Economic Confidential, October, 2009

EDITORIAL SUITE

As credit crisis spreads: Sanusi wins a disciple

By Chijama Ogbu

For quite a while, the Central Bank of Nigeria (CBN), through the instrumentality of law enforcers, has been banging on the doors of debtors demanding immediate repayment of bad loans. The results of the efforts have been good: billions have been recovered and it is quite on course to recover more.

The bare-them-all-and-do them-in trump card played by the Governor of the CBN, Sanusi Lamido Sanusi, is already gaining disciples. The Managing Director/Chief Executive, Federal Mortgage Bank of Nigeria (FMBN), Abdulsalam Ahmed, is sold on the same strategy. Expose the obnoxious borrowers, hound them with the Economic and Financial Crimes Commission (EFCC) and they will melt like a cheap wax.

On September 22, a little over a month after the CBN shock therapy on the banking system, Ahmed is replicating it in the mortgage sub-sector of the financial system. The aggressive debt recovery approach adopted by the federal mortgage banker has already begun to bear fruits. By August, N2.093 billion had been snatched back from the errant borrowers.

Call a man like Ahmed a pushover, and you deserve a punch on the jaw. With calm measures that are beginning to hallmark his administration since he was appointed last April, it is becoming obvious that the Federal Mortgage chieftain is a man with a mission.

Just like the list published by the CBN last August, it never fails to surprise the calibre of Nigerians who have made owing badly their business. With big names as Okoya Thomas, Jakande, Gen. Magoro, Apostle Hayford Alile, listed on FMBN’s obnoxious list of debtors, it will be of little wonder why Nigeria has remained a foster baby at 49. If the up-and-highs, those many take as their lodestars, are the bad examples, where is the hope? For most Nigerians, money borrowed from government-owned financial institutions is more or less money cheaply got: not for repayment or to be repaid, if at all, at the borrower’s terms. That had been the mentality that crippled the several development financial institutions in the country, acting in no small ways as retardants to the country’s economic growth and development.

The same attitude applies to government funds generally. Simply put, to most people government’s money is for grabs.  This attitude arguably is one major reason why this country is one of the most miss-governed on the planet. When this mentality was imported into the banking system, the result is the devastating revelation of the horrendous financial misdeeds by otherwise revered Nigerians. They borrowed without intentions to payback as when due thereby putting depositors’ money in jeopardy.

Ahmed and his team have given debtor customers of the FMBN 21 days to pay up their debts or risk litigation. That ultimatum will expire on Monday, October 5. For the bank the publication of the debtors list became expedient after issuing several notices for them to pay without success. Besides, it sees the decision as being in line with the ongoing sanitisation of the banking industry.

By Ahmed’s calculation, the mortgage bank requires an immense recapitalisation to enable it  fulfil its mandate of providing the needed finance to meet the nation's housing needs. Approximately N40 billion (about $132million) capital base, for him, is what the bank requires in order to effectively carry out its operations. The bank currently operates with N5 billion (or $17 million) capital base, which FMBN chief executive believes is grossly inadequate in view of the magnitude of its mandate to bridge the housing finance gap in Nigeria, which runs into trillions of naira. The bank, with an authorised share capital of N5 billion is partly owned by the Federal Government (50 per cent), the Central Bank of Nigeria (30 per cent) and the Nigeria Social Insurance Trust Fund (20 per cent).

This correspondent believes that the time for the Federal Government to build to propel the development of a viable mortgage system is now. It should build on the promise already shown by Ahmed and his team. One of the basic needs of man is shelter and any responsible government should take steps to help its citizens attain affordable housing. Even in advanced countries like the United States of America, the sheltering their citizens is a major concern of government.

The poor state housing in the country has been attributed to a number of factors, which include lack of a thriving mortgage market; dearth of cheap loan-able funds to increase the existing housing stock on continuous basis; the requirement for governor's prior consent under the Land Use Act; the arrangements for foreclosure proceeding on real estate from general common law provisions, and the absence of specialised courts/tribunals that will fix the terms and timing of challenge/contestation of foreclosure.

Other challenges include: security realisation by banks; commencing the automation and eventual integration of all records and processes of local, state and Federal Government land and; reducing statutory cost structure of all land transactions.

Many of these issues are within the domain of government. First and foremost, the government should infuse more capital into FMBN to increase mortgage liquidity facilities, especially now that loans from banks appear to have dried up.