By Ndubuisi Francis
The federal government may own 15 per cent equity or less in the newly-launched Nigeria Mortgage Refinance Company (NMRC), which is set to address the challenges associated with housing finance in the country.
The NMRC, which has already secured a $300 million loan from the World Bank, is to address the funding gap in the housing sector by assisting those in the middle and lower-end of the income scale to access housing.
It will primarily resolve the twin problems of lack of access to long-term finance and high interest rate associated with mortgages.
In an interview with THISDAY Tuesday, the company’s Chief Executive Officer, Mr. Sonnie Ayere, said the government was expected to have somewhere around 15 or less per cent equity at the end of the day, with the rest held by the private sector made up of Nigerian private sector players and global development finance institutions.
“We expect that as the company begins to evolve and begins to perform, you find out that even more shareholders, more people want to invest in it. So, the idea is that government is actually building the institution today to help it to a steady state. It’s like when you watch a baby start from crawling to standing, and then to walking. And then, when it begins to run, it can run on its own…,” he said.
According to him, most of the Primary Mortgage Institutions (PMIs) are shareholders, while some of the commercial banks are proposed shareholders—which have indicated commitment.
He added that inevitably, the company would command a huge shareholding, adding that this was further attested to with the interest expressed even at the venue of the NMRC launch recently where some commercial banks were asking why they were not involved.
Ayere disclosed that NMRC was to be the equivalent of Malaysia’s Cagamas, which was totally independent and does not have any guarantees, but issues bonds that have the same credit rating as those of the government of that country.
“That is where we want to get the NMRC to—– where it can be totally independent and continue to thrive and provide the service of supporting the housing market, the growth of the housing market in Nigeria without necessarily having the government involved. In the initial years, it will need the government to steer it in the direction to make sure that it actually achieves its goals, and not just purely private sector profit-driven, but a company that is there to be a market enabler; which is what this company will be. That is why we have set it up as a public-private partnership, but driven by the private sector—with the public sector providing the cradle,” he said.
NMRC boss said the NMRC was set to bridge the gap associated with access to long-term finance as well as high interest rate, noting that it would provide mortgage banks long-term money, which will enable them give up to 20 years of mortgages to the average Nigerian.
“What that now does is that for the first time, you can stretch out the repayment of buying a house over a long space of time, which makes it a real mortgage…We are also reducing the interest rate, in the sense that you are not going to be getting mortgages at 18, 20, 24 per cent interest anymore. But at least, let’s bring it down to somewhere in the region of what I will call early teens, for now. So, in concrete terms, you have done two things¬— you’ve stretched out the tenor and brought down the interest rate. To an average Nigerian, it makes housing more affordable to him or her by having this company to support the mortgage banks and the commercial banks,” Ayere said.
He disclosed that for a seamless and very effective mortgage system to thrive in the country, the other two pillars of mortgage finance—titling and foreclosure issues must be adequately addressed.
According to him, to address the titling issue, the federal government is already in a pilot scheme for mass housing with about 14 states of the federation.