In response to the economic decline, the Mortgage Banking Association of Nigeria (MBAN) has gained approval from the Central Bank of Nigeria (CBN) for a matching fund aimed at lowering lending interest rates.

This innovative initiative, called the Mortgage Interest Draw-Back Programme (MIDP), is designed to manage interest rates effectively, without the need for a dual interest rate system or conflicting with the current deregulation policy of the government.

Under the scheme, mortgage banks will borrow from lending banks at market-determined rates but the programme will provide interest rebate of a determined percentage to them where the loans are repaid as and when due.

MBAN President, Mr. Mac-Yoroki Ebilate, who confirmed the development, wants the Federal Government continue to act proactively in taking measures that will see more products-based mortgages that will ensure housing finance is no longer done through short-term facility and commercial loan.

Ebilate, who is the Managing Director, CityCode Mortgage Bank Limited, explained that though products from Nigerian Mortgage Refinance Company (NMRC) have a rate of double digit, it has provided competitive rates to those who might not be keen about products-based mortgages.

According to him, the new policy implementation approved by the Federal Government through its agency, National Pension Commission (PENCOM) with regards to accessing 25 per cent of the retirement savings towards mortgage equity contribution has brought about positive impacts on mortgage indices.

“This has already created impetus in the mortgage sub-sector that will drive both the rate and volume of mortgages. In the coming days we are confident the mortgage loan rate will be coming lower than what they are currently,” he said.

The MBAN president called for the amendment of contribution to the National Housing Fund (NHF) through constitutional amendment to the NHF Act, which would make it effective. “In light of the burgeoning housing needs, the absolute truth is that the contribution of 2.5 per cent of basic salaries to the scheme would only amount to a meagre pool of funds, which may not make a significant impact in addressing the housing finance needs of Nigerians.

“Besides, considering the economic realities in the wake of the new developments, even 2.5 per cent of total salaries would never be adequate and as such there is the critical need for upwards review of the amount contributed to the scheme.

“However, be that as it might be, operations of the NHF scheme had undergone significant internal restructuring in the recent past that resulted in shorter turn-around time of NHF loans, better transparency of the scheme and higher volume of transactions that had been generated.”

He said the review of the NHF Act similar to the revised Pension Act of 2004 would re-ignite the scheme as the NHF scheme holds significant potentials for long-term pooled funds for mortgages in Nigeria. There also exists great potential for the pooling of funds for mortgage financing through mandatory contributions from the workforce.

“In light of the beneficial effects that the reform had on the Pension scheme; since the enactment of the Pension Reform Act of 2004, triggered strong growth in the contributory pension scheme estimated to be N16.76 trillion as at December 31, 2022, which has fatally eclipsed the total contribution to the NHF scheme in its over 30 years of existence.

Ebilate urged the Federal Government to make the required statutory contributions to the scheme and enforce law that ensures institutional contributors do the same. “By the provisions of the NHF Act, commercial banks are required to contribute 10 per cent of their loan and advances at an interest rate of 1 per cent yearly above the interest payable on current account by banks.

“While insurance companies are required to contribute a minimum of 20 per cent of their non-life insurance funds and 40 per cent of life insurance funds to the NHF scheme. The States and Federal governments are mandated by the Act to contribute to the NHF scheme regularly,” he said.

Source: The Guardian