1. THE ROLE OF FMBN IN THE DEVELOPMENT OF THE NIGERIAN MORTGAGE MARKET
A PAPER
PRESENTED BY
MR. GIMBA YA’U KUMO, MD/CE, FMBN
AT THE
1ST ASO HOUSING EXHIBITION & CONFERENCE
17TH – 18TH MARCH, 2011
THE ROLE OF FMBN IN THE DEVELOPMENT OF THE NIGERIAN MORTGAGE MARKET

2. INTRODUCTION
Housing sector plays a critical role in the development of an economy. It not only affects the welfare of the citizens but also the performance of other sectors of the economy.
It is one of the three most important basic needs of man, the others being food and clothing.
Consequently, greater attention is being given by governments in the delivery of affordable housing to its citizenry, through
- Assistance in finance (via aid, subsidy or grants or combinations)
- Assistance in provision of infrastructure
The focus on housing finance has been very prominent, because housing provision requires huge capital outlay which is often beyond the capacity of the vulnerable medium/low income groups.

3. OVERVIEW OF HOUSING IN NIGERIA
720,000 housing units required yearly to meet MGD Goal on housing
Huge housing deficit estimated at 16m units
Estimated mortgage financing gap of over 56 trillion Naira

4. OVERVIEW OF HOUSING IN NIGERIA
Low homeownership rate of 25% compared to 70% in the USA, 63% in Brazil, 61% in Benin and 56% in South Africa

5. OVERVIEW OF HOUSING IN NIGERIA
CHART 1
CHART 2
Real estate sector in Nigeria contributes only about 0.5% of the total GDP, while in developing countries contribution is about 60% and between 30-40% in emerging economies
CHART 1: Real Estate sector contribution to GDP has stagnated over time
CHART 2: Real Estate sector growth has underperformed real growth and non-oil growth rates
Source: National Bureau of Statistics Nov 2010

6. THE MANDATE OF FMBN

7. FMBN MANDATE FMBN was established to -
MANDATE 1: Encourage the emergence and growth of a viable secondary mortgage market to service the needs of housing delivery in Nigeria
MANDATE 2: Link the mortgage market to the capital market for sustainable long tenored funding and become a prominent capital market operator through issuance of debt and Mortgage Backed Securities (MBS)
MANDATE 3: Mobilize domestic and foreign funds into the housing finance subsector
MANDATE 4: Collect and manage the National Housing Fund (NHF) in accordance with the NHF law

8. PERFORMANCE ON MANDATE
Encourage the growth of a viable secondary mortgage market in Nigeria
- Successful refinancing of 9,525 mortgages valued at N26 billion created by Mortgage Loan Originators in the 1st tranche of the N100 billion Mortgage-Backed Bond programme to sell FG non-essential residential houses in the FCT in Year 2007
- The expected refinancing of about 6,533 outstanding mortgages valued at N14 billion in the 2nd tranche

9. PERFORMANCE ON MANDATE
Link the Mortgage Market to the Capital Market
- The Federal Mortgage Bank of Nigeria is registered as an issuing house by the Securities and Exchange Commission (SEC)
- FMBN is recognized as an issuer of mortgage-backed instruments by the Federal Government of Nigeria
- FMBN’s mortgage-backed bond (MBB) continued to retain its ‘AAA’ rating

10. PERFORMANCE ON MANDATE
Mobilize foreign and domestic funds
- FMBN is recognised as a first-choice investment conduit by foreign investors
- FMBN is exploring opportunities of issuing debt instruments in local and international capital markets in collaboration with international financial institutions
- Investor profile include global banks, international investment firms, conglomerates, foreign housing corporations, etc.

11. PERFORMANCE ON MANDATE
Collect and manage the National Housing Fund (NHF)
- Significant increase in the number of registered participants which reflects growing confidence in the Scheme
+ 26 states now participating, from only 3 in Year 2002
+ all 24 banks participating, etc.
- Willingness to expand access channels to NHF mortgage originations e.g. PFAs, insurance companies, MFBs
- Steady increase in total annual collections and disbursements
(see next slides)

12. MANDATE 4: Collect and manage the NHF: NHF Collections
NHF collections of N31.8b realised between Jan ’08 - Dec ’10
That is, 49% of cumulative collections from Jan ‘92 to Dec ‘10

13. MANDATE 4: Collect and manage the NHF: NHF/PMI and Estate Development Loans

14. OTHER ACHIEVEMENTS AS AT DEC 2010
NHF CONTRIBUTIONS REFUND:
Cumulative of N942,662, refunded to 50,522 contributors
LOAN RECOVERY:
Total of N4,063,480,982 recovered on classified facilities in past 24 months
RESEARCH & DEVELOPMENT:
To bridge the knowledge gap on the housing situation, in 2010 FMBN’s Research & Documentation Unit carried out -
a survey on housing delivery in the FCT and
a market survey of building materials in all geopolitical zones of the country.

