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FG approves $300m World Bank loan for mortgage refinancing


News » Politics
Nigeria

IMAGE: FEC Meeting »

Nov.7.2013

 

The Federal Government on Wednesday announced its formal approval and receipt of a $300 million (N48.6 billion) loan facility from the International Development Association (IDA) of the World Bank to kick-start the Nigeria Mortgage Refinance Corporation (NMRC) due for launch this month.

The IDA loan, which is a World Bank cheap credit, comes at a zero percent interest rate with a 0.4 percent service charge and a moratorium period of 40 years, it was learnt.

The loan was announced after the Federal Executive Council (FEC) meeting yesterday and is specifically to be devoted to the establishment of the mortgage refinancing company being championed by the Ministry of Finance as well as the creation and strengthening of other institutions that will drive the mortgage venture in the country.

The company, which has already got the approval of the regulator – the Central Bank of Nigeria (CBN) – to set up, will provide low-interest housing loans to middle-income earners in the country to enable them own their own homes.

The MRC is expected to bridge Nigeria’s current housing gap by raising mortgages from an annual average of 20,000 to at least 200,000 in the next three years.

President Goodluck Jonathan had in March this year declared the FG’s intention to establish a mortgage refinance corporation which would be private-sector driven, saying the NMRC would be established under a Public Private Partnership (PPP) arrangement and that the partners would include the Federal Government, Nigeria’s local banks and savings and loans institutions, and the multilateral institutions, especially the World Bank which is providing concessional credits of $300 million.

The expectation is that the NMRC would be able to access the capital markets to raise long-term funds via bond issues.

Yerima Ngama, minister of state for Finance, who briefed journalists after the weekly FEC meeting, said the objective of the Nigeria housing finance project was to increase access to housing finance by deepening the primary and secondary mortgage market in Nigeria.

The housing demand in Nigeria has expanded rapidly due to current urbanisation trends and the estimated demand annually is about 700,000 units.

After deliberations, council approved that Ngozi Okonjo-Iweala, the coordinating minister for the economy/minister of finance, should execute the financing agreement on behalf of the Federal Government, Ngama said.

The council also directed the attorney-general of the federation and minister of justice to issue legal opinion required to render the project effective.

Explaining the technicality of the loan, he said that FEC approved the access of the $300 million loan from the World Bank IDA which is the soft-borrowing arm for developing countries.

“The facility is going to be used to meet the government’s objective in the proposed housing finance project. The Nigeria housing finance project is aimed at increasing access to housing finance through primary as well as secondary mortgage market in Nigeria,” he said.

“Right now we only have primary mortgage institutions. So we are going to establish a mortgage refinance company that will benefit from this. Hence $250 million will be devoted to the establishment of the mortgage refinance company. The remaining money will also be used for three other companies for the Nigeria housing finance project.”

Ngama said the establishment of mortgage guarantee product targeted at the lower income borrower would gulp $25 million, adding that the guarantee would enable people who otherwise could not provide adequate collateral to access loans. He further said there would also be $25 million which would be lent to microfinance banks so that they too could provide housing finance.

“We know that one of the major issues that constraining the development of our mortgage industry is lack of technical competence as well as capacity building. So $10 million will be devoted to capacity building and also as technical assistance. This would give them the capability to drive the mass housing scheme,” he said.

Article Credit: Business Day Newspaper

Updated 5 Years ago
 

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