The Imperatives of Change
- Posted By Vitalis_Obidiaghaa | On September-28-2020 12:05:46
- Appraising the impact of FMBN’s Innovative Mortgage Financing for Nigerian workers
Just the other day, I went to the barbers shop to have my haircut, a weekend ritual that is performed by most adult men. There, I met Mr. Akin Adegbite, a middle-aged man who had come for the same purpose. As we sat there waiting for our turns to sit on the proverbial barbers’ sit, I started a casual conversation with Mr Adegbite, which developed into an insightful dialogue. After our pleasantries, I inquired from him if he lived in my neighbourhood and he said yes. He then told me that he owns one of the houses in my estate. Wanting to know more about him, I asked him what he does for a living and he told me that he is a civil servant. Teasingly, I asked him how he managed to acquire such a property within that neighbourhood and he told me that he has been a diligent contributor to the National Housing Fund which is being managed by the Federal Mortgage Bank of Nigeria (FMBN). I left the barbers’ shop determined to find out more about the initiatives of the Federal Mortgage Bank of Nigeria (FMBN).
Established with the core mandate of providing long-term credit facilities to mortgage institutions in Nigeria amongst other functions which are stipulated in the FMBN Act, the Federal Mortgage Bank of Nigeria (FMBN) has continued to bridge the funding cost of residential mortgages and promote the availability as well as the affordability of good and decent housing to Nigerians. However, the efforts of the FMBN in ensuring affordable mortgage financing for Nigerians to have their own houses is not without some challenges. A review of the operations of the FMBN indicates that one of the major challenges and constraining factors associated with housing provision for the low- and medium-income earners in Nigeria is the issue of undercapitalization. From our findings, it was observed that FMBN as an organization which is supposed to have a minimum capital base of N5 billion, is currently operating with a capital base of about N2.5 billion mainly because other stakeholders who are mandated by the FMBN Act to contribute part of the required N5 billion, are yet to fulfill their obligatory equity contributions.
For a nation that is currently faced with over 17 million housing deficits with a projected annual increase of about 900,000, the N2.5 billion capital base is definitely inadequate in achieving the housing needs of Nigerians, which is one of the basic human necessities. The housing sector plays a more critical role in our nation’s economy than is always recognized because it directly affects not only the wellbeing of our citizens but also the performance of other sectors of the economy. Mortgage financing in Nigeria has been a major area of concern, identified as one of the most formidable constraints in the housing sector mainly because of the critical role financing plays in affordable housing delivery for the masses.
Another major constraint was the issue of lack of accountability and transparency associated with previous management of the National Housing Fund (NHF). Until recently, most Nigerian workers who are the major contributors to the National Housing Fund (NHF) could not monitor the level of their contributions, because there was no system on ground that gave contributors the accurate figures of the actual amount their employers were deducting from their incomes. This created an atmosphere of distrust between the primary beneficiaries of the National Housing Fund and their employers, consequently affecting the ability of the FMBN to mobilize long-term funds to advance concessionary loans to contributors.
There was also the challenge of affordability of FMBN loans which has been attributed to high cost of equity contributions by Nigerians. For the majority of Nigerian populace that falls below the middle class, this previous high equity contribution had made the dream of owning their homes almost impossible. To understand the social effect of this national challenge, just imagine the possibility of not having a shelter for a week and see how unproductive you could be as an individual, not to talk of the fact that most Nigerian workers have the responsibility of ensuring that their families are comfortable, with a decent roof over their heads.
To address the challenge of lack of accountability and transparency as noted above, the Federal Mortgage Bank of Nigeria (FMBN) in a historic move designed to usher in a new era of transparency and accountability in the operations of the National Housing Fund (NHF), launched a mobile Digital Platform that empowers contributors with real-time access to information on their NHF accounts. The FMBN Digital Platform is an ecosystem of innovative mobile messaging solutions integrated into a single suite and seeking to address the challenges associated with effective monitoring, management and notification of monthly National Housing Fund (NHF) contributions nationwide. The introduction of this digital platform marked a historic milestone in FMBN’s strategic plan to leverage technology and automate decades-old manual business process in order to enhance the bank’s operations.
