NMRC is the bank mak­ing home­own­er­ship a re­al­ity for Nige­ri­ans

Hous­ing con­struc­tion sup­ports both for­ward and back­ward in­te­gra­tion in the econ­omy.

Financial Nigeria Magazine - - Contents - Charles Inyangete

Man­ag­ing Di­rec­tor/CEO, Nige­ria Mort­gage Re­fi­nance Com­pany, Prof. Charles Inyangete, dis­cusses in this ex­clu­sive interview with Man­ag­ing Edi­tor, Fi­nan­cial Nige­ria mag­a­zine, Jide Ak­in­tunde, the crit­i­cal role of NMRC in ex­pand­ing ac­cess to af­ford­able hous­ing in Nige­ria.

Jide Ak­in­tunde (JA): The Nige­ria Mort­gage Re­fi­nance Com­pany was con­ceived as a ma­jor in­sti­tu­tional and fi­nanc­ing in­ter­ven­tion for the coun­try's hous­ing sec­tor. How would you like to break down what the NMRC was setup to achieve?

Charles Inyangete (CI): The NMRC's man­date is very clear. Our man­date is to pro­vide liq­uid­ity to mort­gage lenders. Part of how we do that is by con­nect­ing mort­gages to the cap­i­tal mar­ket. We go to the cap­i­tal mar­ket, is­sue bonds and use the pro­ceeds of the bonds to re­fi­nance mort­gages. In do­ing so, we help to pro­vide af­ford­able mort­gages for Nige­ri­ans.

JA: Spe­cial­iz­ing in mort­gage re­fi­nanc­ing sug­gests the NMRC is ir­rel­e­vant to Nige­ri­ans as­pir­ing to own their first home. How mis­lead­ing would such view be?

CI: Com­pletely mis­lead­ing. Noth­ing could be fur­ther from the truth. Let's look at what con­sti­tutes af­ford­abil­ity of hous­ing for Nige­ri­ans. The first is cost. For a house to be af­ford­able, it has to be within the pa­ram­e­ters that peo­ple can use their salaries, or what­ever source of in­come, to pay for it.

The Cen­tre For Af­ford­able Hous­ing Fi­nance in Africa (CAHF) reck­ons that an af­ford­able house in Nige­ria should cost in the re­gion of be­tween N3.5 mil­lion to N7 mil­lion. Very few Nige­ri­ans can af­ford that be­cause our in­come lev­els are rel­a­tively low.

What we do at NMRC is we step in and ex­tend the tenor – the time-span for re­pay­ment of a loan for the own­er­ship of your home. If you ex­tend the tenor of a N6 mil­lion or N7 mil­lion loan over a 10 to 20year pe­riod, it be­comes more af­ford­able. That's our role. We ex­tend the time it takes for you to pay for your home by pro­vid­ing long-term fund­ing to mort­gage lenders. This ad­dresses the cost el­e­ment of af­ford­abil­ity.

The other el­e­ment has to do with in­ter­est rates. The rates in the mar­ket to­day are still very high rel­a­tive to what peo­ple want. Many Nige­ri­ans want rates to be in sin­gle digit. Un­for­tu­nately, even the Nige­rian gov­ern­ment cur­rently doesn't bor­row at sin­gle dig­its. We pray for that day to come when rates would be at sin­gle dig­its. But we are not quite there yet.

JA: One other no­tion is that the NMRC is a “bad bank” for the hous­ing fi­nance mar­ket. How healthy is the port­fo­lio of the NMRC, and how healthy you project it will re­main?

CI: Noth­ing could be fur­ther from re­al­ity than sug­gest­ing we are a “bad bank.” Our role, as I have in­di­cated ear­lier, is to ac­tu­ally pro­vide ac­cess, through the cap­i­tal mar­ket, to long-term fund­ing to fi­nance mort­gages. This means we have a much wider pool of fund­ing avail­able for the hous­ing mar­ket. We have never had the ob­jec­tive or man­date of be­ing a bad bank. Ours is to in­ter­me­di­ate in the hous­ing mar­ket.

By go­ing to the cap­i­tal mar­ket and is­su­ing bonds, we have a big­ger pool of funds. Based on our cur­rent pro­gramme of about N440 bil­lion, we can cre­ate the es­sen­tial liq­uid­ity re­quired to make homes more af­ford­able in Nige­ria.

