Mortgage Backed Securities
NMRC specializes in the issuance of Mortgage Backed Securities (MBS) in Nigeria by aggregating mortgage portfolios of partner banks for investors in the Capital Market to buy through its N400bn FGN guaranteed Bond Issuance Program. Through this NMRC raises long-term funds to boost liquidity in the mortgage market thereby empowering its partner mortgage lending institutions to provide longer term loans to potential homeowners.
This aligns with NMRC’s business mandate, which is to promote access to affordable housing finance in Nigeria by linking the capital market with the housing sector and establishing an operational and viable secondary mortgage market.
Since NMRC commenced operations, four years ago, we have successfully tapped the Nigerian Capital Market on two occasions to raise finance for the mortgage market.
First, in July 2015, NMRC successfully issued a 15-year N8 billion Series 1 Bond with coupon rate of 14.9% under its N440billion Medium Term Note Programme. By this act, NMRC made history as the first mortgage refinance facility in Africa to issue bonds to finance its operations. NMRC deployed the funds raised from the bond issue to the refinancing of the mortgage portfolios of its member banks.
To further boost liquidity in the country’s mortgage market, NMRC again in June 2018, successfully completed an N11billion Series II Bond Issuance. The order book was subscribed by over 200 percent. Net proceeds of the bond issue will again be deployed to the refinancing of conforming mortgage portfolios of its member banks.
So far, NMRC has raised N19billion through Bond Issuances from the Capital Market to refinance mortgage portfolios of its member banks. The resulting improved liquidity in the market is empowering mortgage lenders to for the first time give commercial mortgage loans that are payable over 15-20-year periods at significantly lower interest rates per annum.
The Nigeria Housing Programme seeks to address the key barrier to developing accessible and affordable housing in Nigeria. It is designed to be implemented with parallel funded projects in land registration and construction sectors by the DFID and GIZ (Deutsche Gesellschaft fur Internationale Zusammenarbeit GmbH).
The Programme has three components and will be most effective if a coordinated approach to all parts of the value chain is implemented. The main areas are a) land and legal framework, b) access to affordable housing finance, and c) housing development and construction.
NMRC is established with the primary aim of resolving access to affordable housing finance, and to act as a focal point for creating an enabling environment for housing finance by playing a strong developmental role in supporting the improvement of land and legal framework and housing development and construction.
NMRC provides mortgage-lending institutions with access to long-term finance at an affordable interest rate, thereby enabling mortgages to be issued by these institutions to Nigerians, at longer tenors and affordable rates. The provision of mortgage loans at longer tenors will provide the average working Nigerian citizens an opportunity to buy a home and conveniently pay for it.
In simple words, NMRC is government inspired but a private sector led effort to provide affordable housing for Nigerians through loans accessed from mortgage and commercial banks. NMRC will contribute to a better alignment of the Housing Finance Programme.
A core strategic objective for the Nigerian government is to achieve broad based and inclusive growth by unlocking markets that have the potential to generate jobs.
The increasing gap in residential homes in Nigeria is now estimated by experts to be in a deficit of about 22million housing units. This presents a huge opportunity for private investment and job creation. It is estimated — following labor impact assessments in countries such as Columbia, Malaysia and South Africa — that at least 5.62 direct jobs can be generated with every new home and 2.48 indirect jobs associated in housing related expenditure
One of the roles of NMRC is to provide a safety net for financial institutions, allowing them to convert illiquid mortgage assets into cash when in difficulties. This allows for a facility such as NMRC to make direct provision of long-term funding into the mortgage market.
In addition, given that the US$250 Million IDA loan is being used as Tier 2 capital, it allows NMRC to raise its own funds through the issuance of long-term bonds to institutional investors.