NIGERIA: Govt must intervene to crash interest rate on mortgages – Experts

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THE rate of poverty in Nigeria is unarguably very high. In fact, the Bureau of Statistics in its latest report, estimates that a whopping 102 million Nigerians fall within the poverty bracket. The question is,  how many of these less privileged Nigerians can borrow money from the bank at a 20 percent interest rate to either buy or build their own houses?

Against this backdrop, built environment experts are now campaigning for the direct intervention of the Federal Government in the mortgage sector so that interest rate on mortgage loans would not exceed a single digit.

Specifically, the Nigerian Institution of Estate Surveyors and Valuers NIESV, which has been in the vanguard of calls for a reform of the nation’s land tenure system, has  joined the fray in campaigning for a reform of the country’s mortgage finance system.

Its president, Mr. Emeka Eleh said the reform has become very imperative in view of its multiplier effects on the economy.

“The Government must reform the mortgage finance system to ensure that mortgages are available at single digit interest rates. It would require a lot of shouting and that is what we want to champion from this March. We have been saying that Government has intervened in virtually every sector -the banking sector, SMEs, aviation, agriculture is a permanent intervention, people say the government even intervened in Nollywwod or whatever, so why can’t government intervene in housing.

“The American government even intervened in housing; there are interventions in housing all over the world. Because of the multiplier effects of investments in housing, the benefits to the government are enormous because if you invest in housing and employment is created and the economy gets robust and people can build their houses, whatever subsidy government has given, can be gotten back through increase in economic activities and betterment of the lives of the people,” he said.

One how to bring down interest rate to a single digit, the NIESV President said government should use the same model of intervention adopted for small and medium enterprises, SMEs.

His words: “Our view is that government must intervene directly to bring down mortgage interest rates. The only way of having a single interest rate is by government’s direct intervention. Look at the way government funds SMEs. They will give you loan at maybe nine percent through a bank. The bank will now go to the Bank of Industry and the Bank of Industry will buy back the loan. If the bank gives you the loan at six percent, they (BOI) will buy back the loan at nine percent and the bank makes a spread of three percent. What it does is that people are able to borrow money under the SME scheme all over the country, not necessarily through BOI”.

Eleh insisted that the Federal Mortgage Bank should play the same type of role BOI is playing. “We are saying that the Federal Mortgage Bank , FMBN should play a strong role in fast-tracking liquidity for the mortgage industry. Federal Mortgage Bank has no business lending to anybody, whether he is a developer or a private person. Their role should be to create an environment for liquidity to exist in the market and we say that one way of doing so is for government to intervene directly in such a way that mortgage funds would be available and would be given out to Nigerians through the retail banks.

“When I say retail banks, I mean First Bank, UBA etc. They all have mortgage units. I am not discountenancing the Primary Mortgage Institutions, PMIs; what I am saying is that they (mortgages) should also be available to be given out through retail banks. That way, it is available all over the country. Let me give you a classic example, If the government comes out with N500 billion for investment in housing, they can say this money would be available through the Federal Mortgage Bank. If a bank gives out mortgages to Mr. A at six percent, they can sell the same mortgage to FMBN at nine percent.

“So, the individual is paying six percent while the bank will earn three percent. What it does is that the mortgages will be available all over the country. We know the effect of investment in housing on the economy, it means that employment will be created when more houses are built, it means that local governments will earn more money because people will pay tenement rates, it means that home ownership will improve and we are able to meet our MDG goals.

“Housing also has a way of boosting the macro-economy. What we are saying is that the benefits of what we are talking about cannot be quantified; of course the government is not losing because the money will come back because the banks don’t give loans to those they don’t know. The multiplier effects of that kind of investment in the sector which would be available all over the country, will be very immense for the country,” he posited.

Corroborating the views canvassed by the NIESV President, a Lagos-based construction cost expert, Mr. Obafemi Onashile called on the government to set aside an intervention or subsidy fund to enable banks give mortgages. Onashile who is a former Chairman of the Lagos State chapter of the Nigerian Institute of Quantity Surveyors, NIQS, explained that this is the practice all over the world.

Onashile who noted that mortgage interest rates currently oscillate between 14 and 15 percent declared: “Interest rate on mortgage loans should not exceed seven percent; if it does it becomes nonsensical and unattainable”.

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