All workers should be contributors to the NHF
We have just above 4.6 million contributors out of a working population of about 60 million.
In this Special Feature on the Nigerian housing sector, Arc. Ahmed Musa Dangiwa, Managing Director/Chief Executive Officer, Federal Mortgage Bank of Nigeria (FMBN), discusses the achievements of implementing the National Housing Fund and other affordable and sustainable housing initiatives under his leadership. He was interviewed exclusively by Jide Akintunde, Managing Editor, Financial Nigeria magazine.
Jide Akintunde (JA): The National Housing Fund (NHF) was 25 years old last year. What is the strategic importance of the NHF and what have been its successes?
Ahmed Musa Dangiwa (AMD): The journey of the NHF scheme has been an interesting but challenging one. The scheme has not performed badly but the truth is that we are far from where we want to be by our guiding vision due to numerous challenges. You can only appreciate the strategic importance of the programme by considering the rationale behind its establishment and the aims and objectives of the NHF scheme.
The broad intention of the government in establishing the scheme is to create a sustainable, long-term source of funding for affordable mortgage financing for Nigerians. As enshrined in the legal instrument setting up the Fund (NHF Act 3 of 1992), the aims and objectives of the NHF include;
1. To facilitate the mobilization of the fund for the provision of houses for Nigerians at affordable prices.
2. To ensure the constant supply of loans to Nigerians for the purpose of building, purchasing and improving of residential houses.
3. To provide incentive for the capital market to invest in property development.
4. To encourage the development of specific programmes that would ensure effective financing of housing development, in particular low cost housing for low income workers,
5. To provide proper policy control over the allocation of resources and fund between the housing sector and other sectors of the Nigerian economy, and
6. To provide long-term loans to mortgage institutions for on-lending to contributors to the fund.
Considering these provisions of the NHF Act, the strategic importance of the Fund cannot be overemphasised. It is a social security programme that reflects what obtains in other climes in the continued strive of the Government to facilitate the provision of affordable housing accommodation for the people.
The NHF scheme has performed creditably, given the quantum of resources at its disposal and the considerable challenges it has faced overtime. When we started, the main challenge was the cumbersome land titling process and the inability of NHF contributors to access Certificate of Occupancy (C of O), which is a requirement for the advancement of NHF mortgage loans. In order to surmount this challenge, the Bank introduced the Estate Development Loan (EDL) window through which we advance loans to housing developers to construct houses for allocation to interested NHF contributors. This has helped to eliminate the necessity for individual presentation of title documents.
Despite its challenges, the EDL window has helped considerably in increasing the housing stock in Nigeria. So many housing estates across the country stand as testimony to this fact. You can hardly find any State where we do not have NHF beneficiaries, there is none. Many Nigerians have been empowered as home owners.
We also have thousands of beneficiaries from the individual NHF loans granted through the Primary Mortgage Banks (PMBs). We have also advanced loans to housing cooperatives to build houses for their members. The FMBN Home Renovation Loan is currently making waves across the nation due to its liberalised conditions for access. So, a lot has been achieved and we aspire to do more. That is why we are struggling every day to expand the Fund and recapitalise the Bank.
JA: The NHF has had its fair share of the general challenges which have limited the performance of many Nigerian public institutions and initiatives overtime. But with specific regard to the NHF, what have been the limiting factors for its performance?
AMD: The main challenge faced by the scheme is acceptability by eligible Nigerians, the willingness by those expected to contribute to the scheme to do so. You know, the resources of the Fund are expected to come through contributions from every Nigerian worker who earns N3,000 and above in both public and private sectors. I don’t think there is any working Nigerian above 18 who does not earn up to that amount. That means every worker should be a contributor to the National Housing Fund (NHF). But what is the reality today? We have just above 4.6 million contributors out of a working population of about 60 million. Can you imagine the quantum of funds that will be available for affordable mortgage financing if every eligible contributor is captured in the scheme?
Not only that, commercial banks and insurance companies are also expected to contribute certain percentage of their loans and advances and life and non-life funds, respectively. But we are now struggling to actualise this. The Federal Government is also expected to make regular contributions to the Fund. So the main challenge is how to expand the scheme to deepen the level of funding available through the Fund. However, we are working to tackle the challenges.
