The Nigeria Mortgage Refinance Company(“NMRC”) is a Public Private Partnership arrangement between the Federal Government of Nigeria and private sector. It is a component of the Nigeria Housing Finance Programme initiated by the Federal Ministry of Finance in collaboration with the Central Bank of Nigeria (“CBN”), Federal Ministry of Lands, Housing & Urban Development (“FMLHUD”) and the World Bank/IFC.
NMRC is a vehicle set up to bridge the funding cost of residential mortgages and promote the availability and affordability of good housing to working Nigerians by providing mortgage lending banks with increased access to liquidity and longer terms funds in the mortgage market.
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
The World Bank approved a concessional US$300 Million 40-year interest free International Development Association (IDA) loan to facilitate the execution of the Housing Finance Programme. US$250 Million of the IDA loan was disbursed in instalments to NMRC as Tier 2 Capital based on key performance indicators — it will be retained on NMRC’s balance sheet to provide credit support for NMRC’s bond issuances.
The balance of US$50 Million will be allocated to other components of the Housing Finance Programme as follows: US$25 Million for the establishment of a Mortgage Guarantee Facility for lower income borrowers and US$25 Million to support the development and piloting of Housing Microfinance Products
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.
NMRC is the first co-owned institution that is operating with a Public Private Governance structure. All other institutions have either a fully private or public function.
NMRC is a private sector led mortgage refinance institution. The project represents the first effective collaboration in the financial sector between the public sector — the States, the Ministries of Land, Justice, and Finance, the regulators, CBN, SEC, and the private sector — financial institutions, bilateral and multilateral institutions in addressing prevailing imperfections that limit access to finance, with all parties making meaningful contributions to the NMRC.
This initiative is for the benefit of all Nigerians in the long term. Beginning from the first phase of operations, average Nigerians with sustainable and verifiable level of income can access mortgage loans easier and faster from participating mortgage lenders. These institutions are being better equipped to provide long term loans with refinancing from NMRC. This also enables developers to build homes faster and allow these homes to be purchased at an affordable cost, and hence save more household disposable income for other investments.
NMRC and FMBN are working on different aspects of providing affordable housing for Nigerians. Primarily, FMBN is a public sector institution focused on the role of providing mass housing and mobilisation of housing funds for the neediest in society. Loans are directly accessed by Nigerian citizens through the National Housing Fund in accordance with the provisions of the NHF Act. The NHF fund is also to service the non-salaried informal populace.
While NMRC as a secondary mortgage refinancing institution will inject liquidity from the capital market to support mortgage loans accessed through respective financial institutions. These institutions include mortgage and commercial banks. NMRC does not provide mortgage loans directly to individuals
With the full operation of NMRC, a substantial building block will be put in place for mortgage finance institutions to meet Nigeria’s current housing deficit, in concert with the responsible behavior of other agencies/tiers of Government and the private sector.
The land registries, land courts, representing one such agencies of government, have to provide quick and easy access to certificates of occupancy and fair justice. Macro policy and fiscal discipline must be maintained to achieve acceptable inflation rates and enable refinancing cost to fall to single digit. State governments need to provide an enabling environment by digitizing land registries and simplifying the process of access to and transfer of land title.
However, NMRC can only make substantial impact on resolving the housing deficit with the full buy-in of all key players. A Malaysian success story is ‘Cagamas’ which is currently supporting the entire Malaysian housing market.
By creating an enabling environment for mortgage finance, State Governments will be able to attract NMRC to refinance mortgage loans created in these states. This will in turn improve the economy of these states by increasing employment/labour and housing production by stimulating housing construction and manufacturing of building materials in such states.
More importantly such States should experience a significant increase in Internally Generated Revenues (IGRs) through withholding tax earned from increased transactional activities, personal income tax earned from increased residency in such states, and fee income earned from increased volumes of mortgage transactions at the lands registries due to efficiencies created by digitisation and reduced mortgage transaction costs.
NMRC sits as a financial intermediary between the Nigerian capital market and financial institutions that provide mortgage loans to average working Nigerian citizens.
NMRC accesses the capital market by issuing long-term bonds, and on-lend the proceeds of the bonds issued to these mortgage lending institutions by providing loan facilities secured by the mortgage pool created according to an agreed underwriting standard.
No. NMRC is a wholesale financial institution which refinances portfolios of mortgage & commercial banks rather than originating individual mortgages and will cater for financial institutions rather than individual borrowers.
Yes. The introduction of NMRC is helping to bring down the cost of mortgage loan by improving market efficiency, lowering cost of funds and allowing for longer repayment tenor period by financial institutions.
The opportunity presented by the housing market can be exploited if all Government agencies (State and Federal) and Private Sector (Financial Institutions and Construction Companies, etc.) act responsibly. What this means, for example, is that:
- All households wishing to either, develop their existing home, or acquire a home of their own, must know that they have easy and fair access to a certificate of occupancy without any doubt, this must be as natural as the right to a passport. Land registries in the States must provide access to these rights at a low cost and within a few months rather than within a few years, as is often the case.
- Mortgage Institutions have to provide transparent product offerings, with standardized documentation, so that consumers can make self-assessments and develop realistic savings plans towards financing their homes.
- Construction companies, artisans, suppliers of building materials, have to start building homes of real value and not of speculative value. This means that the quality and cost of homes should be easy to assess without large costs to the borrower.
- In the rare cases of default, the financial and mortgage institutions must be able to repossess, fairly and quickly. For this to be possible, the legal justice system for mortgages must be developed to work professionally