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Managing Director/CEO, Nigeria Mortgage Refinance Company, Prof. Charles Inyangete, discusses in this exclusive interview with Managing Editor, Financial Nigeria magazine, Jide Akintunde, the critical role of NMRC in expanding access to affordable housing in Nigeria.

Jide Akintunde (JA): The Nigeria Mortgage Refinance Company was conceived as a major institutional and financing intervention for the country's housing sector. How would you like to break down what the NMRC was setup to achieve?

Charles Inyangete (CI): The NMRC's mandate is very clear. Our mandate is to provide liquidity to mortgage lenders. Part of how we do that is by connecting mortgages to the capital market. We go to the capital market, issue bonds and use the proceeds of the bonds to refinance mortgages. In doing so, we help to provide affordable mortgages for Nigerians.

JA: Specializing in mortgage refinancing suggests the NMRC is irrelevant to Nigerians aspiring to own their first home. How misleading would such
view be?

CI: Completely misleading. Nothing could be further from the truth. Let's look at what constitutes affordability of housing for Nigerians. The first is cost. For a house to be affordable, it has to be within the parameters that people can use their salaries, or whatever source of income, to pay for it.
    
The Centre For Affordable Housing Finance in Africa (CAHF) reckons that an affordable house in Nigeria should cost in the region of between N3.5 million to N7 million. Very few Nigerians can afford that because our income levels are relatively low.
    
What we do at NMRC is we step in and extend the tenor – the time-span for repayment of a loan for the ownership of your home. If you extend the tenor of a N6 million or N7 million loan over a 10 to 20-year period, it becomes more affordable. That's our role. We extend the time it takes for you to pay for your home by providing long-term funding to mortgage lenders. This addresses the cost element of affordability.
    
The other element has to do with interest rates. The rates in the market today are still very high relative to what people want. Many Nigerians want rates to be in single digit. Unfortunately, even the Nigerian government currently doesn't borrow at single digits. We pray for that day to come when rates would be at single digits. But we are not quite there yet.

JA: One other notion is that the NMRC is a “bad bank” for the housing finance market. How healthy is the portfolio of the NMRC, and how healthy you project it will remain?

CI: Nothing could be further from reality than suggesting we are a “bad bank.” Our role, as I have indicated earlier, is to actually provide access, through the capital market, to long-term funding to finance mortgages. This means we have a much wider pool of funding available for the housing market. We have never had the objective or mandate of being a bad bank. Ours is to intermediate in the housing market.
    
By going to the capital market and issuing bonds, we have a bigger pool of funds. Based on our current programme of about N440 billion, we can create the essential liquidity required to make homes more affordable in Nigeria.

But more importantly, from a Nigerian's perspective, we are creating an environment where affordability can take hold. To create that environment, we issued what we call the Uniform Underwriting Standards. This means anyone who wants to get a mortgage loan today and any financial institution that wants to eventually qualify for NMRC refinancing have to meet those underwriting standards. This framework levels the playing field. It means when you go to borrow, you now know that you will be evaluated on the same basis as everybody else.

Furthermore, our bond issuance is rated. We are also rated as an institution. As it is today, we have the guarantee of the Federal Government of Nigeria for our bond issuance, which is rated AAA. This is classified as a high grade.  

Our existing portfolio, which is in excess of N8.5 billion, has not one single case of default. So, we have a perfectly-performing portfolio. We are not a bad bank. Rather, we are the bank to make homeownership a reality for Nigerians.     

JA: A huge deficit of 17 million units is often cited in the Nigerian housing market. Why has this supply gap persisted?

CI: We are in an environment where there has been a high propensity for construction at the upper end of the market. Meanwhile, there is a lack of supply of affordable housing. If you take Abuja for example, you will find a lot of empty houses. But these are upper-end houses. Housing construction generally hasn't kept pace at the affordable range relative to the upper end.

About 3 percent of Nigerians in the rural areas move into the urban areas annually. Therefore, to reduce the housing deficit and meet the growing demand, we need to ramp up construction of affordable houses. Whether they are build-to-buy houses or homes built-for-rent, they have to be affordable. The focus has to shift to construction of houses that are affordable; we have to look into construction of social houses. This is because the middle market is where majority of Nigerians are.

We need to construct something in the region of 700,000 houses every year. Some people even estimate we need to construct a million houses each year to try to bridge the deficit as well as keep pace with the influx of people moving into the urban areas.

JA: What would be the economic gains of a stronger Nigerian housing market?
 
CI: That is quite easy to see. I would like to invite you to a construction site. If you go to a site where there are 100 houses, for example, being constructed, the labour force will be about four times the number of the housing units.

The employment that is created due to the construction cuts across a wide spectrum. You will find the artisans, architects, as well as civil and electrical engineers. You will also find those who are supplying the construction materials and the woman who comes to sell food. Housing construction supports both forward and backward integration in the economy.

So, a buoyant and vibrant housing sector is good for any economy. In fact, in some places, people look around to observe the number of cranes that are visible in the town or city. They believe the more cranes they see the more the impetus for growth in the economy.  

