Housing and Nigeria’s evolving mortgage industry

Mortgage financing has been in Nigeria for quite a while. The Federal Mortgage Bank of Nigeria (FMBN) was established in 1956, known then as the Nigerian Building Society (NBS), a joint venture of the Commonwealth Development Corporation and the Federal and Eastern Governments of Nigeria. But the industry has remained state dominated until the arrival […]

Mortgage financing has been in Nigeria for quite a while. The Federal Mortgage Bank of Nigeria (FMBN) was established in 1956, known then as the Nigerian Building Society (NBS), a joint venture of the Commonwealth Development Corporation and the Federal and Eastern Governments of Nigeria. But the industry has remained state dominated until the arrival of the Federal government reform programmes of the early 2000s which liberalised national policy on housing and urban development in the country.
Today, there are over 90 registered primary mortgage institutions (PMIs) in Nigeria; from the little known one-branch names to the more household multi-branch names like Aso Savings & Loans Plc. If the Central Bank of Nigeria’s mulling of the appropriate capital base of the PMIs is anything to go by, then soon their numbers will be curtailed drastically – there will be less players, albeit more qualitative ones.
Mortgage financing is a multi-billion dollar industry world-wide. Despite the slow recovery from the sub-prime home mortgage crash in US in 2008, Wells Fargo, a US based mortgage bank and the biggest home-loan servicer, posted $2.9 billion in mortgage-banking income in the first quarter of 2012. Lloyds Banking Group, the leading mortgaging financing institution in the UK, provided £26.2 billion of gross new mortgage lending in 2012 to its retail customers in UK. This translate into supporting over 55,000 customers in buying their first home, equivalent to one in every four first time buyers.
Aso Savings & Loans Plc is not only one of the registered primary mortgage institutions (PMIs) in Nigeria , but  a key player in the mortgage banking sub-sector in the country and an unarguably a primary stakeholder in the quest to develop the sector further than its current stage, for the good of the people and the state. Primary stakeholders in any fledgling industry will have a lot of toiling to do to get all the right instruments in place for smooth operation of the business and to take the industry to a level where it will be attractive not to only local investors but also foreign ones.
It is within this context that the place of Aso Savings & Loans Plc and its leadership can be appreciated as a key player in this potentially viable industry that is yet to be fully tapped. The Mortgage industry is struggling with the government and the law makers to put in place the right legal framework for the industry to be not only attractive but a safe investment haven. Most of the lobbying and the constructive stakeholder engagements with the government is done by industry players like the Aso.
Two important pieces of legislative instruments are being pursued by the few mortgage bankers around like the Aso. These include the Foreclosure Bill, and Mortgage Finance Corporation. The former is essential to providing a reasonable remedy in case of customer’s failure to pay back his loans. The mortgage bankers need a swift, less clumsy legal framework that can ensure smooth recovery of properties and their subsequent disposal to recover the loan advances. As the issue of recovery stands now, much is left to be desired. The latter, on the other hand, is what will consolidate the ability of the Mortgage Bankers in the country to serve their more commercial customers. It will enable banks to go and create mortgages using short term money, knowing that they can sell those loans to the corporation. And, they can also afford to give money for 20 and even up to 50 years.
Without Foreclosure Bill and a Mortgage Finance Corporation in place the PMIs are left to their survival strategies. Add this to the inevitable contraction that will occur in the marketplace when CBN implement its rule that requires N5 billion capital bases for PMIs who want national operating licence and N2.5 billion for State level operating licence. And this is where quality thought leadership and innovation come into play to save the days of those who are prepared through cognate experience to lead a Mortgage Bank.
Moving from the premise that anybody anywhere in Nigeria who has income, who wants to own a home, should be able to afford to buy one and aware of the fact that there is 15 million housing deficit in Nigeria, Malam Hassan Tanimu Musa Usman, the MD/CEO of Aso Savings & Loans Plc has found a way of staying afloat the tidal waves of Nigeria’s Mortgage Financing industry.
His innovative take of the situation is to focus on providing houses whose unit cost is N20m and below and to segment the markets in Nigeria. Abuja, Lagos and Port Harcourt will get the N20 million houses. But outside these areas Aso, according to Hassan Usman, in a recent media engagement, will be providing the N10million and below housing units. Another promise from the University of Cambridge educated CEO is, hear him, “Over the next one year, Aso will work with developers so that they can actually develop and deliver up to 3,000 houses of which at least three-quarters will be those of N20 million and below. And if you are doing that you will have to find those who can buy those houses and they are not elites, they are the common people”.
This approach clearly sets Aso in tangent to the path of the frequently defaulting category of mortgage financing— the 50million and above bracket.
Provide the right mix of legalism, innovative products such as the strategies Aso is bringing to the market and get the right institutional players, the sky will be the limit to what can be achieved in Nigeria in the evolving housing financing sector of our economy in few years to come.
Hassan can be reached through: [email protected]