The role of fmbn in the development of the nigerian mortgage market
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THE ROLE OF FMBN IN THE DEVELOPMENT OF THE NIGERIAN MORTGAGE MARKET PowerPoint PPT Presentation


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THE ROLE OF FMBN IN THE DEVELOPMENT OF THE NIGERIAN MORTGAGE MARKET. A PAPER PRESENTED BY MR. GIMBA YA’U KUMO, MD/CE, FMBN AT THE 1 ST ASO HOUSING EXHIBITION & CONFERENCE 17 TH – 18 TH MARCH, 2011. INTRODUCTION.

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THE ROLE OF FMBN IN THE DEVELOPMENT OF THE NIGERIAN MORTGAGE MARKET

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The role of fmbn in the development of the nigerian mortgage market

THE ROLE OF FMBN IN THE DEVELOPMENT OF THE NIGERIAN MORTGAGE MARKET

A PAPER

PRESENTED BY

MR. GIMBA YA’U KUMO, MD/CE, FMBN

AT THE

1ST ASO HOUSING EXHIBITION & CONFERENCE

17TH – 18TH MARCH, 2011


Introduction

INTRODUCTION

  • Housing sector plays a critical role in the development of an economy. It not only affects the welfare of the citizens but also the performance of other sectors of the economy.

  • It is one of the three most important basic needs of man, the others being food and clothing.

  • Consequently, greater attention is being given by governments in the delivery of affordable housing to its citizenry, through

    -Assistance in finance (via aid, subsidy or grants or combinations)

    -Assistance in provision of infrastructure

  • The focus on housing finance has been very prominent, because housing provision requires huge capital outlay which is often beyond the capacity of the vulnerable medium/low income groups.


Overview of housing in nigeria

OVERVIEW OF HOUSING IN NIGERIA

  • 720,000 housing units required yearly to meet MGD Goal on housing

  • Huge housing deficit estimated at 16m units

  • Estimated mortgage financing gap of over 56 trillion Naira


Overview of housing in nigeria1

OVERVIEW OF HOUSING IN NIGERIA

  • Low homeownership rate of 25% compared to 70% in the USA, 63% in Brazil, 61% in Benin and 56% in South Africa


Overview of housing in nigeria2

OVERVIEW OF HOUSING IN NIGERIA

  • Real estate sector in Nigeria contributes only about 0.5% of the total GDP, while in developing countries contribution is about 60% and between 30-40% in emerging economies

  • CHART 1: Real Estate sector contribution to GDP has stagnated over time

  • CHART 2: Real Estate sector growth has underperformed real growth and non-oil growth rates

    Source: National Bureau of Statistics Nov 2010

CHART 1

CHART 2


The mandate of fmbn

THE MANDATE OF FMBN


Fmbn mandate

FMBN MANDATE

FMBN was established to -

MANDATE 1:Encourage the emergence and growth of a viable secondary mortgage market to service the needs of housing delivery in Nigeria

MANDATE 2:Link the mortgage market to the capital market for sustainable long tenored funding and become a prominent capital market operator through issuance of debt and Mortgage Backed Securities (MBS)

MANDATE 3: Mobilize domestic and foreign funds into the housing finance subsector

MANDATE 4: Collect and manage the National Housing Fund (NHF) in accordance with the NHF law


Performance on mandate

PERFORMANCE ON MANDATE

  • MANDATE 1:

    Encourage the growth of a viable secondary mortgage market in Nigeria

    -Successful refinancing of 9,525 mortgages valued at N26 billion created by Mortgage Loan Originators in the 1st tranche of the N100 billion Mortgage-Backed Bond programme to sell FG non-essential residential houses in the FCT in Year 2007

    -The expected refinancing of about 6,533 outstanding mortgages valued at N14 billion in the 2nd tranche


Performance on mandate1

PERFORMANCE ON MANDATE

  • MANDATE 2:

    Link the Mortgage Market to the Capital Market

    -The Federal Mortgage Bank of Nigeria is registered as an issuing house by the Securities and Exchange Commission (SEC)

    -FMBN is recognized as an issuer of mortgage-backed instruments by the Federal Government of Nigeria

    -FMBN’s mortgage-backed bond (MBB) continued to retain its ‘AAA’ rating


Performance on mandate2

PERFORMANCE ON MANDATE

  • MANDATE 3:

    Mobilize foreign and domestic funds

    -FMBN is recognised as a first-choice investment conduit by foreign investors

    -FMBN is exploring opportunities of issuing debt instruments in local and international capital markets in collaboration with international financial institutions

    - Investor profile include global banks, international investment firms, conglomerates, foreign housing corporations, etc.


Performance on mandate3

PERFORMANCE ON MANDATE

MANDATE 4:

Collect and manage the National Housing Fund (NHF)

-Significant increase in the number of registered participants which reflects growing confidence in the Scheme

+ 26 states now participating, from only 3 in Year 2002

+ all 24 banks participating, etc.