JA: Since its operational take off two and half years ago, what are the key activities of the NMRC that mark its accomplishments?

CI: I mentioned one in passing earlier, that is, the Uniform Underwriting Standards – which I said levels the playing field for the mortgage industry. It's a key accomplishment. It now means that today, you can walk into a mortgage institution knowing you will be evaluated on a level playing field.  
    
On our second accomplishment, we recognize the environment for doing business needs a lot of improvement. So, we came up with the draft of a mortgage and foreclosure law. By adopting that law, registration of mortgages and the foreclosure process will be very clear and transparent. One of the things that is holding back private investment in housing and real estate is the absence of foreclosure. Also, the registration of mortgages is a very tedious and protracted process. We drafted the law to address these two areas.

Thirdly, as part of our doing business, we have sort to integrate the entire housing market. We have done so by building a technology platform, which we call the Mortgage Market System (MMS). That system was setup to integrate what we viewed as a fragmented housing market.  Let me add that the MMS won us Business Day's Most Innovative Mortgage Institution Award in April this year.    
 
JA: Financing is a major issue in housing provisioning in Nigeria, but it is definitely not the only issue. Apart from macroeconomic instability, there have been talks about the mismatch of high-end housing with demand for low-cost housing. And then we have poor environmental and building standards, poor infrastructure and land racketeering, which all prevent Nigeria from developing an international housing market. How is significant progress possible under the current trends in Nigerian housing market?

CI: We need to move away from operating in silos. We need to collaborate. The various stakeholders need to come together.

For us, we have adopted the value approach to business. In looking at refinancing of mortgages, we are not looking at simply having mortgages in place. We are looking at the entire housing chain.

Put simply, it's important for us to look at what happens at the land assembly point and titling; it's important to ask what happens in the construction stage because we need good quality properties to be in place. That would be the basis for our refinancing. It's also important to ask what happens in the origination of mortgages. All these considerations are important to us in our refinancing activities and also securitization in the open market.

When all the stakeholders – including the policymakers and regulators – come together in a collaborative sphere and push forward the right policies to empower, enhance and create access for first-time homeownership, we can gain the momentum we need to drive the housing market forward. If we continue to act in silos, we would have missed an important opportunity to make progress.   

JA: How do you brace yourself to lead in this critical area of Nigeria's economy, with many challenges and yet strong prospects?

CI: We are letting technology and product innovation to drive our business. For instance, this year, we are going to introduce a sukuk (or non-interest) product into the market as part of our inclusion drive. Part of our ethos in doing business is to promote inclusivity.

We are also building our technology platform to consolidate the fragmented housing market. Our aim is that when you look at all the segments of the housing market, you should see it as one marketplace, instead of seeing housing construction separate from land registry, or distinct from the creation of mortgages and refinancing of those mortgages.

Very soon, Nigerians will be able to go into our information portals, and see where the various properties are being developed. They will also see who is offering what in terms of mortgages and the best they can obtain for their housing needs.

The platform also includes a portal for the rental market so that people can see what is available to make informed decisions. Our housing market information portals will serve as repositories for information that can support better decision-making for prospective homeowners.

The platform is also important for policymaking. A lot of Nigeria's policies are enacted without data on what has been done. Even when the policy changes, we don't have clear mechanisms for evaluating what the outcomes of the previous policies were. NMRC's platform will allow us to evaluate the outcome of policies. And when we need to change a policy, we have a basis for doing so; it would not just be done on a whim.

We are also broadening partnerships. We are partnering with various stakeholders such as developers, financial institutions, and regulators. We are also looking to partner with the judiciary. Next month, we would have an opportunity to bring to the awareness of the judiciary some of the challenges we have in the housing market.

We are looking to build a market that is resilient. The resilience will come from the way we structure our activities and finance our businesses. The capital market gives almost limitless pot of resources to drive the housing market. Being able to go to the capital market will enable us to build a more resilient housing market. That is critical to us.

And of course, NMRC's vision is to be the dominant housing partner in Nigeria. All this coming together would allow us to achieve our vision.    

JA: Any additional remarks?

CI: I like to reemphasis the importance of coming together. Policies cannot be thrown in isolation. Policies need to embrace the realities of the environment and we believe the policymakers need to draw from the operatives in the industry.

The Nigerian housing market, hitherto, has not been operated in a manner that we can say for a certainty that this is a clear-cut policy for driving homeownership. Just about anywhere in the world where there have been huge successes in home ownership, there are polices that address the first-time homeowner. We would like to see such policies in Nigeria. I believe that will give a lot of people confidence that there is a real desire to make homeownership a reality from a policy perspective.

Of course, the macroeconomic environment has been a big challenge for homeownership. We have inflation and interest rates at very high levels. We look forward to when these begin to trend downwards and reach that psychological level where people feel more confident. At the end of the day, confidence plays a big part. If people are going to invest in homeownership, they need confidence that they would not risk unduly losing their homes because of the economic environment.

Going forward, we would like to see an environment that is more conducive from both policy and macroeconomic perspectives.