NMRC’s innovation to unlock N1.4trn pension fund for Housing – Ayere
The Nigerian Mortgage Refinance Company (NMRC) has come up with an initiative that will move the Nigerian mortgage industry from its present nascent state, to one that will support the country’s housing sector and capital market.
Collaborating with eight mortgage banks and Dunn Loren Merrifield (DLM), an investment firm based in Lagos Nigeria, NMRC has created the Warehouse Funding Limited (MWFL), a special purpose company which will be charged with providing short-term, low interest funding to mortgage banks in the country.
MWFL, which seeks to enhance the mortgage origination capacity of the banks, will also enable NMRC to perform the traditional role for which it was established.
The NMRC was established in June 2013 as a component of the Nigeria Housing Finance Programme initiated by the Federal Ministry of Finance (“FMoF”) and its partners, to develop the primary and secondary mortgage markets by raising long-term funds from the capital market and thereby providing access to affordable housing finance in Nigeria. It is a Public Private Partnership between the Federal Government of Nigeria and the private sector.
However, the banks are not creating enough mortgages for refinancing because of the high interest rate regime that has frightened potential mortgagors.
Sonnie Ayere, chairman/CEO of the DLM Group and former managing director of the NMRC, told BusinessDay on Friday last week that MWFL is a vehicle set that will provide off-takes for housing development projects in the country, which most developers do not have presently. According to him, this situation makes it almost impossible for the mortgage banks to finance such projects.
“The beauty of what we have done, is that we have created a system that will allow developers to come and showcase what they are doing and then be prequalified for financing,” Ayere said. “The banks within this system will then sign up and market the project to their customers who will then get a mortgage.”
“What we have done is to get NMRC to begin to do what it is supposed to do,” Ayere noted. “The thing is if the mortgages that the NMRC is supposed to be refinancing are not coming through, then they will have nothing to refinance.”
He added that the crucial step is to give enablement to the mortgage banks, adding that once the banks have that enablement, then they will begin to create mortgage loans.
A part of the enablement, according to Ayere, is to create the right interest rate environment, while the other is to create the right ecosystem.
“What we have been able to achieve so far, is to put the right ecosystem in place,” he said. “We now have the whole system, from construction down to the capital market, and I think we have sort of achieved that to the point where we believe that in setting up Mortgage warehouse funding limited is imperative.”
Nigeria’s housing deficit is currently estimated at over N100 trillion. Analysts say that government cannot fund this deficit and so needs to create the environment to enable the private sector fund it.
The DLM boss said that the problem in the mortgage system is that presently, the mortgage rates which stand at around 22.5 per cent make mortgage unaffordable to the average employee.
He said that the Warehousing Funding will help to overcome this obstacle by creating the environment for attracting funds from the pension industry, for reducing mortgage rates, for stimulating the industry, and for making homes affordable, even to those in the informal sector.
“If we can create a system where employees can allocate part of their salary meant for pension contribution (say 20 per cent) to housing at single digit, we can eventually create a significant pool of funds that will enable the employee access mortgage facility at 9 per cent or even less,” Ayere said.
“What will happen is that an individual who is earning, say N3.5 million a year, can get a mortgage for a home of up to N11 million, whilst still contributing to the pension system.”
This way, he added, the employee can have the satisfaction of moving into his own house before retirement, have his pension funds upon retirement, and still be financially better off after 20 years; “We have this worked out and this is demonstrable,” he said.
“This will also assist in attracting, for now, up to N1.4 trillion of pension funds (the Nigerian pension funds is currently estimated at N7 trillion) to the housing sector and thus bridge the housing deficit significantly.”
Ayere said that the National Pensions Commission (PENCOM) is the critical stakeholder for the success of the innovation which is set to enlarge the pension industry by effortlessly attracting pension contributors from the informal sector of the economy, create jobs for Nigerians, boost the country’s GDP, and provide social security for the citizens.
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