Gimba Ya’u Kumo is the Managing Director/Chief Executive, Federal Mortgage Bank of Nigeria (FMBN). He spoke with journalists on measures being put in place so far to ameliorate the housing challenges in the country and how the sector can be leveraged on to develop the capital market.
A lot of efforts have been made towards recapitalizing the bank. How soon will that happen?
Very soon, of course, timing is very essential, but there are few issues now. You know we are in politics, so government will concentrate more in that area now, but we have been promised as soon as possible.
What amount are you looking at?
What we have requested for is N250 billion. But at the moment, there are a lot of competing needs, security, infrastructure but I know that they will do it.
How would you describe the mortgage industry in Nigeria at the moment?
The mortgage industry in Nigeria is just starting if you look at the size of our contribution to the GDP its less than 1per cent but my target before I leave here is that we should be able to contribute at least 15per cent.That is why we are putting a lot of issues on ground to be able to drive this process. And how do you do that? If you look at the National Housing Fund NHF that we are managing, out of the 170 million population less than 1per cent are the one contributing so we said this is not good, how do we reach the other segment of the society that are not in formal employment.
To what extent have you been able to resolve the issue of NHF concerning some of the states that pulled out?
As at today, we have only six states that are not in NHF and most of those states, particularly Lagos, what happened is that they have formed co-operative societies on their own. But they have registered with us, so they are contributing indirectly to NHF. The other states, we are talking to them and as soon as possible we will see what we can put on the ground. This is because workers want to see actual action; they want to see the mortgages created. This is what we are trying to do in all the 36 states, to be able to build the houses, create the mortgages and at the end of the day we will be able to convince them. But I can assure you that in the next 10 to 11 months all the states will be back.
Within the next four years how many mortgages are you looking at creating?
It depends on availability of funds, but I hope to create based on the memorandum of understanding with NLC, TUC and NECA, we should be able to do at least four million
Developers are not really giving Nigerians affordable houses. What are the problems?
The houses are expensive in the sense that cost of materials for constructing these houses are also high. So, there is need for reduction in the cost of cement, there is need for a reduction in the cost of iron rod and other accessories that will make up the houses. Once that is done, I think it will go a long way in reducing the cost of the houses.
These are the issues we are trying to address, it has been an area that I have laid so much emphasis and concern because if you look at the earning of Nigerians particularly somebody who earns N18, 000. N18, 000 today is not up to 100 dollars going by today’s exchange rate. That person is not in a position to buy even one bedroom apartment going by the present structure. So, what we are trying to do, we are working together with the ministry to see if we can have discount on some of the inputs that make up the house like discount on cement, discount on rods for construction and also hat we are trying to do on our own is to introduce new building methods that will now reduce the cost of houses.
We just came back from Thailand with officials of FCDA, Ministry of Lands, and Housing and Urban Development. After the Tsunami, they put commissioned line seven universities to do research on affordable and sustainable housing. We have seen the development in that country. We took sand from Kuje here and they took it to three of the universities it was discovered that it is even 17 times better than their own sand. So they are producing some blocks for us with less than 5 per cent cement content. So if we do that, that issue of affordability will be addressed. Because apart from addressing the issue of affordability, we want to address that issue of delivering quality houses. This is because most of the houses particularly in Abuja today for which some of the mortgages have been created; you will end up paying for a mortgage for 20, 25 years. How are we sure that these houses will also up to that time? We want to check that aspect because for us to be able to give you mortgage for a particular tenor, we have to make sure that the house will be able to stand within that period. With the support of Nigerians, these are some of the things we want to do.
Accessibility to land is still an issue, how do you plan to tackle it?
I agree with you, but we have put a MoU in place whereby we are working with various state ministries of land and we are also working with the various labour organizations for the land to either be allocated to us as a government bank or to be allocated to labour directly. Why we are doing that is to reduce the cost because if you allocate it to the developer directly he will put any cost he likes on the property. And we insist that particular government that is allocating whether it is a state, federal of even a local government that the land should be allocated freely particularly on the houses that we are building for NHF contributors. I am happy to say that as at today in all the six zones where we have pilot projects we are doing on the ministerial pilot scheme all the land that have been given to us is donated free by the various state governments. I want to call on other state governments that if we approach them or if the labor leaders approach them, they should please make land available to us.
You just got re-appointment for a second time in office, how do you intend to improve the fortunes of the bank?
We will work to continue to provide quality and affordable houses to Nigeria and strive to improve the bank’s balance sheet to modify its standing as a financial institution
Our strategy will involve developing pro-active and effective strategies to attract offshore funding for affordable housing to Nigerians as well as improving service delivery to NHF contributors across the country. We also plan to look at improvement of members of staff welfare across board to ensure a well motivated workforce and profitable operations.
The new management will also ensure the completion of ongoing housing estate projects under the Ministerial Pilot Housing Scheme nationwide and the completion of the Goodluck Jonathan Legacy Estate in Kaba District in the Federal Capital Territory, FCT will be vigorously pursued.
I also want to assure the Federal Government and other stakeholders in the sector, of our determination to sustain the cordial relationship we enjoyed in the previous years.
I use this opportunity to request that the same support and cooperation enjoyed by the previous executive management team be equally extended to the present team. As a returning member of the team, I have had the privilege of experiencing the various challenges facing the FMBN as well as the housing sector in general.
We have tried to improve on the little we find on ground, people say we did well but we are just starting and we hope within the next few months we will be able to do more so that the results of the efforts will be realized.
We have set an agenda for ourselves and chief among them is the recapitalization of the bank. We have made substantial progress on that, in the next few weeks we will see results on the table. We will work hard to continue to satisfy the yearnings of Nigerian workers.
Do you think a single digit mortgage rate can be feasibly sustained given available economic indices?
Yes, our rate have always been single digit, our estate development loan or construction loan is 10 per cent, our mortgages are at six per cent and we also intend to extend that same rate to the informal sector so that we can make the houses affordable to them. Nigerians cannot afford any anything above single digit because the average income is very low that’s why we are providing a buffer whereby they are able to pay.
Like we took the minimum wage of N18, 000 as a base, with that you can be able to do a mortgage of N450 monthly so this is the minimum the informal sector beneficiaries are expected to pay but this will be difficult for some of them so we are looking at a subsidy.
Is there any way that PMIs can be prevailed upon to charge single digit interest rates?
If you say government, you are talking I terms of agencies that delivers mortgages. On the government side for now it is only FMBN that is really delivering mortgage. And our mortgage is single digit, six percent. That is what President Goodluck Jonathan has told us and that is what we are doing. We charge our mortgage at the rate of six per cent on a long tenure basis- 15, 20 and even up to 35 years.