Nigerian housing sector responses to the COVID-19 pandemic: Nigeria Mortgage Refinance Company

Globally, the  COVID-19 pandemic is triggering cross-cutting responses from housing sector practitioners who face the challenge of instituting measures to manage the various risks and challenges associated with an evolving context.

On 30  March 2020, Nigeria commenced its lockdown, conforming with medical and scientific advice, for an initial period of fourteen days. The Nigerian Presidential Task Team on COVID-19 published an Implementation Guidance for Lockdown Policy to inform businesses and citizens.[1]  Citizens were asked to stay at home and practice social distancing, to stop the spread of the COVID-19 virus. As of 4 May, there was approved phased and gradual easing of lock-down measures in the Federal Capital Territory, Lagos and Ogun states. During this time, businesses across Nigeria used various platforms that include, but are not limited to, advertisements and social media to communicate about the COVID-19 pandemic with their clients and stakeholders.

The Nigeria Mortgage Refinance Company (NMRC) is one of many Nigerian businesses and organisations that have issued communications and taken specific action in response to the pandemic. On 24  March, the NMRC issued an official statement on COVID-19, and since then has shared healthcare tips and guidelines to clients and stakeholders via digital channels and social media platforms.[2]  The NMRC’s Business Continuity Plan includes measures taken to enhance the safety of employees, clients and stakeholders while ensuring continued service delivery.[3]  Employees have been encouraged to invest time in their personal and professional development during this time by attending free webinars and registering for online training platforms. NMRC is also collaborating with a multitude of stakeholders towards raising over US$2.7m for a Health Workers Fund for medical personnel posted to COVID-19 disease control centres across Nigeria.

In addition to these recent steps which NMRC has taken in response to the pandemic, since 2014, the NMRC has developed a number of important interventions to promote the creation of a strong legal framework and standards to support the activities of key players in the mortgage market; these initiatives are becoming all the more relevant in the current context of COVID-19. This includes the development of uniform underwriting standards for both the formal and informal sectors of the economy.[4] The key initiatives of NMRC and the Central Bank of Nigeria, another key role player in the affordable housing space, are shared below.

Advancing the adoption of the Model Mortgage Foreclosure Law in Nigeria

Initiated by NMRC, the Model Mortgage and Foreclosure Law (MMFL) calls for the creation of a state mortgage board as a single-window clearance mechanism to facilitate accessible and affordable mortgages for residents of the state. Over the last few years, significant progress with  the Model Mortgage Foreclosure Law has been achieved in states such as Lagos,Kaduna,Ogun, Delta, Kogi, Osun, Ekiti, Kwara, Edo, Nasarawa, Plateau and the Federal Capital Territory (through the Abuja Property Development Company). To increase liquidity in the mortgage market and promote a secondary market during and post COVID-19, the NMRC views the adoption of the Model Mortgage Foreclosure Law by all 36 states as a crucial prerequisite. During this COVID-19 pandemic, the NMRC in collaboration with other housing stakeholders is increasing its lobbying and advocacy efforts to engage all states to adopt this important legislation.

Central Bank of Nigeria’s proposed intervention for housing, mortgage industry over COVID-19

Across the continent, governments are using monetary policy tools at their disposal to combat the effects of coronavirus on the economy. On 15 April, the Central Bank of Nigeria announced that it would initiate funding interventions in four key sectors that include affordable housing. The interventions are detailed in a report titled: “Turning the COVID-19 tragedy into a new opportunity for Nigeria” by the CBN Governor, Mr. Godwin Emefiele. [5]

The CBN’s primary housing COVID-19 intervention is to create a fund that targets developers in support of housing construction[6]. With the fund, the CBN intends to:

  • Verify the financial capacities of eligible buyers before the developer can retrieve the funds. The verification will be done through the Bank Verification Number identification framework.
  • To assist the mortgage finance sub-sector by building the institutional capacity of land administration agencies at the local state level. This includes amendments to and implementation of investment friendly foreclosure laws; and to find ways to optimise the administration time for the issuance of land titles and reduce land documentation costs.

