Prospective home owners to benefit as FG plans N5bn Mortgage Refinance Corporation
Prospective home owners in Nigeria are to benefit, as the Federal Government plans to set up a Mortgage Refinance Corporation (MRC) next year, with an initial N5 billion in capitalisation and a further $250million in debt financing.
This was disclosed yesterday by Ngozi Okonjo-Iweala, minister of Finance and Co-ordinating Minister for the Economy, at the 2012 Lagos Business School (LBS), alumni day, in Lekki, Lagos.
Nigeria is estimated to have a 17 million unit housing deficit and there are currently only 20,000 active mortgages in the country, with a population of 167 million.
The MRC is expected to help address this anomaly by expanding the secondary mortgage market, allowing lenders to reinvest their assets in more lending and in effect, increasing the number of lenders and mortgages in the market.
“We anticipate that the MRC will stimulate the secondary market for mortgages,” said Okonjo- Iweala.
“Our modest goal is to grow the active mortgages in Nigeria, from 20,000 to 200,000 in five years.”
The MRC is also expected to help push down the interest rates for mortgages in Nigeria, from 20 percent currently, to 13 – 14 percent, helping to make mortgages more affordable for prospective home buyers.
The MRC will be backed by the World Bank, with concessionary loans, as well as select private sector players.
The new corporation is also expected to access the capital markets for funding in the future.
The MRC model has been used in a number of countries, to help stimulate the housing market, deepen home ownership and stimulate gross domestic product (GDP) growth.
In the United States, the two housing-finance giants Fannie Mae and Freddie Mac, have helped to expand home ownership to historical highs, as well as engender wealth creation and jobs.
Fannie Mae and Freddie Mac are estimated to own, or have guaranteed about 60 percent of the U.S.’s $12 trillion mortgage market in 2010.
Meanwhile, the Finance Minister disclosed that Government has tightened the process of subsidy payments made to oil marketers, and in the process reduced leakages in government revenue.
“We will not pay the indicted oil marketers” she said. “Contrary to what is being said, the ministry has however been paying the honest marketers. N451 bn was paid for 2011 arrears, and an additional N169 billion has been paid this year.”
Okonjo – Iweala also made allusion to the backdrop of reforms undertaken in the country in the past ten years, which has led to macro-economic stability, a story which according to her, deserves to be told.
“We have a stronger balance sheet today, than we did a decade ago, largely due to the macro-economic policy we put in place. Nigeria’s public finances have improved and Fitch, S&P and Moody’s have upgraded us with a stable outlook. If macroeconomic stability is not given, you cannot begin to work to solve other problems,” she said.