Expanding NHF collection is one of our cardinal objectives. Currently, the proposed amendments to the FMBN Act and the NHF Act are ongoing in the National Assembly to sort out some of these challenges. We are also reaching out to non-participating states and other sectors to bring them back to the fold. Other challenges faced by the scheme border on sector-wide challenges having to do with issues like cumbersome tilting process, prohibitive cost of property transactions, dearth of construction finance and issues of affordability by contributors that inhibit access to mortgage finance generally.
JA: There were the recent efforts to recapitalise the FMBN. To complement the improved capitalization, what institutional reforms have you been working on to raise the institutional performance profile of FMBN over the next few years?
AMD: When we came on board in April, 2017, we were confronted with daunting challenges including the absence of any audited accounts for the past 5-years, lack of proper automation of the Bank’s operations, abandoned/uncompleted projects with huge non-performing portfolios, undercapitalisation and creation of parallel platforms for financing homeownership by CBN and other stakeholders instead of providing institutional support for FMBN.
In confronting these challenges and repositioning the Bank, we developed a six-point strategic agenda. These include: upholding transparency and sound corporate governance culture; implementation of a robust enterprise risk management framework; cost containment; aggressive debt recovery; completion of on-going projects and creation of mortgages to conclude estate funding transactions; and strengthening partnerships with regulatory agencies, development partners and other stakeholders to achieve the Bank’s objectives.
I am happy today that we are making steady progress and witnessing a positive turnaround in every area connected with this strategic agenda. The NHF collection is growing steadily with positive forecast that the year 2018 will be better. As a result of our strategic engagements, several non-contributing states have indicated readiness to re-join the scheme with positive expectations that some of them will come back on board in 2018.
In our mortgage loan operations, more than N10.07 billion was disbursed to about 1,257 beneficiaries in 2017 alone. Our focus on the Bank’s EDL/MPHS loan projects is to ensure completion of ongoing projects and recover FMBN financial outlay currently tied down. This we have done aggressively with over N2.4 billion recovered last year. The Bank is also micromanaging some of the estates to forestall diversion of funds and ensure we recover our loans.
These efforts are also impacting positively on the Bank’s financial performance with impressive growth in our investment portfolio by more than 100%. We are also working assiduously to clear the backlog of unaudited accounts we met on ground. This should be done up to 2017 before the end of this year. The efforts at implementing the risk management framework are also ongoing while the Bank is being assisted by the Institute of Directors to see to the institution of a sound corporate governance culture in the FMBN. We are also rebuilding relationships, with labour unions, employer organisations, civil society organisations, regulatory institutions like the CBN and particularly the National Assembly and the Federal Government.
On our internal processes, a Management Retreat was held from the 29th to 30th of November, 2017, focused solely on promoting efficiency and reducing the Bank’s transaction turnaround time (TAT). Far-reaching decisions were taken at the retreat that are bound to have a positive impact on FMBN service delivery processes. A committee is currently working to ensure and track implementation across all job desks and early signals already show tremendous improvement in our processes.
The most critical hurdle we need to cross now as a corporate entity is recapitalisation. The Bank is grossly undercapitalised with just N5 billion out of which only N2.5 billion is paid up. This needs to be addressed to facilitate the fulfilment of its mandate of providing an effective mortgage financing system to drive housing delivery and home ownership in Nigeria. We are currently interfacing with our supervisory Ministry and the FG to recapitalise the Bank to the tune of N500 billion.
JA: Rapid urbanisation and the pressure on public funds, amongst other challenges, have seemingly overwhelmed the social housing agenda at both Federal and State levels of government. But significant pent up demand for housing in Nigeria cannot be met from a pure commercial financing model. What do you think is the blend of financing that government should promote through both policy and financing instruments?
AMD: What Nigeria lacks now is not a guiding policy document. It is the necessity to implement what is on ground and be faithful to the principles that will help the evolution of the mortgage market. It is obvious that Government alone cannot bear the burden of providing housing for its citizens, as past experiences and results have shown a spectacular failure in this respect. It is that failure, the realisation of the futility of that course of direction that led to the development of the 1991 National Housing Policy, which has been reviewed 2 or 3 times. The guiding principle in the Policy is to cede the driving seat in housing provision to the private sector while the government provides the enabling environment. There is a roadmap in that document. But have we been able to faithfully implement that?
We also have a wonderful vision espoused for the mortgage market in the FSS2020 Strategy document. Are we implementing that vision in pursuance of the deadline? So the need to have a blend, a handshake in policy and financial instruments as a model for housing and mortgage finance is not just coming today. There should be a blend, no doubt. This is already expressed in the National Housing Policy document but we need to have a coordinated front and put in place certain prerequisites necessary for the mobilisation of private funds into housing finance while we try to deepen availability of social housing through government support.