But more im­por­tantly, from a Nige­rian's per­spec­tive, we are cre­at­ing an en­vi­ron­ment where af­ford­abil­ity can take hold. To cre­ate that en­vi­ron­ment, we is­sued what we call the Uni­form Un­der­writ­ing Stan­dards. This means any­one who wants to get a mort­gage loan to­day and any fi­nan­cial in­sti­tu­tion that wants to even­tu­ally qual­ify for NMRC re­fi­nanc­ing have to meet those un­der­writ­ing stan­dards. This frame­work lev­els the play­ing field. It means when you go to bor­row, you now know that you will be eval­u­ated on the same ba­sis as everybody else.

Fur­ther­more, our bond is­suance is rated. We are also rated as an in­sti­tu­tion. As it is to­day, we have the guar­an­tee of the Fed­eral Gov­ern­ment of Nige­ria for our bond is­suance, which is rated AAA. This is clas­si­fied as a high grade.

Our ex­ist­ing port­fo­lio, which is in ex­cess of N8.5 bil­lion, has not one sin­gle case of de­fault. So, we have a per­fectly-per­form­ing port­fo­lio. We are not a bad bank. Rather, we are the bank to make home­own­er­ship a re­al­ity for Nige­ri­ans.

JA: A huge deficit of 17 mil­lion units is of­ten cited in the Nige­rian hous­ing mar­ket. Why has this sup­ply gap per­sisted?

CI: We are in an en­vi­ron­ment where there has been a high propen­sity for con­struc­tion at the upper end of the mar­ket. Mean­while, there is a lack of sup­ply of af­ford­able hous­ing. If you take Abuja for ex­am­ple, you will find a lot of empty houses. But th­ese are upper-end houses. Hous­ing con­struc­tion gen­er­ally hasn't kept pace at the af­ford­able range rel­a­tive to the upper end.

About 3 per­cent of Nige­ri­ans in the ru­ral ar­eas move into the ur­ban ar­eas an­nu­ally. There­fore, to re­duce the hous­ing deficit and meet the grow­ing de­mand, we need to ramp up con­struc­tion of af­ford­able houses. Whether they are build-to-buy houses or homes built-for-rent, they have to be af­ford­able. The fo­cus has to shift to con­struc­tion of houses that are af­ford­able; we have to look into con­struc­tion of so­cial houses. This is be­cause the mid­dle mar­ket is where ma­jor­ity of Nige­ri­ans are.

We need to con­struct some­thing in the re­gion of 700,000 houses ev­ery year. Some peo­ple even es­ti­mate we need to con­struct a mil­lion houses each year to try to bridge the deficit as well as keep pace with the in­flux of peo­ple mov­ing into the ur­ban ar­eas.

JA: What would be the eco­nomic gains of a stronger Nige­rian hous­ing mar­ket?

CI: That is quite easy to see. I would like to in­vite you to a con­struc­tion site. If you go to a site where there are 100 houses, for ex­am­ple, be­ing con­structed, the labour force will be about four times the num­ber of the hous­ing units.

The em­ploy­ment that is cre­ated due to the con­struc­tion cuts across a wide spec­trum. You will find the ar­ti­sans, ar­chi­tects, as well as civil and elec­tri­cal en­gi­neers. You will also find those who are sup­ply­ing the con­struc­tion ma­te­ri­als and the woman who comes to sell food. Hous­ing con­struc­tion sup­ports both for­ward and back­ward in­te­gra­tion in the econ­omy.

So, a buoy­ant and vi­brant hous­ing sec­tor is good for any econ­omy. In fact, in some places, peo­ple look around to ob­serve the num­ber of cranes that are vis­i­ble in the town or city. They be­lieve the more cranes they see the more the im­pe­tus for growth in the econ­omy.

JA: Since its op­er­a­tional take off two and half years ago, what are the key ac­tiv­i­ties of the NMRC that mark its ac­com­plish­ments?

CI: I men­tioned one in pass­ing ear­lier, that is, the Uni­form Un­der­writ­ing Stan­dards – which I said lev­els the play­ing field for the mort­gage in­dus­try. It's a key ac­com­plish­ment. It now means that to­day, you can walk into a mort­gage in­sti­tu­tion know­ing you will be eval­u­ated on a level play­ing field.

