CHAPTER ONE

1.0       INTRODUCTION

Shelter is universally accepted as a basic and second most essential human need coming next to food. However, housing in all ramifications is more than mere shelter since it embraces all the social services and utilities that goes to make a community or neighbourhood a liveable environment. In Nigeria, the problems of housing are enormous and complex, and effective solutions to them are yet to be found. The search however continues. It is in the process of this search that Federal Mortgage Bank of Nigeria was established under FMBN Decree Number 7 of 1977 as fully owned Federal Government Housing Development Finance agency. The Nigerian Building Society (NDS), the forerunner of Federal Mortgage Bank of Nigeria was established in 1956. Inheriting the assets and liabilities of the Nigerian Building society, FMBN had commenced operations on July 1st, 1977 as a fully owned Federal Government agency for housing finance.

For a long time, the Federal Mortgage Bank of Nigeria remained largely the major provider of long-term funds in the housing finance sector. The role of the commercial and Merchant Banks in this sector remained mainly peripheral as they find lending long-term unprofitable because of the short-term source of their funds. Specifically, the bank is mandated by Decree No. 7 of 1977 to: -

-                      Provide long-term credits to individuals, estate developers and to mortgage institutions for housing and property development.

                        -           Encourage and provide the establishment of mortgage institutions as well as supervise and control their activities; the legal framework is prescribed in Decree No. 53/89

            -           To mobilize savings and financial assets

                        -           Assist the operations of companies engaged in the production of building materials.

                        -           Undertake and support applied research to improve its activities and the operations of the sector.

-                      Provide technical assistance services on the various aspects of the sector.

The National Housing Policy, which was launched by the President of the Federal Republic of Nigeria in 1991, recognises housing finance as a centrepiece of any credible housing service. It will be recalled that the National Housing Policy itself was a subject of National debate from 1984 to 1986. The debate became necessary to ensure that wide range of opinions was taking into considerations in fashioning out the policy.

The National housing Fund was established by Decree No. 3 of  1992 to facilitate the continuous flow of low-cost funds for long-term investment in housing for benefits of all Nigerians. The fund is to be managed and administrated by Federal Mortgage Bank of Nigeria essentially to provide long term housing loan to individuals through wholesale lending to primary mortgage institutions.

                        -           To any Nigerian earning an income of =N=3000.00 and above per annum should contribute 2.5% of his or her basic monthly salary or income to the fund.

                        -           If you are self employed or you own your own business, whether as trader, Professional or Businessperson, etc you are expected to contribute to the fund.

In addition, commercial and merchant banks, Insurance companies and the Federal Government will also contribute to the fund. All potential contributors to the fund are to be registered by FMBN. A registration form will be issued by FMBN to an employee through his/her employer. Each employer is to be similarly registered to facilitate the deduction and remittance of their contributions. A participation number will be allocated to you and you should remain the same, even when you change your place of employment. If you are self-employed, you are also expected to register. You are to collect a form from any branch of FMBN. Your employee (if any) should be equally registered. Following your registration with the funds, your employer is expected to deduct 2.5% from your salary monthly and remit to FMBN. If you are self-employed, you pay directly to any of the FMBN. A passbook shall be issued to subscribers to record his monthly contributions. This passbook must be securely kept as it will be required for every transaction, and a yearly statement of one’s contribution shall be sent to him.

The pool of contribution is to provide housing loans for every Nigerian at relatively low rate of interest. To borrow from the fund, you must be a contributor. The housing loan will assist either to buy or build or improve one’s house. Should contributors want to borrow from the fund, all he needs to do is to apply to any mortgage institution, where he will receive further information and assistance. The interest rate applicable at the time you take the loan will remain fixed until the loan is fully repaid; and the repayment period is over a period of twenty-five years. Whether the contributor borrows or not from the fund, his contribution shall attract interest. Refund of contribution shall be made with the accrued interest to the contributor when he is sixty years old or retired or can no longer continue in employment due to ill health. It behaves greatly to understand that the promulgation of the mortgage institutions Decree of 1989 (Decree 53/89) provides the legal framework guiding the operations of primary mortgage institutions in Nigeria. The Decree empowers every institution to:

                        -           Grant loan and advance to any person for the improvement of or extension of a dwelling house;

                        -           Accept savings and deposits from the public a87nd to pay interest thereon. By its establishment, the FMBN is divested of its retail banking and mortgage operations so that the FMBN could concentrate on its rightful role as the nations’ apex mortgage lending agency.

The primary functions of the Federal Mortgage Finance Limited (FMFL) are: -

                        -           To ensure equitable distribution of mortgage lending activities all over the country.

                        -           To operate as an efficient and effective mortgage institution which will be a role model for the private mortgage institutions.

                        -           To dictate the level and pace of growth of mortgage finance industry and;

-                      To minimise avoidable and fraudulent losses, and ensure a timely and adequate loan recovery performance, in order to create opportunities for structured expansion in the provision of housing finance.

1.1       AIMS AND OBJECTIVES OF THE STUDY

The objectives of this study are to be enumerated below: -

                        -           Review of the operational financial intermediaries in housing sector especially Federal Mortgage Finance Limited by taking Maiduguri Branch as a case study.

                        -           Identify the problems impairing its effective performance, and to re-examine some of the fundamental principles and objectives of its existence.

                        -           To proffer solutions in the light of changing sceneries under which it has been compelled to operate.

                        -           Cast a forward glance at the future of the institution and sector in which it operates.

1.2       RELEVANCE OF THE STUDY

The importance of the study lies on the Federal Government of Nigeria ‘s recognition of the imperative to divest the old Federal Mortgage Cooperation; and subsequently established the Federal Mortgage Finance Limited with the corporate mission of providing responsive and credible housing Finance service that will facilitate housing delivery to all segments of the Nigerian population. Therefore it is apposite to mention here that this research work has the following as its importance: -

                        -           To what extent the Federal Mortgage Finance Limited ensure equitable distribution of mortgage lending activities.

                        -           Has the institution been able to operate as an efficient and effective mortgage institution that would qualify it be leader of other private primary mortgage institutions.

                        -           Has it been able to dictate the level and pace of growth of mortgage finance Industry came to create opportunities for structure expansion in the provision of housing finances.

1.3       RESEARCH METHODOLOGY

In carrying out this research work, three methods were used to collect data. Data collected from customers and staffs of Federal Mortgage Finance Limited of Maiduguri branch, questionnaire was distributed to customers and members of staff of (FMFL) under the supervision of Branch Mortgage Officer.

The second method use is personal interview with the Bank Mortgagors officer; Branch Manager Maiduguri, Branch Solicitor and Branch Estate Surveyor. The third method is the consultation with “Mortgage News” Quarterly in-house journal of the Federal Mortgage Finance Limited Volume 1 number 1 and 2, other congenial texts were consulted to put this research work in good perspective.