There are several avenues for the mobilisation of private capital into housing; both local and foreign. But we can only have all of these and more if we have a vibrant mortgage market similar to what obtains in developed economies. Housing is so central to the socio-economic development of any nation to be ignored. Social housing programmes like the NHF can be made more affordable through infrastructural provision and other supports by the Government to drive down the cost to off-takers because there is no free lunch anywhere. Somebody has to pay the bill. Government must also encourage institutions like the FMBN, which is the leading institution in the mortgage sector, through the provision of sovereign guarantee for the mobilisation of FDIs.
JA: What are the opportunities for private sector entities to partner with Federal Mortgage Bank of Nigeria?
AMD: I think the whole of the Bank’s operational framework gives limitless opportunities for private sector engagement. Take our EDL window for example; it is all about private sector partnership. This is a window through which FMBN advances estate development loans to private estate developers, state housing corporations and housing cooperatives. Sadly, the window has been suspended due to the challenges confronting the Bank through non-performing loans and the unacceptable conduct of some of the housing developers. Notwithstanding this, private developers are still largely used under the Cooperative EDL window.
A major game changer in the advancement of this partnership is the development of the Off-takers Guarantee scheme to encourage private sector investments in housing development. The guarantee gives an assurance that mortgage loans will be provided for buyers of property developed by interested and qualified investors. This will go a long way in facilitating access to construction finance for private developers. Our individual mortgages are of course also offered through primary mortgage banks (PMBs) most of which are private sector-led.
In all of these, you will discover that every operational point of the Bank is dependent on partnership with the private sector with limitless opportunities for interested partakers. The scheme also offers a large pool of contributors who are potential off-takers of houses developed by private investors. This no doubt represents a big and viable market for private investors.
JA: In spite of the various public and private sector housing projects, the housing deficit in the country remains staggering, at non-diminishing 17 million units. Are you confident that we can meaningfully close the deficit by 2020?
AMD: It will be dishonest to tell you that the nation’s housing deficit will witness a meaningful reduction by 2020. That is barely 35 months away, right? How many houses are being constructed yearly? Nobody can give you a straight answer, the figures are scattered here and there, no credible data. We must have a coordinated and efficient framework to track whatever activities are ongoing in the sector.
What we need to do is to ensure we put in place structures to aid and facilitate the mobilisation of affordable and sustainable housing and mortgage finance. When we do that and address the prerequisites discussed earlier, you can be sure that the deficit will begin to disappear. We must also continue to explore cheaper and more efficient technology and local content in building construction. Happily enough, efforts are ongoing by major players in the sector and those efforts must be sustained.
JA: The housing sector can drive innovation and sustainable development in Nigeria. For instance, a solar power solution can be embedded into the housing policy, and real estate development can promote the greening of the environment. What is your outlook of the Nigerian housing sector in the context of the implementation of the Sustainable Development Goals and the Paris Climate Agreement, which Nigeria is a signatory to?
AMD: I have a good impression that every goal of the SDGs that relate to housing is embedded in what we do or strive to do in the Nigerian housing sector. A case in point is the recent launching of the National Building Energy Efficiency Code by the Hon. Minister of Power, Works & Housing, Babatunde Raji Fashola, SAN. It is an initiative targeted at exploiting technological innovations to reduce energy use and gas emissions in building construction and use. You will also recall that Nigeria hosted the Africa Regional Meeting on Habitat III in February 2016 to define a common African position preparatory to the UN Conference on Habitat held in Ecuador later the same year. These issues are of global concern and Nigeria is not left out.
The country is concerned about ensuring access to safe and affordable housing and making our cities and urban centres sustainable through adequate provision of infrastructures and other social amenities. The Federal Ministry in charge of housing is also setting the agenda and coordinating Government responses to issues of rapid urbanization, slum upgrading and environmental sustenance. Some of these issues dovetail into the Climate Agreement, issues like creating green public spaces and embracing the solar energy system to reduce pollution and help the environment. Governments at all levels are also adopting measures to promote sustainable urban development and citizens’ inclusiveness in housing provision. The Bank is also involved in dealing with some of these issues through the National Council on Land, Housing and Urban Development and other inter-agency thematic groups. So, a whole gamut of issues is being handled and I believe if we can sustain the tempo and continue to be focused, the outlook for the attainment of the objectives of the SDGs and the Paris Climate Agreement is quite bright.