15. FMBN: STRATEGIC FOCUS & PLANS

16. Consolidate on capital market activities
with issuance of subsequent tranches of its N100 billion bond to refinance sale of FG non-essential residential houses in FCT
To issue mortgage bonds based on FMBN’s financial strength and/or government guarantee
- To take advantage of investor appetite for bonds
Support legal and regulatory framework review
Amendment/replacement of unfriendly housing-related laws
Collaborating with National Assembly Committees on Housing
Consolidate NHF collection and funding operations
Increase in NHF collections by compliance of non-participating state & local governments, the organised private sector & the self-employed
Creation of 8 Zonal Offices for more effective coverage
Introducing NHF e-collection platform pilot scheme for FCT MDAs

17. Commencement of Commercial Lending Operations:
- using capital market resources applied as market-determined, risk-based priced loans
Expand mortgage financing to non-salaried informal sector
- which contributes as much as 65% of GNP, 90% of new jobs in the country, 80% of all non-agricultural employment and 60% of urban jobs [Vanguard, Sept 2008]
- Service delivery channels are trade groups, unions and housing cooperatives, microfinance institutions
Encourage formation of housing cooperatives
- To expand mortgage finance to target groups (teachers, nurses, mission groups (e.g. Catholic missions, organised Islamic organisations), trade groups, etc.

18. Attract foreign funding & investments
- Interests by American, Chinese, Korean & Saudi Arabian investors
- Strategic advantage as a FG-Sponsored entity for investors to channel investments into local economy
Introduction of Innovative Mortgage-related Products
- Mortgage and Title Insurance
to mitigate mortgage-credit risks for lenders
Increases/stimulates mortgage originations
Advantage of lower costs of mortgages (affordability) based on higher volumes
- Real Estate Investment Trusts (REITs)
Covered Bonds
Rental Market Development Products
Securitisation

19. FMBN: THE CHALLENGES

20. Institution/Country (Year)
1. INADEQUATE CAPITAL BASE:
Low capitalization in comparison with similar secondary mortgage institutions worldwide
- FMBN’s capital base is currently equivalent to US$16m compared to an average of US$158m held by similar secondary mortgage institutions
Institution/Country (Year)
Paid-up Capital (‘000)
Total Liabilities
(‘000)
Cagamas Holdings Berhad – Malaysia (2009)
US$49,309
US$9,811,535
Hong Kong Mortgage Corporation Ltd. (2009)
US$256,862
US$6,808,213
Sociedad Hipotecaria Federal – Mexico (2008)
US$342,235
US$4,760,743
National Housing Finance Corporation – South Africa (2010)
US$117,788
US$93,628
Canada Mortgage & Housing Corporation (2009)
US$25,196
US$265, 629
Average Paid-up Capital for selected Institutions
US$158,278
Federal Mortgage Bank of Nigeria
US$16,367
US$352,241

21. Cost To Register Property – Administrative Fees Vary
2. HIGH COST AND DELAY IN MORTGAGE PERFECTION
Cost To Register Property – Administrative Fees Vary
WB: Doing Business Report

22. Governor’s Consent – Bottleneck To Registering Property
2. HIGH COST AND DELAY IN MORTGAGE PERFECTION CONT…
Governor’s Consent – Bottleneck To Registering Property
WB: Doing Business Report

23. 3. NEED TO REVIEW CBN PRUDENTIAL GUIDELINES FOR REAL ESTATE LENDING
To be more conducive to the long-term nature of mortgage lending
4. POOR INFORMATION STRUCTURES
Investment in information infrastructure to improve lenders’ capability to assess risk
Credit Bureaus
Real Estate Information Agencies
Property Valuation Companies
5. COMPLIANCE WITH THE NHF ACT
By banks, insurance companies and organised labour
- only 3.5m out of 50m workers are registered
- employers not remitting deductions to FMBN or not deducting at all

24. “…everyone deserves a home”
THE WAY FORWARD…
FMBN commends Aso Savings & Loans Plc for the initiative to organise a forum for stakeholders to showcase products and services FMBN appeals to stakeholders in the housing industry to work together towards the collective goal of ensuring that every Nigerian owns a home at affordable prices
“…everyone deserves a home”

25. THANK YOU FEDERAL MORTGAGE BANK OF NIGERIA PLOT 266 CADASTRAL AO
CENTRAL BUSINESS AREA
ABUJA