Nigeria's mortgage crisis - Nigerian Tribune

By The Citizen

One of the issues that has dominated contemporary discourse is the proliferation of mortgage finance institutions. Few days ago, the Federal Government announced the proposal to set up a mortgage  finance institution. Few days later, the Lagos State government also announced a plan to float a similar financial outfit.

We are however of the opinion that the proliferation of these allied institutions is not the solution to the country's mortgage crisis. We recall that following the adoption of the Structural Adjustment Programme (SAP) by the Ibrahim Babangida administration in July 1986, primary mortgage institutions  dotted  the

Nigerian financial landscape with the purported objective of boosting the mortgage sector. It was a failed experiment as these institutions were primarily operating savings accounts like commercial banks. They were unable to provide the much needed fund to the housing sector which was the primary motive for their establishment. Soon, these institutions folded up. In many instances, depositors lost their funds to the liquidated primary mortgage institutions.

The Federal Mortgage Bank (FMBN), the  apex  mortgage financial institution in the country, has not been able to perform its roles in the mortgage sector due to  poor funding.  At the state level, the various property development corporations which have mortgage finance divisions are virtually moribund as far as lending to the housing sector is concerned. Even the  'low cost' housing estates built by some state governments lack basic infrastructural facilities and have been perjoratively described as not even suitable as police barracks. It is unfortunate that the various interventions in the housing sector, either through direct development or mortgage finance, have failed woefully in tackling the hydra-headed housing problem of the country. We recall that the Shehu Shagari housing programme in the Second Republic was a colossal failure, as the houses were built in remote areas without basic infrastructural facilities.

There is the need for the Federal Government to inject the much needed funds into the FMBN to carry out its assigned functions, instead of duplicating its functions by setting up another mortgage finance institution. The state governments should also resuscitate their respective  property or housing development corporations. Indeed, the proposed Lagos  Home Mortgage Finance outfit is a duplication of the mortgage finance responsibility of the Lagos State Property

Development Corporation (LSPDC) except the state intends to sever this function from the assigned responsibilities of the LSPDC.

Similar institutions in developed countries play crucial roles in developing the mortgage sector. For instance, in the State of Illinois, the Illinois Housing Development Authority and the Chicago Housing Authority are primarily established to ensure that there is affordable rental housing for the people of the state and city. They achieve their objectives by providing or guaranteeing concessionary mortgage financing to private developers to build affordable rental housing for the people.

The Lagos State Home Ownership Mortgage Scheme is designed as a solution to the high cost of rental housing in Lagos. The question, however, is whether establishing a home ownership scheme is a solution to rental housing paucity. The problem in Lagos, over the years, is the problem of affordability, with the so called 'low-cost housing estates' clearly beyond the reach of its supposed beneficiaries. Even if a one-bedroom housing unit costs less than five million naira, the question is which site in the metropolis are the housing units located in. What are the basic infrastructural facilities in these housing  estates? How accessible are the sites vis-à-vis the working places of the proposed home owners? These are some of the pertinent questions which the nation's mortgage finance solutions must address. In the present circumstance, what the nation needs are simple functional and affordable buildings. This should be the focus of any mortgage scheme. Any attempt to design grandiose architectural buildings to be financed by any mortgage scheme will take them out of the reach of the majority of prospective home owners.

Another major problem of the Nigerian mortgage market is the existence of a plurality of defaulters who have vitiated the chances of potential beneficiaries.

Indeed, a study on the Nigerian mortgage market revealed that mortgage beneficiaries in a state property development corporation defaulted  for more than three decades and the accumulated interests more than tripled the original principal advanced. In similar situations, the result is that the chances of potential beneficiaries are automatically vitiated especially in the face of dwindling injection of funds to the mortgage finance institutions.

Once again, we reiterate our position that the FMBN and the state property development corporations should be resuscitated through adequate injection of funds with a view to achieving a functional, effective and efficient mortgage finance delivery system in the country.