Central Bank of Nigeria Unveils Guidelines for Proposed Mortgage Refinance Company

Posted by Don Okereke /  February 07, 2014 / in News

Central Bank of NigeriaIn one of my earlier essays, I hinted that plans were in the works by the Federal Government to introduce an encouraging mortgage regime that will be accessible to many Nigerians especially low income earners.

Sequel to the flagging off, of the newly inaugurated Mortgage Refinance Company (MRC), the Central Bank of Nigeria (CBN) has brainstormed a regulatory and supervisory framework that will guide the activities of the Mortgage Refinance Company. Let me quickly point out that the MRC is analogous to the United State's Fannie Mae. The establishment of the MRC promises to increase the liquidity within the mortgage sub-sector and availability of mortgage credit in Nigeria as well as reduce mortgage and related costs, and make residential housing more affordable. It is expected that the advent of the Nigeria Mortgage Refinance Company will 'help to extend maturities for Nigerian homebuyers to as much as 20 years, encouraging the building of 75,000 new homes annually and creating at least 300,000 Jobs.

According to the guidelines released by the CBN,

  1. A MRC shall commence operations with, and maintains at all times, a minimum paid up capital of five billion naira.
  2. A MRC should maintain at all times, a minimum ratio of core capital to total assets (leverage ratio) of not less than 5%.
  3. The tier 1 capital of the company should consist of paid up capital and reserves plus retained earnings, statutory reserves, other reserves and published current earnings, less goodwill and other intangible assets and identified losses, or as otherwise defined by the Central Bank for licensed financial institutions.
  4. The MRC shall maintain at all times, a minimum ratio of qualifying capital to the value of its risk-weighted assets of not less than 10%. Assets risk weights to be used for this computation shall be those prescribed by the CBN for licensed banks.
  5. The MRC shall not be allowed to grant consumer or commercial loans, originate primary mortgage loans, accept, demand, savings and time deposits, or any type of deposits; finance real estate construction, undertake estate agency of facilities management services for real estate development and manage pension funds or schemes.

The CBN asserts that the requirements, procedures and criteria to be adopted in granting an operating license to a MRC shall be akin to those specified for Banks under the Banks and other Financial Institutions Act, CAP B3, Laws of the Federation of Nigeria, 2004 (herein after referred to as "BOFIA") and any other regulations issued by the CBN.

Things are really looking up for prospective homeowners in Nigeria.

 

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