to procure and deploy a core banking software application at the cost of N487.39 million from Messrs. Fintrak Software Solution.

The implementation of the banking system would be significant and far-reaching. Once operational, it would help the FMBN to create an integrated technology-driven platform to activate its operations. On the back of the digital service provisioning eco-system, the bank would then tackle the many systemic challenges that it has had to contend with over the years due to the largely manual nature of its operations.

Top on the list is fixing the longstanding inability of the bank to update, in real-time, subscribers’ monthly contributions to the National Housing Fund (NHF) Scheme. As manager of the NHF scheme, a pool of funds, comprising 2.5 per cent of subscribers’ monthly salaries, is deployed towards the delivery of affordable housing.

FMBN has drawn much flak from workers, stakeholders, and the general public regarding its handling of the scheme. Much of this is because of the multi-stakeholder structure of the NHF operations. Ideally, employers in the public and private sectors are expected to deduct 2.5 per cent of the monthly income of workers, who are registered with the NHF Scheme, and remit the same to the bank.

Subscriber complaints and investigations, over the years, have shown that many employers are dutiful and prompt in shaving off the 2.5 per cent of worker’s monthly salaries, but sluggish and unwilling to remit the same to the FMBN.

There have been several cases of workers, who, after years of working and seeing the monthly deductions from their paychecks, are heartbroken to discover that only a paltry sum had been credited to their accounts with the National Housing Fund, because their employer had either failed to remit, or remitted only a portion of what was deducted.

These have resulted in instances of subscribers complaining that deductions made by their employers from their salaries were not reflected in their NHF accounts due to non-remittances by their employers to the FMBN, as well as the inability to promptly access details and information on the status of subscriber’s accounts.

However, such complaints would be in the past as the FinTrak subscriber management component of the application is specifically designed to fix them to ensure a smooth subscriber and customer experience for all workers that contribute to the NHF Scheme.

This means seamless back-end integration with employers in a way that makes deductions from workers’ salaries and remittances to the FMBN more transparent to all stakeholders. NHF subscribers will now get real-time alerts on all transactions on their NHF accounts, and stay informed on the status of their accounts.