The new digital platforms enable contributors to receive instant notifications, stay in the know of their contributions and remittances to the scheme on the go, update their records, check contributions, register and retrieve NHF numbers, request for statement of account, calculate home affordability & mortgage payment, and search for NHF related information from FMBN bulletin board service. The systems are secured, available, reliable, easily accessible and easy to use with or without an internet connection. Key advantages of the mobile solutions include giving each NHF contributor increased access to their contributions, greater transparency, clearer disclosure and convenient access from the comforts of their homes/offices or while on the go via phone or email.
Speaking at the launch of this initiative, the Managing Director and Chief Executive Officer of FMBN, Architect Ahmed Musa Dangiwa expressed delight and stated that the launch of the FMBN Digital Platform is the result of the new management’s commitment to addressing in a structured manner, the challenges that have bedevilled the effective implementation of the NHF scheme. In his words: “on resumption of office in April 2017, we audited the system and discovered that most employers under remit deductions, remittance schedules of deductions are not provided, contribution records are updated and maintained in passbooks and most contributors do not know the status of their contributions. Having critically evaluated the issues, we decided to automate the process to give contributors unfettered access to the information pertaining to their contributions and the policies associated with the scheme for greater efficiency, transparency, accountability and service delivery. I am extremely excited that today, we are here to witness the realization of this strategic milestone”
Speaking further, the FMBN boss stated that the launch of the FMBN Digital Platforms is significant because it marks the end of over 30-year period of opaqueness in the management of NHF funds – where contributors were completely in the dark about the state of their NHF accounts. He added that the introduction of the mobile digital solutions has now put the power of convenient access to information about the state of NHF accounts in the hands of contributors since they can now manage, monitor, and receive prompt/instant notifications via their mobile phones and email accounts on activities on their accounts. Architect Ahmed Musa Dangiwa reiterated that the new executive management of FMBN under his leadership is committed to repositioning the bank for better service delivery and will continue to leverage the power of technology to improve efficiency, transparency and enhanced service operational performance. He advised Nigerian workers to register and contribute to the National Housing Fund, so they can enjoy access to FMBN’s suite of affordable housing products such as low interest and long-term mortgage loans payable over thirty-year periods, rent-to-own scheme, home renovation loans of up to 1M payable over 5 years and individual housing construction loans amongst several others. The FMBN Digital Platform is supported by a robust IT infrastructure and built in partnership with globally recognized data storage and IT solutions providers such as NetApp.
Moreover, to address the issue of affordability of FMBN loans, the Bank has made a historic downward review of the equity contribution requirement for accessing NHF loans to increase accessibility and affordability. This includes zero equity contribution for the provision of housing loans of up to N5milion and 10% contribution for housing loans ranging above N5 to N15 million by the contributors to the National Housing Fund (NHF). The revised requirements, which were approved by the Board of FMBN last year (2018), represent a huge reduction in the equity that contributors to the housing fund were hitherto expected to bring before they could access the housing loans. (I.e. from 10% to zero percent for loans of N5 million and below and a reduction from 20% and N30% equity to 10% for loans above N5 million to N15 million.)
The FMBN is also making housing more affordable with the Rent-To-Own Housing Scheme aimed at ensuring that Nigerian workers (especially those who are contributors to the National Housing Fund – NHF) have their own quality and decent houses. Under this scheme, a contributor’s rent is counted as part of the down payment for home ownership. The scheme is another strategic move by the FMBN designed to make home ownership more accessible and affordable for Nigerian workers. It is an innovative affordable housing product which provides an easy and convenient payment plan towards home ownership for workers in the country.
Unlike similar schemes developed by private sector operators which demand higher interest rates for shorter repayment tenor, the FMBN Rent-To-Own is designed in such a way that makes it possible and easy for benefiting workers to move into houses built by FMBN as tenants, and commence payment for units which will eventually become their property having completed payment through monthly or yearly rent payments spread over a period of up to 30 years. The best part of this scheme is that the units will attract a single digit interest rate of 9 percent (9%) on the price of the property on an annuity basis. And the product will cover property with the maximum value of fifteen million naira (N15million).
