Stories by Maduka Nweke
Obviously, lack of adequate mortgage financing has stalled the development in the housing sector. A lot of schemes that exist in other climes that help in the development of real estate are lacking in Nigeria hence, the large number of housing deficit being brandied year on year. This mortgage liquidity facilities (MLFs), exist in other African countries, because of population density has her peculiar challenges.
In the event of exploring the role of mortgage liquidity facilities (MLFs) in housing finance in Africa using the Malaysian experience (Cagamas Berhad) and comparing it to that of Egypt, Tanzania and Nigeria, we would find that the different challenges have different backgrounds. MLFs have traditionally provided funding and capital market access to primary mortgage lenders. Seen as less complex than securitisation, MLFs can play a critical role in establishing a more developed secondary mortgage market, including the development of securitisation.
Thus, MLFs are more appropriate for emerging markets involving lower levels of transfer risk, and not linking bond issues directly to the underlying mortgages.
The Centre for Affordable Housing Finance (CAHF) in Africa has shown through a study how MLFs could help housing markets increase in sophistication, contribute to the growing track record of novel solutions and initiatives, pioneered by policy makers, financiers, developers and households themselves that suggest that there are new opportunities for making the housing finance sector work for the poor in Africa.
MLFs play a vital role as a centralised issuer of corporate bonds to mobilise long-term funding from domestic capital markets, but can also catalyse the development of the primary mortgage market for the development of the housing sector. However, the greatest undoing in all these arose as a result of no strategic housing scheme that has been consolidated for years. If there is any sustained housing scheme developed by different administrations for three consecutive terms, the housing deficit in the land today, would have reduced drastically.
But before the establishment of a MLF, consideration needs to be given to the nature of the domestic institutional investor base, the development of the private bond market and its ability to support cost-effective credit rating, bond underwriting, and servicing infrastructure. Also, there needs to be a sufficiently homogenous pool of mortgages to be underwritten under sound origination standards.
In the right sense of the word, liquidity of facilities are different from securitisation platforms or conduits in terms of risks and requirements. Usually a government sponsored conduit is not necessary to initiate securitisation as market entities can do this efficiently if there is sufficient demand and the right tax and regulatory environment. MLFs can have a big impact in developing the primary mortgage market like in Egypt and Tanzania. Sometimes there is a need for refinancing to kick-start the generation of mortgage assets onto banks’ balance sheets which can be used for refinancing.
If on the other hands, since there are a lot of lands to develop and most of those who have these lands may not have the money to develop them all of a sudden, they could see partnership developer, mortgage to build and develop these lands. Then what we call housing deficit today would have gotten another nickname.
On the other hand, government is still paying lip service to the issue of providing housing to the citizenry because it does not take the National Assembly anything to promulgate the kind law that can mandate the state government to build 5,000 housing units per year for the four years tenure.
PenCom to finetune housing modalities for contributors
The Director-General, National Pension Commission (PenCom), Mrs. Chinelo Anohu-Amazu has said that the commission is fine-tuning modalities to ensure that every contributor owns a house of his own in the country.
Speaking during the just concluded 2016 World Pension Summit Africa Special held from September 27- 28 in Abuja, Anohu-Amazu, noted that the reason behind the Pension Reform Act 2014 was because the pension Reform Act 2004 did not allow any sort of synergy between contributory pension savings account and owning a home.
The DG said the synergy now exists in the new law which was signed in 2014, adding that the pension operators are looking at the modalities to ensure that that is achievable.
“What we are looking out now is modalities to make sure that pension funds are protected. We don’t want a situation where there will be an interplay between the developers, mortgage companies and RSA account holders complaining of houses that have no quality.”
“We are working out the guidelines to make it happen because we want to touch every home, when people have roof over their heads, it reduces the need to engage in unwholesome practices,” she noted.
She added that various ministries such as Finance, Works and Housing are doing a lot of work on the issue of mortgage and that state governments are very concerned. She stated that states have lands, which they can make available because they want houses for their workers. She added that their participation would make it faster than focusing on federal level because federal level is more cumbersome to pursue.
“If we break it down to state level it will be faster and easier. For example when you go to Anambra state they will tell you they need 20 million houses and we begin to think of how to deploy the pension fund to achieve quality and affordable houses and gradually more states and local governments would have houses,” she said.
This, she said means more states would have to sign up to contributory pension scheme and avail themselves of the opportunity to provide their citizens with better houses at a municipal level, first the state capital, then the local governments.
In his contribution, the President of Pension Fund a Operators Association of Nigeria (PenOp), Mr. Longe Eguarekhide noted that pension funds could be channelled to mortgage for the contributors while stressing that it must not be left alone for only pension industry operators.
According to him anything that has to do with impact investment cannot be discussed with out government input, adding that government has to be involved with the issue of investing in mortgage.
”We are hoping that the land that would be contributed by government to have quality housing scheme, would meet the demand of the contributors. He noted that it requires domestication of building skills, requires discussion and dialogue with government at all level to achieve it.
2nd Niger Bridge: Strategy delays pension funds investment
Lack of clear strategy to guide investment of pension funds into major projects in the country is delaying the takeoff of the 2nd Niger Bridge going by the explanation of the President, Pension Fund Operators Association of Nigeria (PenOp), Longe Eguarekhide.
The President, who spoke during this year’s World Pension Summit, Africa Special, in Abuja, noted that for pension funds to be invested in infrastructure development, a clear strategy is needed from the Federal Government.
Eguarekhide noted that lack of clear strategy has resulted in the none commencement of those major projects.
According to him, “The pension industry is willing and has demonstrated its willingness to invest in infrastructure development in the country by attending several meetings with the legislatures and labour groups. The rules are clear on investment and government only needs to meet with them.”
He stated that the industry could not appropriate government’s assets and invest in them, noting that government needed to articulate a specific direction for the pension operators to follow. He disclosed that the operators were looking at commencing small-size projects such as power projects that would assist small communities.
He argued that until a clear strategy, provided by the government to enable pension operators and other stakeholders invest in infrastructure development is stipulated, the issue would continue to be on the front burner without any achievement.
He said: “The issue of infrastructure development requires definite steps to be taken by government because its position in infrastructure development must be clear to operators and the National Pension Commission (PenCom).
“It is true that the industry needs to diversify its portfolio investment such as in infrastructure development, but such investment must be clear-headed investment. Presently, there are outstanding projects that have not been completed or commenced as a result of this clear strategy,” he said.
Speaking in the same vein, the Executive Secretary, PenOp, Susan Oranye, noted that the issue of infrastructure development need is not peculiar to Nigeria, but the whole of Africa. She noted that the primary focus is the safety of the funds that belong to contributors in the contributory pension scheme.
“A lot of infrastructure bonds that pension funds have to do with like housing; roads, and railways can improve the lives of farmers and the agricultural sector. These have positive social effect on the lives of the people. So, we need the government to put together clear strategy that will set the ball rolling for investment,” she added.