Stakeholders across Nigeria’s housing value chain are strategizing on measures to support the successful implementation of the fund. This involved stakeholders mobilising through webinars and social media platforms to provide comments and suggestions that would enable the efficacy of the proposal. Social media platforms have provided the platform for housing practitioners to reflect, engage and brainstorm on housing sector interventions needed in Nigeria during and post COVID-19. On its social media platform, the Housing Development Association of Nigeria (HDAN) has hosted relevant discussions around interventions required to support the housing sector. On the 22nd of April, HDAN convened a webinar titled “The Crisis Perspective: Affordable Housing post COVID 19” to examine trends and reshape the housing sector in Nigeria post COVID-19. [7] Mr. Femi Adewole (CEO of Family Homes Funds) was among a group of high level panelists partaking in the discussion. Echostone Nigeria hosted a Virtual Open House on mortgage financing on  23 April featuring the Nigeria Mortgage Refinancing Company CEO, Mr. Kehinde Ogundimu and  Federal Mortgage Bank of Nigeria , Mr. Ahmed Musa Dangiwa among other housing industry stakeholders. [8]

The CBN’s potential funding interventions are additional to initiatives implemented in recent years under the CBN’s Nigerian Housing Finance Programme to support mortgage market development in Nigeria.  These too, are useful in a COVID-19 economic context.  These include the proposed creation of the Mortgage Interest Draw Back Fund[9] (MIDF) and Nigerian Mortgage Guarantee Company (NMGC).[10] The MIDF was approved for establishment in 2018 as an intervention fund to catalyse and deepen the mortgage and housing finance market by the CBN’s Committee of Governors (COG). The NMGC is a Public-Private-Partnership designed to improve access to affordable housing finance in the country and currently under incubation with equity investment  and infrastructure support from NMRC.[11] In the context of COVID-19 and the CBN’s planned funding intervention for housing, the NMRC has provided commentary on the NMGC and investment for the accelerated implementation of the MIDF. This includes a  proposed budget of N100 billion (US$ 256.95 million) for the implementation of the MIDF and the disbursement of the funds to be processed using NMRC’s Mortgage Market System.[12] Finally, the NMRC recommend that the NMGC should be fully implemented within 12 months – that is, by Mid-2021. The CBN, as the apex bank of Nigeria, would need to encourage commercial banks to invest and participate in the implementation of both the Fund and the partnership.

The CBN is also engaging various housing stakeholders including the NMRC to provide commentary and suggestions for the practical implementation of the COVID-19 funding intervention for the housing and mortgage industry.[13] The NMRC has suggested the following strategy (including the MIDF and NMGC commentary above) for consideration by the CBN:[14]

  • The full implementation of the Electronic Mortgage Asset Registry System (EMARS) within 12 months. The EMARS is an “integrated IT system linking the federal and states’ land and mortgage assets registries, to make mortgage transactions online, simplified and accessible by stakeholders and to track encumbered mortgage assets used as collateral.”[15] The EMARS is an ongoing housing data development initiative by the NMRC with the support of the World Bank.
  • The NMRC suggests the use of the Global Standing Instruction (GSI) in case there is an overpayment (either by mistake or fraud) to any individual (developer) participating in the CBN’s primary housing COVID-19 intervention. The GSI is an initiative of the CBN which “stops existing bad debtors planning to borrow extra money from other financial institutions.”[16] The suggestion is premised on the fact that the GSI is linked with the Bank Verification Number (BVN) and would assist with the CBN’s verification process of potential offtakers.
  • There is also NMRC’s Mortgage Market System (MMS) which is a proprietary mortgage underwriting and mortgage transactions processing system that is currently integrated with the Nigeria Inter-Bank Settlement System (NIBSS) on Bank Verification Number. The NIBSS is a shared service infrastructure for facilitating inter-bank payments. NMRC suggests the use of the MMS for handling all housing-related transactions as part of the proposed housing intervention.

To align with the CBN Governor’s intervention report, the NMRC suggests the following allocation of funds by the CBN  on the demand and supply side of the housing value chain:

  • The allocation of N295 billion (US$ 758 million) for a housing demand intervention. NMRC in collaboration with States and Primary Mortgage Lenders would manage the creation of mortgages. In this suggestion, each of the 36 states would have access to an average of N 8Billion (US$20.5 million), with the condition that they pass the Model Mortgage and Foreclosure Law; and provide the offtakers that meet Uniform Underwriting Standard conditions. This incentive intends to streamline and encourage the adoption of the Mortgage and Foreclosure Law across all 36 states.
  • The allocation of N 200 billion (US$ 513.9million) to boost the supply of affordable housing units. This would be implemented by Family Homes Funds in collaboration with States and developers.
  • The allocation of N 5Billion (US$ 12.8 million) to establish a Special Purpose Vehicle (SPV) for a Robust Housing Finance Ecosystem. This would contribute to matching housing demand and supply through the collection and analysis of data that informs policy and decision-making. This would be an annual project on Nigeria’s Housing Finance Ecosystem.