According to the Managing Director and Chief Executive Officer of FMBN, Architect Ahmed Musa Dangiwa in a recent interview with newsmen, the ‘Rent-to-Own’ housing product is designed to make sure that any worker who collects a salary should be able to live in his own home and pay conveniently over periods as long as 30 years. “This rent-to-own scheme is yet another ground-breaking initiative of our bank that is targeted at increasing access to affordable housing by Nigerian workers who fall into the low-medium income bracket. This is a massive relief especially given how little workers earn. I am delighted that we have successfully added this product to the many other initiatives that we made possible to make home ownership a lot easier for Nigerian worker”, he stated.
To further increase affordability, the FMBN also introduced the Home Renovation Loan scheme under the Federal Staff Housing Loan scheme, to help Nigerian workers fix their old homes with the financing of the project by FMBN. The loan is to afford Nigerians an opportunity to access mortgage loans for the renovation or improvement of their existing homes. The product is specifically designed for Nigerians who are contributors to the National Housing Fund and desire to renovate or improve existing properties which are personally owned by them or through family ownership. In delivery of this promise, the Federal Mortgage Bank of Nigeria (FMBN) has disbursed N2.6 billion to 3,034 beneficiaries under its intervention housing loan through the Federal Staff Housing Loan scheme, the Managing Director, Architect Ahmed Musa Dangiwa has said.
Architect Ahmed Musa Dangiwa said this in Abuja when Hannatu Fika, the Executive Secretary of Federal Government Staff Housing Loans Board, paid him a courtesy visit. “As the federal government tries to provide cost effective and affordable housing for civil servants, it is pertinent to note that a total sum of N2.6 billion has so far been disbursed by the Federal Mortgage Bank of Nigeria to 3,034 beneficiaries through the Federal Staff Housing loan. “I am also indeed very pleased with the remarkable results that we have been able to achieve in the Home Renovation Loan,” he said. According to him, the Home Renovation Loan is one of several products of the bank aimed at ensuring contributors to the National Housing Fund benefit from the scheme. He stated that the FMBN Home Renovation Loan was created for the purpose of renovating existing structures at six per cent for tenure of five years maximum.
Just recently, the FMBN, in collaboration with the Nigerian Labour Congress, the Trade Union Congress and the Nigerian Employers’ Consultative Association launched one of the most ambitious housing delivery programmes in this country; the National Affordable Housing Delivery Programme. It is a programme to deliver affordable houses to Nigerian workers in every state of the federation. The pilot phase is to deliver 100 houses in each of two states across the six geo-political zones of the country. This mass housing project comprises of 14 pilot centres across the nation with 2 centres in each geo-political zone and 2 special centres in Lagos and Abuja. As at the time of this report, the pilot projects have commenced in earnest in most of the centres. FMBN report reveals that the bank has done ground-breaking in 7 states and within the next one month, it will start commissioning them while still doing ground-breaking in the other states. According to the project plan for this unique scheme, the bank will build 100 housing units in each state of the federation and the Federal Capital Territory (FCT) to address housing deficit in Nigeria. The bank plans to deliver 100housing units in every state of the federation through this project.
The Bank also has the Individual Construction Loan which is aimed at supporting individuals to build their own houses. According to FMBN, the only condition to access this loan is that the land must have a good title (Certificate of Occupancy), engineering design and bill of quantity. The disbursement of this loan facility comes in a minimum of three instalments of 30%, 30% and 40% payments to the beneficiaries.
There is also the Estate Development Loan (EDL). The EDL is a facility granted to private developers, State housing corporations and housing cooperatives to bridge the housing deficit through mass production of houses for ownership by NHF contributors. The facility is granted at 10% interest with a maximum repayment period of 24 months. It is a facility devised to facilitate large scale production of houses for sale to contributors at affordable prices and thereby, expand the availability of affordable housing in Nigeria. As a general policy of the Bank, houses produced through the EDL window should not exceed ₦15million in price and must be sold only to NHF contributors.
According to industry watchers, the sustained implementation of these initiatives by the bank with continued support and collaboration of other stakeholders will no doubt, help to totally ease the burden of home ownership, enhancing social housing development in the country. These laudable initiatives, the ongoing reforms and innovative leadership of Architect Ahmed Musa Dangiwa towards repositioning the Federal Mortgage bank of Nigeria on the path of efficiency, accountability and transparency are highly commendable.