On our sec­ond ac­com­plish­ment, we rec­og­nize the en­vi­ron­ment for do­ing busi­ness needs a lot of im­prove­ment. So, we came up with the draft of a mort­gage and fore­clo­sure law. By adopt­ing that law, reg­is­tra­tion of mort­gages and the fore­clo­sure process will be very clear and trans­par­ent. One of the things that is hold­ing back pri­vate in­vest­ment in hous­ing and real es­tate is the ab­sence of fore­clo­sure. Also, the reg­is­tra­tion of mort­gages is a very te­dious and pro­tracted process. We drafted the law to ad­dress th­ese two ar­eas.

Thirdly, as part of our do­ing busi­ness, we have sort to in­te­grate the en­tire hous­ing mar­ket. We have done so by build­ing a tech­nol­ogy plat­form, which we call the Mort­gage Mar­ket Sys­tem (MMS). That sys­tem was setup to in­te­grate what we viewed as a frag­mented hous­ing mar­ket. Let me add that the MMS won us Busi­ness Day's Most In­no­va­tive Mort­gage In­sti­tu­tion Award in April this year.

JA: Fi­nanc­ing is a ma­jor is­sue in hous­ing pro­vi­sion­ing in Nige­ria, but it is def­i­nitely not the only is­sue. Apart from macroe­co­nomic in­sta­bil­ity, there have been talks about the mis­match of high-end hous­ing with de­mand for low-cost hous­ing. And then we have poor en­vi­ron­men­tal and build­ing stan­dards, poor in­fra­struc­ture and land rack­e­teer­ing, which all pre­vent Nige­ria from de­vel­op­ing an in­ter­na­tional hous­ing mar­ket. How is sig­nif­i­cant progress pos­si­ble un­der the cur­rent trends in Nige­rian hous­ing mar­ket?

We are let­ting tech­nol­ogy and prod­uct in­no­va­tion to drive our busi­ness. For in­stance, this year, we are go­ing to in­tro­duce a sukuk (or non-in­ter­est) prod­uct into the mar­ket as part of our in­clu­sion drive.

CI: We need to move away from op­er­at­ing in si­los. We need to col­lab­o­rate. The var­i­ous stake­hold­ers need to come to­gether.

For us, we have adopted the value ap­proach to busi­ness. In look­ing at re­fi­nanc­ing of mort­gages, we are not look­ing at sim­ply hav­ing mort­gages in place. We are look­ing at the en­tire hous­ing chain.

Put sim­ply, it's im­por­tant for us to look at what hap­pens at the land as­sem­bly point and ti­tling; it's im­por­tant to ask what hap­pens in the con­struc­tion stage be­cause we need good qual­ity prop­er­ties to be in place. That would be the ba­sis for our re­fi­nanc­ing. It's also im­por­tant to ask what hap­pens in the orig­i­na­tion of mort­gages. All th­ese con­sid­er­a­tions are im­por­tant to us in our re­fi­nanc­ing ac­tiv­i­ties and also se­cu­ri­ti­za­tion in the open mar­ket.

When all the stake­hold­ers – in­clud­ing the pol­i­cy­mak­ers and reg­u­la­tors – come to­gether in a col­lab­o­ra­tive sphere and push for­ward the right poli­cies to em­power, en­hance and cre­ate ac­cess for first-time home­own­er­ship, we can gain the mo­men­tum we need to drive the hous­ing mar­ket for­ward. If we con­tinue to act in si­los, we would have missed an im­por­tant op­por­tu­nity to make progress.

JA: How do you brace your­self to lead in this crit­i­cal area of Nige­ria's econ­omy, with many chal­lenges and yet strong prospects?

CI: We are let­ting tech­nol­ogy and prod­uct in­no­va­tion to drive our busi­ness. For in­stance, this year, we are go­ing to in­tro­duce a sukuk (or non-in­ter­est) prod­uct into the mar­ket as part of our in­clu­sion drive. Part of our ethos in do­ing busi­ness is to pro­mote in­clu­siv­ity.

