Dr Chii Akporji who is Executive Director, Policy Strategy Partnership, Nigeria Mortgage Refinance Company (NMRC) spoke with Viewpoint Housing News in Abuja saying the 66,000 mortgage applications in 2015 could not be refinanced because mortgage banks were unwilling to drive the process. She maintained that NMRC has done a lot to turn around the mortgage sector in Nigeria…
Viewpoint: People wonder what the use of NMRC is. They can hardly pint at its uses.
Akporji: We were set up under a PPP arrangement between the Federal Government of Nigeria and some private sector shareholders, primary mortgage banks. We were incorporated in 2013. The whole idea of setting up of NMRC is basically two-fold – to address the housing deficit which has been variously put at between 17million and 23 million units.
Two, to more importantly address the issue of mismatch between the long term funding needed for the mortgage business and the short term fund that is available to mortgage banks. Mortgage by nature is a long term business so you need to have a long term capital to support the business. But what was available to banks was short term capital – 30-day money, 90-day money at very high market rate. That was why the business was not thriving.
And what is the correlation between housing deficit and mortgage? It’s like the umbilical cord linking mortgage and housing because without mortgage, you can’t have a robust housing sector. So to address the massive housing deficit, you need to grow mortgage sector. And one of the ways of growing the housing sector is to make sure there’s availability of long term capital to support the sector.
So NMRC was essentially set up to address that gap in long term capital. We were set up as a mortgage refinance company. What does that mean? Refinance means we don’t offer mortgages but we stand behind mortgage banks who offer mortgages to enable them create mortgages and offer these mortgages to Nigerians so that they can buy their own homes.
We raise funds in the capital market. We issue bonds and our bond issuances are backed by unconditional Federal Government guarantee – making our bond rating almost same as Federal Government’s. With this, it’s easy for us to go to the market – raising long term capital – 10-year money, 15-year money, and 20-year money.
So when a mortgage bank comes to us with a mortgage, as long as that mortgage conforms to what we call Uniform Underwriting Standards, after just six months of that mortgage or the borrower repaying, the mortgage bank brings that whole mortgage back to us. We buy it off them in total even if it were to run for 10, 20 years, we buy it, give them the whole money back on condition that they go back and create a new mortgage, creating opportunity for somebody else to be able to buy a house. We’re a catalyst for growth within the mortgage sector.
But because the market is nascent, still growing – it’s not as developed as what you find in the US, UK. We’re working with stakeholders in what we call the housing value chain, starting with the state governments who are owners of the land on which the houses are built. The Federal Government has land but not as much as state governments.
We work with developers who are the builders of the houses on which mortgage banks create mortgages. We work with the mortgage banks, our core constituency. And of course, we’re at the very end of the housing value chain, ready to buy off these mortgages created against houses built by developers on land provided by state governments.
Viewpoint: There’s this general feeling that NMRC only exists in name.
Akporji: When you talk about perception, I can understand. People don’t understand what we do. We were launched in January, 2014. And as part of that process of creating awareness, the government came up with the idea of 10,000 mortgages programme which eventually metamorphosed into 66,000 mortgages programme. The idea was for 10,000 mortgages which would be passed to mortgage banks to finance.
But because of the demand, from 10,000, it blew into 66,000. I remember we went to the president [former President Good luck Jonathan] to complain that this thing had gone beyond our expectation. What should we do? The answer was go ahead and work with the 66,000.
It was difficult. One, our mortgage banks were not ready. NEMRC hadn’t even been fully operational. This was 2014. We received our final licence to operate in February 2015. So as at 2014, we were not even supposed to do the things we were doing. We were just making noise. That’s why that programme didn’t succeed.
Maybe now that the market is growing, NMRC is fully functional, it’s able to go to the market, and maybe we can revisit that programme. It must have created a negative impression in the minds of people.
Viewpoint: NMRC made a big show at the 2015 Abuja Housing Show. We haven’t seen such any more. Why?
