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Chike-Obi recommends N10tn capital base for NMRC

By BusinessNews Staff on November 22, 2014

In order for the Nigeria Mortgage Refinancing Company Plc (NMRC) to effectively play its role in the economy, the Managing Director/Chief Executive Officer of the Asset Management Corporation of Nigeria (AMCON), Mr. Mustapha Chike-obi has suggested a minimum capital base of N10 trillion for the agency.
The AMCON boss made this proposal while speaking at the Legal Business Summit 2014, titled: “Waking Up Dead Capital,” that was organised by Olisa Agbakoba & Associates in conjunction with BusinessDay Conferences in Lagos yesterday.
The NMRC’s capital base is presently $1 billion.
He argued that N10 trillion would enhance the liquidity position of the mortgage company.
Chike-obi explained that he had proposed that of the $10 trillion, the federal government guarantees 80 per cent of the mortgage, the banks 10 per cent and an insurance company guarantees 10 per cent.
He added: “When I first came to Nigeria as CEO of AMCON, I wrote a 17-page paper about mortgage financing. But let me make a few points about the NMRC, it requires enough capital.”
Furthermore, he identified the inability to enforce contracts as one of the biggest problems of mortgage financing in the country.
Chike-obi noted that when an institution forecloses on a mortgage, three things determine how much it gets out of the process.
He listed these to include the amount of equity in the business, the amount you recover from selling the property and the time to recover.
“If it takes you 10 years to go through the legal system in order to get your property sold, then you might have lost everything you have.

So, the issue of being able to foreclose quickly and efficiently on the property is probably the biggest problem for the banks.
“So a bank will not lend to any mortgage where the collateral is only the house because it could take them five to 10 years to get the money back. So, we have to deal with the legal issue.
“So, my solution was that an institution like AMCON that has extra-ordinary powers to recover, should be at the forefront of the mortgage revolution because AMCON has the powers to quickly foreclose and take assets,” he added.
On his part, a Senior Partner at Olisa Agbakoba & Associates, Dr. Olisa Agbakoba argued that the NMRC should be an intervention agency and not a primary player in the industry.
“I am not going to support a mortgage system that does not include the poor man. That is my view. We are too elitist. This (the NMRC) is an elitist programme and the point I am making is to exclude anybody who has an income level that can guarantee a comfortable house from the scheme.
“Given my background, i would like to see the mortgage system that is spread beyond the narrow Nigerian class,” Agbakoba maintained.
But the Group Managing Director/Chief Executive Officer, Access Bank Plc, Mr. Herbert Wigwe pointed out that the NMRC is still evolving.
“It only started recently even though the current model appears to be a learning model. However, what Chike-obi said is truly critical if we want to make progress.
“We need to revisit and find out how we can push it to the next level if we need to make sure that true lending happens,” Herbert stated.
However, the Managing Partner, Perchstone & Graeys, Mr. Osaro Eghobamien disagreed that government should guarantee mortgage.
In his response, the Chief Executive Officer of the NMRC, Mr. Sonnie Ayere explained that mortgage banks do not have the solid capital that commercial banks have.
“So, the model that had to be designed initially was the one to address the fact that there was no liquidity in the system. So we had to find long term money,” he said.

[ThisDay]

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