The NMRC is scaling up and lobbying the implementation of its existing market interventions to respond to COVID-19. This would assist its mandate of ‘promoting homeownership while deepening the primary and secondary mortgage markets.’ In conclusion, it is anticipated that increased collaboration and synergy between the efforts of the public, private and NGO sectors in Nigeria will be critical for the implementation of the CBN’s funding intervention for affordable housing. COVID-19 presents an uncomfortable challenge for organisations and practitioners involved in Africa’s housing sector. However, there is an opportunity to forge new partnerships and design more innovative products that will benefit the majority of the housing population that need it the most.

We thank our AUHF member, the Nigeria Mortgage Refinance Company, for sharing information on how they are contributing to the ongoing conversations in Nigeria aimed at supporting the housing sector. We thank the NMRC for also sharing their protocols, policy documents, and posters that they have used in this period to communicate about the COVID-19 pandemic with their clients and stakeholders.  These documents are available on CAHF’s website, as well as on the NMRC page on the AUHF website. We encourage all AUHF members and housing practitioners to share their experiences and reactions to the COVID-19 pandemic.

For more information, please contact:

auhf@housingfinanceafrica.org

 

 

[1] Presidential Task on Covid-19 (2020). Implementation Guidance for Lockdown Policy. https://statehouse.gov.ng/wp-content/uploads/2020/04/PTF-COVID-19-Guidance-on-implementation-of-lockdown-policy-FINAL.docx-2.pdf

[2] Nigeria Mortgage Refinance Company (2020). NMRC’s Official Statement on Covid-19. 24 March 2020. https://www.linkedin.com/posts/nigeria-mortgage-refinance-coy_staysafenigeria-staysafesavelives-takeresponsibility-activity-6649949285368504320-9wQf (Accessed on 28 April 2020)

[3] Nigeria Mortgage Refinance Company (2020). NMRC’s Official Statement on Covid-19. 24 March 2020. https://nmrc.com.ng/nmrcs-official-statement-on-covid-19/ (Accessed on 28 April 2020)

[4] Nigeria Mortgage Refinance Company (2014). Uniform Writing Standards. https://nmrc.com.ng/resources/uniform-underwriting-standards/

[5] Godwin Emefiele (2020). Turning the Covid-19 tragedy into a new opportunity for Nigeria. Central Bank of Nigeria  https://www.cbn.gov.ng/Out/2020/CCD/EDITED–Turning%20Covid%20Tragedy%20into%20Opportunity%20for%20New%20Nigeriat–OpEd%20by%20Gov%20Godwin%20Emefiele–Tue14April2020%201.pdf  pg 22.

[6] Godwin Emefiele (2020). Turning the Covid-19 tragedy into a new opportunity for Nigeria. Central Bank of Nigeria  https://www.cbn.gov.ng/Out/2020/CCD/EDITED–Turning%20Covid%20Tragedy%20into%20Opportunity%20for%20New%20Nigeriat–OpEd%20by%20Gov%20Godwin%20Emefiele–Tue14April2020%201.pdf  pg 22.

[7] Housing Development Advocacy Network (2020). Post COVID-19: Housing Stakeholders Hold Webinar, Brainstorm On Way Forward . 23 April 2020.https://africahousingnews.com/2020/04/23/post-covid-19-housing-stakeholders-hold-webinar-brainstorm-on-way-forward/ (Accessed on 28 April 2020)

[8] Echostone Nigeria (2020). Peridot Parkland Open House. https://vimeo.com/411166362 (Accessed 28 April 2020)

[9]The Central Bank of Nigeria. Letter to All Banks. https://www.cbn.gov.ng/out/2018/fprd/october%20mgcs.pdf

[10] Punch (2019). FG to deepen mortgage industry with new guarantee company. 4 February 2019 https://punchng.com/fg-to-deepen-mortgage-industry-with-new-guarantee-company/. (Accessed 29 April 2020)

[11] Punch (2019). FG to deepen mortgage industry with new guarantee company. 4 February 2019 https://punchng.com/fg-to-deepen-mortgage-industry-with-new-guarantee-company/. (Accessed 29 April 2020)

[12] The NMRC has launched the Mortgage Market System (MMS) which “is a market tracking system that tracks activities in the mortgage market and integrates the entire housing market by covering construction finance, primary and secondary mortgage activities.”

[13] Email correspondence with the NMRC regarding their housing sector response to the COVID-19 Pandemic

[14] Email correspondence with the NMRC regarding their housing sector response to the COVID-19 Pandemic

[15] Financial System Strategy 2020. Mortgage Sector for FSS2020. https://www.fss2020.gov.ng/mortgage/ (Accessed 30 April 2020)

[16]Microfinance Arena (2019). Global Standing Instruction (GSI): Central Bank of Nigeria (CBN)’s New Tool to tackle multiple loans

https://microfinancearena.com/global-standing-instruction-gsi-central-bank-of-nigeria-cbn-new-tool/ (Accessed 30 April 2020)

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