Hope is fading gradually and steadily for Nigerians looking to become home owners through mortgage

Hope is fading gradually and steadily for Nigerians looking to become home owners through mortgage, as loans and advances from primary mortgage banks (PMBs) have declined, limiting access through that window considerably.

The Nigeria Deposit Insurance Corporation (NDIC) says loans and advances extended by these PMBs declined by a steep 31.87 percent to N168.96 billion in 2015.

Fourteen out of 42 PMBs failed to render returns to the NDIC and unpaid premium from nine PMBs amounted to N238.30 million in 2015 which operators attribute to headwinds which have been the bane of businesses and the economy at large in the past 12-18 months.

Though his bank recorded impressive result in its financials in the year ended December 2015, Akin Opeodu, chairman, Safetrust Mortgage Bank Limited, says the operating environment has been very challenging for most businesses in the country, including PMBs and has impacted on their bottomlines.

Most of the operators have however, been very cautious and creative in their operations, which explains the significant improvement in the quality of assets, as non-performing loans (NPL) ratio decreased from 44.14 percent in 2014 to 15.40 percent in 2015.

Despite that improvement, the NPL ratio of 15.40 percent exceeded the prudential maximum threshold of five percent.

  According to the NDIC annual report, the banks’ unaudited profit before tax rose from N2.79 billion in 2014 to N3.31 billion in 2015 due to a significant rise in interest income and non-interest income by 90.75 percent and 321.05 percent in 2015, respectively.

The PMBs shareholders’ funds increased by 93.91 percent to N138.92 billion in 2015 from N71.64 billion in 2014. The subsector Capital Adequacy Ratio (CAR) was 74.04 percent as at December 2015 which exceeded the prudential threshold of 10 percent.

Analysts say the 31.87 percent decline in loans and advances from these mortgage banks is quite significant, pointing out that it will worsen the already bad situation in Nigeria. The country has a housing demand-supply gap estimated at 17 million units by the United Nations.

The mortgage industry in the country has been on the throes of liquidity crisis which was why the Federal Government in January 2014 established the Nigeria Mortgage Refinance Company (NMRC).

The aim of the mortgage refinance company which is private sector led, is to bring liquidity into the mortgage system by refinancing mortgages originated by the PMBs with money raised from the capital market.

The NMRC has gone to the market to raise N8 billion, but has been able to refinance a few PMBs, including Imperial Homes Mortgage Bank, Homebase Mortgage Bank, Trustbond Mortgage Bank, and Sun Trust Mortgage Bank.

“Other mortgage banks are finding it difficult to access this fund because of the high interest rate which the NMRC demands from them”, Femi Johnson, a director in NMRC and the CEO, Homebase Mortgage, says.

The NMRC, he says, is also handicapped in terms of performing its refinancing function because the Securities and Exchange Commission (SEC) says they cannot come back to the market to raise more money until they have disbursed   up to 70 percent of the proceed from the first visit to the market.