Akporji: That was our first outing at the show so we wanted to make people know we existed. And in 20115, was the first time we went to the market. We went to the market in July 2015 when we raised N8 billion which we used to refinance Legacy Mortgages, existing mortgages that mortgage banks brought to us for refinancing. These were mortgages from all over the country.
Viewpoint: Those 66,000 applications, did you carry them out?
Akporji: We were not the ones to carry them out. Mortgage bank were the ones to…
Viewpoint: But you opened the window for the applications.
Akporji: No! Government opened the window for them. Our mortgage banks were not ready to issue the mortgages. They issued a few. I believe up to 9,000 were eventually…You, know, they do the normal credit analysis and then provide the mortgage.
Of course, when you apply for something, it doesn’t mean you’ll get it. Are you qualified? Out of these 66,000, after they finished all the screening, it would be whittled down to 20,000.
Viewpoint: The World Bank was to put money into this programme. What happened to the fund?
Akporji: The World Bank funded this project to the tune of $300 million. Not just NMRC. When people hear of World Bank, they think the World Bank would just give out money. No. The World Bank will put the money in the Central Bank and would be realising the money in tranches. Each release is tied to your meeting certain milestone.
So NMRC doesn’t have access to $250 million out of that $300 million. So far, we have only been able to draw $120 million. It was given to us in what was called tier-two capitals to enable us operate efficiently. But that money is still with the Central Bank.
And then, the balance of that money is used to set up two other institutions. One is a Mortgage Guarantee Company to be set up with $25 million and the other is Housing Micro Finance Component to be set up with $15 million and the balance of $10 million is to be used for Technical Assistance.
The entire programme is out of our hands. It’s been managed by the CBN. We don’t even see the money.
Viewpoint: What can you confidently say NMRC has done in improving home ownership in Nigeria? How many mortgages has NMRC refinanced?
Akporji: We raised N8 billion the first time, which we deployed to mortgage refinancing. We refinanced 400 and something mortgages with that. Then we just went to the market for our series-two bond issuance. We raised N11 billion, which we’re now using to refinance mortgages. Once that fund is exhausted, we plan to go to the market again, before the end of this year to raise another N16 billion to help refinance mortgages.
I can’t tell you the amount of mortgages because, it’s the mortgage banks, once they’ve created mortgages and brought to us, we know how many mortgages actually…
We really standardised a lot of things in the market. We introduced uniform standards for the formal sector. We’ve just introduced uniform standards for the informal sector so that the businessman, if you’re self-employed, the market woman, the spare parts dealer, small and medium scale industry people; we’ve created standards to enable them also come into the mortgage fold. We launched that at this year’s Abuja Housing Show. To tell them, look, you too can own your own home.
We also created standards for diaspora mortgages. A lot of Nigerians in the Diaspora want to own houses in Nigeria.
We’re working on non-interest bearing mortgages. We’re working with Lotus Capital. They’re our advisers.
We’re working with state governments on adoption of modern mortgage foreclosure law. I’ve already referenced the Kaduna example and how adoption of that law enhances the state’s ease of doing business, attracting investments.
Viewpoint: What is your relationship with the Federal Mortgage Bank of Nigeria and the Family Homes Fund?
Akporji: I spoke with the MD [Umar Dangiwa] yesterday [14 Aug. 2014]. We’ve been talking of how we can work together. The difference between FMBN and NMRC is that FMBN is entirely public sector. They receive housing fund contributions. The new MD is really taking it to the next level. They’ve created many more mortgages in the short time he has been there.
We worked together at this year’s Abuja Housing Show when we launched the informal sector…because they were part of the stakeholders and also the Diaspora mortgages. We have good relationship.
You know, the maximum cut off for NHF mortgage is N15 million. So for people whose mortgages are beyond N15 million, we can come in and support FMBN.
Same thing with Family Homes Fund. It’s public sector set up under this administration. It was in the Ministry of Finance but I understand it has been moved to the Ministry of Housing.