FMBN: Closing Nigeria’s Vast Housing Gap
Established in 1956, the Federal Mortgage Bank of Nigeria (FMBN) has the primary objective of providing affordable housing finance for Nigerians. Despite the huge housing deficit in the country, the bank is steadily fulfilling its mandate, writes Emmanuel Addeh
Nigeria’s Housing Gap
Nigeria, Africa’s largest nation, faces a significant housing challenge, characterised by a huge deficit in housing supply, inadequate infrastructure, and unaffordable housing options for many citizens.
With the debate surrounding the country’s actual housing gap continuing, this recently prompted the Ministry of Housing and Urban Development to set up a panel to establish the actual number. But for now, Nigeria’s housing deficit is put at circa 17 million to 20 million units, with an annual demand of roughly 700,000 to 1 million new housing units.
This challenge has not been made easier by the country’s surging population, which is now approximately 230 million, and is projected to reach around 400 million by 2050, further exacerbating the housing de cit.
Coupled with these is the fact that housing prices are mostly out of reach for many Nigerians, with limited access to mortgage finance, inadequate infrastructure as well as poor urban planning, often characterised by a lack of coordination and insufficient public spaces.
These factors have various impacts, including implications like reduced economic growth, increased poverty, and slumping productivity. The housing challenge also has social implications, including increased homelessness, overcrowding, and social unrest.
Key Objectives
Among the major objectives of setting up the FMBN as spelt out in its enabling Act and other related legislations, are to provide long- term credit facilities to mortgage institutions in Nigeria as well as encourage the emergence and promotion of the growth of viable primary and secondary mortgage institutions to service the need of housing delivery.
Besides, the FMBN which metamorphosed from the Nigerian Building Society (NBS) in 1973 has the mandate of mobilising both domestic and offshore funds into the housing sector, linking the capital market with the housing industry as well as administering the National Housing Fund (NHF).
Furthermore, the FMBN provides mortgage finance to individuals, cooperatives, and corporate bodies for the purpose of acquiring, constructing, or renovating residential properties. It also has the job of promoting homeownership by providing liquidity, promoting standardisation, and enhancing the overall efficiency of the mortgage market.
Challenges
Like every organisation, the FMBN despite its efforts to provide affordable housing finance to Nigerians, faces several challenges and like all financial institutions, is impacted by the vissicitudes of economic instability, including inflation and exchange rate fluctuations.
Similarly, as an institution operating in a highly regulated environment, changes in regulations can impact its operations and challenges in the housing market, including a shortage of affordable housing and ability to provide housing finance.
In addition, FMBN faces challenges with non- performing loans, which impacts its pro stability and ability to provide housing finance as well as challenges in recovering loans from defaulting borrowers.
Because of the nature of its operations, the FMBN needs to interact closely with its various stakeholders. Sometimes, coordinating with these stakeholders, including state governments, to provide housing finance, remains an issue.
But despite the hurdles, the FMBN says it is collaborating with key stakeholders to expand its reach and access new resources.
Shehu Osidi’s Leadership
Shehu Osidi’s leadership at the FMBN has been marked by significant achievements. As the Managing Director/Chief Executive, Osidi has been instrumental in driving the bank’s vision of providing affordable housing finance to Nigerians. Like a strategist, he has gone ahead untangling all the issues and setting forth to solve them.
Less than a year since his appointment, Osidi is showing a clear understanding of the challenge, engaging and partnering with critical stakeholders and leading a transformation at the bank. He has since initiated and pursued crucial reforms to strengthen the bank’s capacity to perform, optimise its processes, enhance customer service delivery, and generally increase its impact on Nigerians. Others include:
Improving Corporate Governance
Osidi has also prioritised improving corporate governance at the FMBN. He has implemented various reforms aimed at strengthening the bank’s governance structure and promoting transparency and accountability.
One of his notable achievements in this area is the establishment of a robust risk management framework that ensures the bank’s operations are aligned with international best practices.
Delivering Affordable Housing
The FMBN is the only institution in Nigeria that offers housing loans and mortgages at single-digit interest rates, mostly between 6-7 per cent, while also offering a repayment tenor of up to 30 years.
It is the institution mandated to oversee the NHF, a contributory scheme set up to provide a pool of funds through monthly contributions from Nigerian workers. This includes economically-active Nigerians from both the public and private, formal and informal sectors.
Once an individual has contributed 2.5 per cent of their monthly income to the scheme for up to six months, such an individual qualifies to apply for a mortgage loan of up to N50 million depending on affordability, and for up to 30 years, depending on age or number of years left before their 60th birthday.
Some others are: NHF Mortgage Loan, Individual Construction Loan, Rent-to-Own, Home Renovation Loan (HRL), Estate Development Loan (EDL), Cooperative Housing Development Loan (CHDL), as well as the soon-to-be-launched Rental Assistance Loan, and NHF Diaspora Mortgage Loan.
As of September 2024, barely seven months after Osidi’s takeover, the bank had delivered 1,033 housing units out of the 39,425 recorded since the FMBN’s inception.