We are also build­ing our tech­nol­ogy plat­form to con­sol­i­date the frag­mented hous­ing mar­ket. Our aim is that when you look at all the seg­ments of the hous­ing mar­ket, you should see it as one mar­ket­place, in­stead of see­ing hous­ing con­struc­tion sep­a­rate from land reg­istry, or dis­tinct from the cre­ation of mort­gages and re­fi­nanc­ing of those mort­gages.

Very soon, Nige­ri­ans will be able to go into our in­for­ma­tion por­tals, and see where the var­i­ous prop­er­ties are be­ing de­vel­oped. They will also see who is of­fer­ing what in terms of mort­gages and the best they can ob­tain for their hous­ing needs.

The plat­form also in­cludes a por­tal for the rental mar­ket so that peo­ple can see what is avail­able to make in­formed de­ci­sions. Our hous­ing mar­ket in­for­ma­tion por­tals will serve as repos­i­to­ries for in­for­ma­tion that can sup­port bet­ter de­ci­sion-mak­ing for prospec­tive home­own­ers.

The plat­form is also im­por­tant for pol­i­cy­mak­ing. A lot of Nige­ria's poli­cies are en­acted with­out data on what has been done. Even when the pol­icy changes, we don't have clear mech­a­nisms for eval­u­at­ing what the out­comes of the pre­vi­ous poli­cies were. NMRC's plat­form will al­low us to eval­u­ate the out­come of poli­cies. And when we need to change a pol­icy, we have a ba­sis for do­ing so; it would not just be done on a whim.

We are also broad­en­ing part­ner­ships. We are part­ner­ing with var­i­ous stake­hold­ers such as de­vel­op­ers, fi­nan­cial in­sti­tu­tions, and reg­u­la­tors. We are also look­ing to part­ner with the ju­di­ciary. Next month, we would have an op­por­tu­nity to bring to the aware­ness of the ju­di­ciary some of the chal­lenges we have in the hous­ing mar­ket.

We are look­ing to build a mar­ket that is re­silient. The re­silience will come from the way we struc­ture our ac­tiv­i­ties and fi­nance our busi­nesses. The cap­i­tal mar­ket gives al­most lim­it­less pot of re­sources to drive the hous­ing mar­ket. Be­ing able to go to the cap­i­tal mar­ket will en­able us to build a more re­silient hous­ing mar­ket. That is crit­i­cal to us.

And of course, NMRC's vi­sion is to be the dom­i­nant hous­ing part­ner in Nige­ria. All this com­ing to­gether would al­low us to achieve our vi­sion.

JA: Any ad­di­tional re­marks?

CI: I like to reem­pha­sis the im­por­tance of com­ing to­gether. Poli­cies can­not be thrown in iso­la­tion. Poli­cies need to em­brace the re­al­i­ties of the en­vi­ron­ment and we be­lieve the pol­i­cy­mak­ers need to draw from the op­er­a­tives in the in­dus­try.

The Nige­rian hous­ing mar­ket, hith­erto, has not been op­er­ated in a man­ner that we can say for a cer­tainty that this is a clear-cut pol­icy for driv­ing home­own­er­ship. Just about any­where in the world where there have been huge suc­cesses in home own­er­ship, there are po­lices that ad­dress the first-time home­owner. We would like to see such poli­cies in Nige­ria. I be­lieve that will give a lot of peo­ple con­fi­dence that there is a real de­sire to make home­own­er­ship a re­al­ity from a pol­icy per­spec­tive.

Of course, the macroe­co­nomic en­vi­ron­ment has been a big chal­lenge for home­own­er­ship. We have in­fla­tion and in­ter­est rates at very high lev­els. We look for­ward to when th­ese be­gin to trend down­wards and reach that psy­cho­log­i­cal level where peo­ple feel more con­fi­dent. At the end of the day, con­fi­dence plays a big part. If peo­ple are go­ing to in­vest in home­own­er­ship, they need con­fi­dence that they would not risk un­duly los­ing their homes be­cause of the eco­nomic en­vi­ron­ment.

Go­ing for­ward, we would like to see an en­vi­ron­ment that is more con­ducive from both pol­icy and macroe­co­nomic per­spec­tives.

Charles Inyangete, Man­ag­ing Di­rec­tor/CEO, Nige­ria Mort­gage Re­fi­nance Com­pany

Charles Inyangete

Charles Inyangete

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