Experts warn against looming collapse of Nigeria’s mortgage sector in 2017

Unless the government, through the regulatory agencies, comes up with a major policy decision that will arrest the crisis that is looming in the mortgage sector of the financial system, more Nigerians who could have built or bought their own houses through mortgage will remain ‘homeless’, experts have said.

Feelers from the sector reveal that  as at December 2016, about 15 of the 36 primary mortgage banks  (PMB) were not able to pay their insurance premium contribution over liquidity problems which the experts say reflect operational challenges in that sector.

They cited few primary mortgage banks (PMBs) which were allegedly unable to meet their obligations to depositors and this has raised fears of possible collapse of the sector which may spell doom not only for mortgage banking customers, but also for the entire financial system.

Commenting on the issue, former Managing Director/CEO, Refuge Homes, Sola Olubode, noted that situations like this explain the low mortgage contribution to gross domestic product (GDP) at 0.12 per cent as against  63 per cent in US; 64 per cent in Britain; 55 per cent in Germany;  15 per cent in Thailand; 20 per cent in South Africa; 5 per cent in India, and 3 per cent in Ghana.

“Nigeria’s low home ownership level is at a little above 10 per cent where US has 72 per cent; UK,  78 per cent; China, 60 per cent; South Korea, 54 per cent, and Singapore, 92 per cent. This can also be traced to the liquidity issues in its mortgage sector which limits access to mortgage loans,” he said.

The concern raised by the looming crisis in this sector is deepened by the fact that not long ago liquidity problems led to the consolidation and recapitalisation of the sector, reducing the 83 primary mortgage banks at the time to 36 a few of which were recently refinanced by the Nigerian Mortgage Refinance Company (NMRC).

The PMBs inability to pay their premium is all the more critical as each depositor in a mortgage bank is only insured to the tune of N500,000, meaning that in the event of a collapse of the sector, customers would be in for trouble.

This is more so as  the Nigeria Deposit Insurance Commission (NDIC), the insurer, says its capacity to sustain efforts at ensuring that insured institutions are put on the part of sustainable growth and development depends largely on the premium contribution, which is an amount paid periodically by the mortgage banks for covering their risk.

Another player in the sector, the Managing Director of NDIC, Umaru Ibrahim, was quoted as saying that the inability of as many as 15 PMBs to pay the insurance premium as at December 2016 was an unfortunate situation capable of putting customers at higher risk.

It would be recalled that players in the sector had noted a contraction in access to housing finance following a 31.8 per cent decline in loans and advances from the PMBs.