Owning a home is usually the reasonable dream
of every adult. In the 21st Century, citizens’ ability to
realise this dream is probably a major indicator of the strength
and relevance of a nation’s socio-economic structures. Developed
Societies see housing as necessary adjuncts of politico-economic
engineering. To articulate and achieve this goal all the
national sectors and agencies are motivated or compelled to
participate and contribute. This is based on recognition of
housing as a basic need and ‘right’ of every citizen. This
perhaps underpins the United Nations Habitat program that most
member nations have adopted with varying shades of success and
sincerity. Nigerians however, have a different and unpleasant
story to tell.
Recently, two clients engaged me with an
offer to prospect for landed property on Lagos mainland. They
sought to leverage the recent ‘conversion’ of our bloated, sorry
consolidated banks, to mortgage finance. Each sought mortgage
loans from separate banks and being ‘high net-worth’ were well
received. However, on advice, each requested from their banks
details of their monthly obligations under the mortgages without
the usual ‘bankernese’ and fine print.
In one case for a mortgage loan with 15-year
tenure, the mortgagee was expected to pay about N0.3million
monthly including interest. Mathematics was never my strongest
point, but a simple calculation revealed that over 15 years, the
mortgagee would have paid N54 million if he did not miss out on
any monthly instalment. If he did, your guess is as good as mine
about the compound ratio at which the interest would have been
calculated. Interestingly, the property value is just N25
million, out of which the mortgagee is to provide 20 per cent.
The second case is similar except the
property value is N55 million out of which the buyers required
N40 million from the bank. At the end of 20 years, they would
have paid the bank over N72 million assuming they were making
the same monthly payments to service the mortgage. Though the
monthly payment is meant to reduce after some years, yet a
considerable amount would nevertheless have been paid before
this; but for argument’s sake, I’ll stick to my above scenario.
As indicated above, bank mortgages as
currently structured cannot be serviced by the average worker
outside the blue chip companies (Oil & Gas, Telecoms, and
banking). Even in these cases, such mortgages are best entered
into with caution in Nigeria’s uncertain work environment.
Mortgage loans within the context of Home
Ownership schemes are primarily a commercial but secondarily
social service offered by banks under special governmental
regulation and incentives. The aim from my observation of other
climes is to provide citizens with access to cheap long term
funds to finance their home-ownership dreams. The intention is
to enable a mortgagee achieve his home-ownership dreams whilst
paying towards this a periodic amount slightly higher than the
rent payable to a Landlord for a comparative property. This
differs from the purely commercial transactions where a borrower
puts up his property as collateral to secure credit for his
business or private purposes. This is a layman’s understanding
of mortgage services within this article’s context. I stand to
be corrected.
The housing sector is an area Nigerian banks
could make a serious social impact. Today, despite the
difficulties in land registration created by the Land Use Act of
1978, there is a boom in this sector spearheaded by private
entrepreneurs. The banks have proved late converts in this area,
but have begun to finance large building developments for sale
to the public. This is commendable, but still falls far short of
what they can do.
Bankers’ excuses for this state of affairs
are legion. The truth in my humble opinion lies in banks’
preference for short term business and which translates to quick
profits to long term projects and slower profits. That is a true
capitalist orientation. Unfortunately, it is also a
short-sighted orientation. The greater percentage of Nigerians
in need of housing is outside the ‘high net worth’ group able to
service the existing mortgage repayment schedules of the various
banks in Nigeria.
Government’s ineptitude and indifference on
this issue is even worse. The several ‘interventions’ of Federal
and State governments have had little impact on the average
Nigerian. Public Housing schemes have generally been swallowed
up by Public officials and their cronies. This has left those
who really need the homes with no alternative choice but to rent
these ‘low cost’ or ‘medium cost’ homes from the new landlords
as tenants at prohibitive costs.
The Federal Mortgage Bank of Nigeria was dead
on arrival. The National Housing Fund Scheme has been worse. Few
of those who registered and serviced the scheme could surmount
the legal and financial hurdles to accessing its benefits. Even
after fulfilling the requirements of accessing the N5million
(maximum) loan available under the scheme, you will still
contend with avaricious Primary Mortgage Institutions (PMIs) who
are exclusively its processing agents. Reportedly, some process
and receive the funds from FMBN (where it is available) and roll
it over continually whilst making the beneficiary believe it is
not been disbursed. Today, the scheme is in need of a serious
makeover; procedurally as well as in its disbursable limit.
However, with excess money available to burn
in their vaults; the Big 25 banks are showing some interest in
the sector although they still target up-end customers. A
realistic mortgage plan that’s structured within the pockets of
the average civil servant, teacher, and worker will work if
approached with humane professionalism. The myth that Nigerians
are scammers I have found largely untrue. Many bank defaults are
often as a result of unfair practices by bankers themselves. In
other cases, there are elements of internal collusion in several
‘bad debts’ reported across the banking landscape.
Dr. Tai Solarin’s People’s Bank showed that
if treated fairly low/mid income earners will generally respect
their bank obligations. An owner/occupier Mortgagee will hardly
default on facility securing his family shelter. However
offering mortgages at rates precluding an average worker meeting
them on his honest income, foists on him a Catch 22
situation.
Even when facilities are granted to private
developers, the cost of funds to service the bank facility
becomes a major portion of the retail price of the property and
can more than triple the profit of the developer himself. In
2003, I was involved in studies that showed that with less than
N2 million, tasteful 2/3 bedroom semi detached bungalow
apartments were possible on laid out estates if the high cost of
funds could be significantly reduced or eliminated.
However, my observation of our nation’s
peculiar banking landscape often leaves me perplexed and
‘scatter-whelmed’. Today, the two main industries that flourish
whatever the political or economic temperature are the banks and
churches. Our banks seem more conscious of the bottom-line than
social impact. They appear more interested in promoting
programmes and activities with questionable socio-economic
impact than creating and promoting wealth and societal well
being. Where they do show some presence, a closer look often
reveals a Shylock-like motivation and intent in securing a pound
of flesh from their ‘hapless’ customer.
This view may appear harsh to those who fail
to see beyond the hype and inventive public relations gimmicks
often seen in Nigerian media. I do not mean that no good comes
out of our banking sector; however, I do respectfully assert
that its social and community impact leaves much to be desired.
I also accept that banks are not charitable organisations, but
business entities set up for commercial profit. However, the
experience of our Niger Delta region and the Oil majors reveal
that commercial profit alone cannot power any business concern.
Failure to realise and make concrete provisions to assist the
community in which we operate can have devastating consequences
in the long term.
