Affordable Housing: CBN Addressing High Mortgage Interest Rate, Other Issues

Central Bank of Nigeria (CBN) Deputy Director and Director of FMBN, Adedeji Adesemoye has revealed the several interventions by the apex financial institution in increasing home ownership in Nigeria through regulations, funding, mortgages, policy frameworks, partnerships and many more initiatives.

While speaking to Africa Housing News on Thursday in Abuja at the opening ceremony of the training on emerging trends in real estate development in Nigeria organised by the real estate developers association of Nigeria (REDAN), Adesemoye said the bank is currently addressing the country’s high level of inflation which has a direct effect on mortgages.

‘’The National Bureau of Statistics has given an inflation figure of about 11.2, and for you to encourage real investment you must be able to have a rate that is above the inflation. That floor rate is already set by monetary policy statutory committee responsible for this.

‘’However, the CBN and the bankers committee are making interventions in this area. They have been able to put money together from the profit of the bank in order to be able to set up what we call mortgage interest drawback. So if you get mortgage loan at 16.5 in the bank today, that loan can actually be drawn back by 40% so that you will be paying 9.9% or below. So it comes back to single digit.

‘’That is to make those who wants to raise money particularly in the area where we have the gap, that is the people who wants to raise just about 5 million and below where we have the deficit, they can raise money today and be able to pay at that single digit than 9%.’’

On the contributions of CBN to ensuring affordable housing in Nigeria, he said that the contribution of the apex bank has been growing over the years.

‘’One of the components of this is the fact that CBN is partnering with key partners in the industry like NMRC for the creation of Nigeria Mortgage Guarantee Company, which is addressing the creditor.

‘’In that particular program, also as part of the advocacy, CBN collaborated with the industry players including NMRC in developing the mortgage model and foreclosure act that focuses on providing enabling legal framework for states to be able to use the opportunity given to them in the constitution as trustees of the lands in the states.

‘’This is also to enable developers to have access to land. That enables mortgages that have been created to be foreclosed if it is not performing. That provides title to people who wants to build their home and use this particular land as a security to get mortgage in the financial institutions.

‘’We want the mortgage model and foreclosure act to go through legislative processes in the states to be passed into law. Today, they are active in states like Lagos, Kaduna, and Ogun, while it is on the way in many other states including Cross-River and Plateau.

‘’We will be working with the Nigeria Governors’ forum to see this is scaled up because for mortgage to thrive we need enabling legal framework that everybody will recognise. It will enable states to have electronic lands registry system and a working mortgage system, so that it will be easy to conduct searches and then when there is need for banks to realise the collateral for non-performing loans, it will be timely.

‘’We need to streamline all these approval processes. And the fee that is being spent needs to be at the rate than you can do business with,’’ he said.

The latest CBN intervention according to him is the mortgage interest drawback scheme which the CBN governor introduced to bring the current double digit interest rate on mortgages to a single digit. This, he said, is in collaboration with the bankers committee.