Similarly, a total of N10.477 billion in NHF refunds have been recorded within this short period of Osidi’s administration. Total loans disbursed within this period is placed at N28.328 billion out of a total of N453.954 billion disbursed since the bank’s inception. The bank boasts 6,853 ongoing housing projects in 106 locations across the country, with a potential of creating 171,325 jobs for Nigeria’s teeming unemployed populations.
Leveraging Technology
The importance of technology in driving business growth in today’s fast-paced business landscape cannot be overstated. Aware of this fact, the Osidi-led FMBN, said it had at the top of its seven-point agenda, “deepening process automation” to enable it stay ahead of the business curve.
To this end, the bank says it has been working on concluding the deployment of the Core Banking Application to usher in a new era of automated service delivery to its corporate and individual customers.
By deepening process automation, the bank streamlines operations, reduces turnaround times, and improves service delivery. This will enable the bank to respond more swiftly to market demands and better serve its customers, ultimately repositioning FMBN as a leader in the mortgage finance industry.
Enhancing Public/Private Partnership
The FMBN has continued to leverage and expand strategic partnerships with key stakeholders, both within the public and private sectors. By building and nurturing these partnerships, the bank leverages synergies, accesses new resources, and expands its reach.
As a direct result of these engagements, the bank was able to recover N12 billion out of the N19 billion trapped 40 per cent deductions from NHF by the Office of the Accountant General of the Federation (OAGF) through the intervention of the Minister of Finance and Coordinating Minister of the Economy, Wale Edun.
Also, as part of these strategic engagements, the bank said it has concluded arrangements to sign a Memorandum of Understanding (MoU) with Shelter Afrique Development Bank to explore lines of funding for its new initiative like rental housing and the development of student hostels.
Additionally, the bank is strategically engaging with the International Union for Housing Finance (IUHF) with a view to improving access to mortgage financing in Nigeria.
Customer Service Delivery
FMBN notes that under the leadership of Osidi, it has reinforced its commitment to delivering exceptional customer service. With customer- centricity as a pillar of the bank’s core values, the current management has consistently emphasised professionalism and a customer-first approach.
One such measure, it said, is the introduction of mystery shopping as a strategic tool to improve customer service delivery and enhance customer experience and satisfaction. This initiative is expected to ensure that staff conducts are properly monitored and a culture of excellent service delivery is enthroned. For optimal results, the management says it consistently encourages employees to uphold professional and courteous behaviour, supported by a determination to enforce strict consequences for any unprofessional actions.
Innovative Products
The FMBN has demonstrated this recently with the introduction of the Rental Assistance Loan and the Diaspora Mortgage Loan.
The FMBN Rental Assistance Loan was introduced in response to the need to engage a more inclusive and equitable housing finance system for Nigerians and to alleviate the financial burden of rental payments for eligible Nigerians.
This micro-housing product has been crafted to ensure accessibility, affordability and flexibility, making it a viable solution for many who have found it challenging to secure housing finance through other traditional financial arrangements.
Similarly, in order to cater to the housing needs of Nigerians living outside the shores of the country, the bank, in collaboration with the Nigerians in Diaspora Commission (NiDCOM), introduced the NHF Diaspora Mortgage Loan.
The Diaspora Mortgage Loan is designed in such a way that a Nigerian subscriber living abroad, who has contributed to the NHF for a period of at least six months, can access up to N50 million to buy or build their own home in Nigeria.
N100bn Guarantee
Driven by the vision to provide affordable housing for Nigerians of average income status, the FMBN recently provided N100 billion in off-taker guarantee in support of the Renewed Hope Cities and Estates Programme of the Federal Ministry of Housing and Urban Development.
This is in addition to the bank’s commitment to provide mortgage loans to the off-takers upon completion of the houses, which would be spread across the nation.
Reduction of Non-performing Loans
To reduce the bank’s Non-Performing Loans (NPLs) which rose to a disturbing point, thereby hindering the bank’s capacity to effectively deliver on its mandate of providing access to affordable mortgages, the FMBN inaugurated seven Loan Recovery Task Teams to drive the recovery of its delinquent loans across the country’s six geopolitical zones and the Federal Capital Territory (FCT).
This was a significant milestone in the bank’s ongoing efforts at enhancing its financial stability and operational efficiency, given that it would ensure the availability of funds for disbursement to new beneficiaries, while maintaining the integrity of the Bank’s lending operations.
Inaugurated about six months back, the loan recovery task teams have successfully recovered N5.7 billion as disclosed by Osidi recently. By implication, N5.7 billion that was earlier tied down somewhere has been released within this period for the benefit of Nigerians desiring access to mortgages.
Employee Devt
The CEO has also emphasised the importance of employee development and capacity building at FMBN. He has implemented various training programs aimed at enhancing the skills and knowledge of the bank’s employees.
Under his leadership, FMBN has also established partnerships with various international organizations, including the World Bank and the International Finance Corporation (IFC), to provide training and capacity-building programmes for the bank’s employees.
Future Prospects
The bank is poised to continue its transformative journey, driven by Osidi’s clear understanding of the challenges facing the housing sector.
Coupled with its strategic initiatives and commitment to customer-centricity, the FMBN is well-positioned to make a significant impact in addressing Nigeria’s housing deficit.
