Transcript THE ROLE OF FEDERAL MORTGAGE BANK IN THE DEVELOPMENT …

A PAPER
PRESENTED BY
MR. GIMBA YA’U KUMO,
MD/CE, FMBN
AT THE
1ST ASO HOUSING
EXHIBITION &
CONFERENCE
17TH – 18TH MARCH, 2011
THE ROLE OF FMBN IN
THE DEVELOPMENT OF
THE NIGERIAN
MORTGAGE MARKET
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.
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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
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OVERVIEW OF HOUSING
IN NIGERIA
70
70
63
61
56
60
50
61
41
(%)
40
30
25
20
10
0
Nigeria
Benin Rep
Libya
South Africa
Brazil
Colombia
USA
 Low homeownership rate of 25% compared to 70% in the USA, 63% in
Brazil, 61% in Benin and 56% in South Africa
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OVERVIEW OF HOUSING
IN NIGERIA
Non-Oil Growth
400
Real Growth
Real Estate
30
350
25
300
20
250
200
15
150
10
100
5
50
0
Q1'09
Q2'09
Q3'09
Q4'09
Q1'10
Q2'10
Q3'10
REAL ESTATE SECTOR CONTRIBUTION TO GDP (2009-Q3'10)
CHART 1
0
Q1'09
Q2'09
Q3'09
Q4'09
Q1'10
Q2'10
Q3'10
CHART 2
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

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THE MANDATE OF FMBN
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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
Collect and manage the National Housing Fund (NHF) in
accordance with the NHF law
 MANDATE 4:
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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
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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
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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.
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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)
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MANDATE 4: Collect and manage the NHF:
NHF Collections
70.00
60.00
• NHF collections of N31.8b realised between Jan ’08 - Dec ’10
• That is, 49% of cumulative collections from Jan ‘92 to Dec ‘10
Billions of Naira
50.00
40.00
30.00
20.00
10.00
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
Year
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MANDATE 4: Collect and manage the NHF:
NHF/PMI and Estate Development Loans
90.00
80.00
70.00
60.00
50.00
Billions
40.00
ESTATE DEVT LOANS
30.00
NHF LOANS
20.00
10.00
0.00
97
98
99
00
01
02
03
04
05
06
07
08
09
10
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OTHER ACHIEVEMENTS
AS AT DEC 2010
 NHF CONTRIBUTIONS REFUND:
 Cumulative of N942,662,263.88 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.
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FMBN:
STRATEGIC FOCUS & PLANS
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 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 selfemployed
- Creation of 8 Zonal Offices for more effective coverage
- Introducing NHF e-collection platform pilot scheme for FCT MDAs
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 Commencement of Commercial Lending Operations:
- using capital market resources applied as market-determined, riskbased priced loans
 Expand mortgage financing to non-salaried informal sector
- which contributes as 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.
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 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
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FMBN:
THE CHALLENGES
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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
Institution/Country (Year)
Paid-up Capital
(‘000)
Total Liabilities
(‘000)
Cagamas Holdings Berhad – Malaysia (2009)
US$49,309
US$9,811,535
Hong Kong Mortgage Corporation Ltd. (2009)
US$256,862
US$6,808,213
Sociedad Hipotecaria Federal – Mexico (2008)
US$342,235
US$4,760,743
National Housing Finance Corporation – South Africa
(2010)
US$117,788
US$93,628
US$25,196
US$265, 629
Canada Mortgage & Housing Corporation (2009)
Average Paid-up Capital for selected Institutions
Federal Mortgage Bank of Nigeria
US$158,278
US$16,367
US$352,241
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2. HIGH
COST
AND
DELAY
MORTGAGE PERFECTION
Saudi Arabia
Ghana
0%
1.3%
9.2%
Abuja, FCT
Bauchi
Cost To Register Property –
11% Administrative Fees Vary
Kano
11.9%
Enugu
11.9%
13.4%
Abia
13.9%
Kaduna
Sokoto
15.0%
15.3%
Anambra
16.9%
Ogun
Lagos
22.2%
23.6%
Cross River
Stamp duty
WB: Doing Business Report
IN
Legal fees
Other costs
Cost
(% of property value)
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2. HIGH
COST
AND
DELAY
MORTGAGE PERFECTION
New Zealand
Sudan
Abuja, FCT
Cross River
Governor’s Consent – Bottleneck
To Registering Property
9
19
38
42
60
38
63
Lagos
60
Bauchi
60
Enugu
60
Kaduna
CONT…
2
CONSENT DELEGATED
Kano
IN
82
89
104
130
75
Ogun
90
174
CONSENT GRANTED BY GOVERNOR
Sokoto
102
75
Anambra
180
Abia
WB: Doing Business Report
229
150
Time for consent
213
Time for other procedures
Time (days)
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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 organised labour
only 3.5m out of 50m workers are registered
employers not remitting deductions to FMBN or
not deducting at all
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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”
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THANK YOU
FEDERAL MORTGAGE BANK OF NIGERIA
PLOT 266 CADASTRAL AO
CENTRAL BUSINESS AREA
ABUJA
www.fmbnigeria.org
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