-Willingness to expand access channels to NHF mortgage originations e.g. PFAs, insurance companies, MFBs

-Steady increase in total annual collections and disbursements

(see next slides)


Mandate 4 collect and manage the nhf nhf collections

MANDATE 4: Collect and manage the NHF:NHF Collections

NHF collections of N31.8b realised between Jan ’08 - Dec ’10

That is, 49% of cumulative collections from Jan ‘92 to Dec ‘10


The role of fmbn in the development of the nigerian mortgage market

MANDATE 4: Collect and manage the NHF:NHF/PMI and Estate Development Loans


The role of fmbn in the development of the nigerian mortgage market

OTHER ACHIEVEMENTS AS AT DEC 2010

  • NHF CONTRIBUTIONS REFUND:

    • Cumulative ofN942,662,263.88 refunded to 50,522 contributors

  • LOAN RECOVERY:

    • Total of N4,063,480,982 recovered on classified facilities in past 24 months

  • RESEARCH & DEVELOPMENT:

    • To bridge the knowledge gap on the housing situation, in 2010 FMBN’s Research & Documentation Unit carried out -

      • a survey on housing delivery in the FCT and

      • a market survey of building materials in all geopolitical zones of the country.


  • Fmbn strategic focus plans

    FMBN: STRATEGIC FOCUS & PLANS


    The role of fmbn in the development of the nigerian mortgage market

    • Consolidate on capital market activities

      • with issuance of subsequent tranches of its N100 billion bond to refinance sale of FG non-essential residential houses in FCT

      • To issue mortgage bonds based on FMBN’s financial strength and/or government guarantee

        -To take advantage of investor appetite for bonds

    • Support legal and regulatory framework review

      • Amendment/replacement of unfriendly housing-related laws

      • Collaborating with National Assembly Committees on Housing

    • Consolidate NHF collection and funding operations

      • Increase in NHF collections by compliance of non-participating state & local governments, the organised private sector & the self-employed

      • Creation of 8 Zonal Offices for more effective coverage

      • Introducing NHF e-collection platform pilot scheme for FCT MDAs


    The role of fmbn in the development of the nigerian mortgage market

    • Commencement of Commercial Lending Operations:

      -using capital market resources applied as market-determined, risk-based priced loans

    • Expand mortgage financing to non-salaried informal sector

      -whichcontributesas much as 65% of GNP, 90% of new jobs in the country, 80% of all non-agricultural employment and 60% of urban jobs [Vanguard, Sept 2008]

      -Service delivery channels are trade groups, unions and housing cooperatives, microfinance institutions

    • Encourage formation of housing cooperatives

      -To expand mortgage finance to target groups (teachers, nurses, mission groups (e.g. Catholic missions, organised Islamic organisations), trade groups, etc.


    The role of fmbn in the development of the nigerian mortgage market

    • Attract foreign funding & investments

      -Interests by American, Chinese, Korean & Saudi Arabian investors

      -Strategic advantage as a FG-Sponsored entity for investors to channel investments into local economy

    • Introduction of Innovative Mortgage-related Products

      -Mortgage and Title Insurance

      • to mitigate mortgage-credit risks for lenders

      • Increases/stimulates mortgage originations

      • Advantage of lower costs of mortgages (affordability) based on higher volumes

        -Real Estate Investment Trusts (REITs)

    • Covered Bonds

    • Rental Market Development Products

    • Securitisation


    Fmbn the challenges

    FMBN:THE CHALLENGES


    The role of fmbn in the development of the nigerian mortgage market

    1. INADEQUATE CAPITAL BASE:

    Low capitalization in comparison with similar secondary mortgage institutions worldwide

    -FMBN’s capital base is currently equivalent to US$16m compared to an average of US$158m held by similar secondary mortgage institutions


    Cost to register property administrative fees vary

    Cost To Register Property – Administrative Fees Vary

    2.HIGH COST AND DELAY IN MORTGAGE PERFECTION

    WB: Doing Business Report


    Governor s consent bottleneck to registering property

    Governor’s Consent – Bottleneck To Registering Property

    2.HIGH COST AND DELAY IN MORTGAGE PERFECTION CONT…

    WB: Doing Business Report


    The role of fmbn in the development of the nigerian mortgage market

    3.NEED TO REVIEW CBN PRUDENTIAL GUIDELINES FOR REAL ESTATE LENDING

    • To be more conducive to the long-term nature of mortgage lending

      4. POOR INFORMATION STRUCTURES

    • Investment in information infrastructure to improve lenders’ capability to assess risk

      • Credit Bureaus

      • Real Estate Information Agencies

      • Property Valuation Companies

        5. COMPLIANCE WITH THE NHF ACT

    • By banks, insurance companies and organisedlabour

      -only 3.5m out of 50m workers are registered

      -employers not remitting deductions to FMBN or not deducting at all


    The way forward

    THE WAY FORWARD…

    FMBN commends Aso Savings & Loans Plc for the initiative to organise a forum for stakeholders to showcase products and services

    FMBN appeals to stakeholders in the housing industry to work together towards the collective goal of ensuring that every Nigerian owns a home at affordable prices

    “…everyone deserves a home”


    Thank you

    THANK YOU

    FEDERAL MORTGAGE BANK OF NIGERIA

    PLOT 266 CADASTRAL AO

    CENTRAL BUSINESS AREA

    ABUJA

    www.fmbnigeria.org


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