CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

The Nigeria building society (N.B.S) was established in 1956 as a federal savings scheme for members of the public. Under the popular saving scheme, the saver was required to deposit in the account on initial sum of N5 (five naira) at opening. The save may subsequently deposit in the account as much as he can from time to time.

The popular saver received interest of four percent on the account and could draw up to four hundred naira (N400.) per amount. Larger drawing would require a month notice to the society.

Other special packagers were equally handled by the Nigeria society. One important service rendered by the NBS was home purchase mortgage loans.

Under the loan scheme the NBS enabled Nigerians to acquire houses with loans payable over many years up to maximum of twenty (20) years. Applicants who benefits from the loan were expected to immediately bear a small portion of the interest was spread in such a way that the beneficiary completes the payment in not later than the age of 55 years. Repayment was usually in Monthly installments.

In 1977, the Nigeria building society was reconstituted and renamed the federal mortgage Bank of Nigeria (FMBN). The duty of the federal mortgages bank as the sole institution at the federal level for encouraging the flow of funds from various sources to the housing industry through the primary mortgage instructions (PMIs)

The FMBN was set up with an authorized and paid-up capital of N150 million.       

BACKGROUND INFORMATION OF FEDERAL MORTGAGE BANK OF NIGERIA

The federal mortgage bank of Nigeria (FMBN) was established in 1956, known then as the Nigeria building society (NBS), a joint venture of the common wealth development corporation and the federal and Eastern Government of Nigeria.

Following the introduction of the indigenization policy, the federal government, by indigenization Act 1973, under took 100 percent ownership acquisition of the NBS and consequently renamed it the federal mortgage banks of Nigeria (FMBN).

The Bank operates as an effective vehicle for increasing the mobilization of long-term funds lending volume and expansion of mortgage lending services to all segments of the Nigeria population.

The FMB started the management and administration of the contributory savings scheme known as the national housing fund (NHF) established by Act 3 of 1992.

The NHF is a pool that mobilizes long-term funds from Nigeria workers, banks, insurance companies and the federal government to advance loans at soft interest rates to its contributors.

 In 1994, the federal mortgage Bank of Nigeria with the promulgation of the FMBN Act 82 (1993) and the mortgage institutions Act 53 (1989) was accorded the status of the Apex mortgage institution and thus ceded its retail function to an autonomous company, federal Mortgage finance limited (FMFL) which was carved out of the FMBN, itself fully owned by the federal government of Nigeria.

Under the reform of the housing sector based of the FGS 2002/2006 National policy on Housing and Urban development the FMBN was restructured into a federal government sponsored enterprise (FGSE) with more focus on secondary mortgage and capital market functions. It plays the critical role of developing a robust mortgage finance on secondary mortgage and capital market functions. It plays the critical role of developing a robust mortgage finance system for the country.

To meet its mandate, the FMBN has shifted operation, emphasis to expand its functions from only social housing on-lending under the NHF to include commercial no-lending for housing commercial mortgage refinancing mortgage purchasing and ware housing and mortgage-backed securitization.

Under this mandate FMBN finances mortgages created by primary mortgage institutions (PMI) under the National Housing fund scheme and also gives estate. Development loans (EDL) to real estate developers.

The Banks overall mandate is to promote the delivery of affordable and modern houses to Nigerians.                                 

STATEMENT OF PROBLEM

Shelter has been universally accepted as the second most important essential human need after food.  Housing in its entire ramification, is more than shelter since it embraces all social services and utilities that go to make community, a neigbourhood a livable environment.

The problem of housing in Nigeria are enormous and exhibit apparent and marked regional difference. In most of our urban center the problem is not only restricted to quantity but also the poor quality of available hocusing units and the environment.

The scenario is only slightly different in the rural areas where the problem is primarily that of quality of hosing and inadequate infrastructural facilities like road, drawings, water supply and so on.

From available statistics, the magnitude of housing problem in the urban areas of the country is such that five million new housing units will be required to meet excising and future needs up to the year 2010 A.D.

The housing situation in the rural areas of the country reside is ever more statistics shows that about thirty-two million (32, million) new housing units are required to meet the housing needs in the rural area of Nigeria by the year 2010 A.D. however, it is observed that the housing problem in the rural areas in mainly that of housing problem in the rural areas in mainly that of qualitative improvement in terms of sanitation and infrastructure for existing housing stock in these areas.

The amount of the essential services may be approximated to new housing need of the areas to some eight million housing units.

At this juncture, one would like to know if the current increase in mortgage banking business is actually contributing to the housing development in Nigeria.

Again, one would like to know the types of person that can apply for the national housing fund loan and what the purpose of the loan is like.

Following the high cost of building or purchasing a residential house/home, people may like to ascertain the maximum limit loanable under the National Housing fund scheme.

Equally, information to how the loan is repaid will be beneficial to potential mortgage and readers alike.

It will be interesting equally to indicate the extent reached by various levels of government in contributing to the housing development in Nigeria.

The contributions made far by the FMBN towards housing delivery in Nigeria shall be examined and besides the relevance of the National Housing policy towards the development of housing in the country shall be analyzed.

Finally, this work will reveal other information a reader or a potential mortgage may inquired for in the general mortgage business in Nigeria.                       

PURPOSE/OBJECTIVE OF THE STUDY

The objective of this study is to locate how far the establishment of federal mortgage Banks of Nigeria has achieved its purpose of aiding Nigeria citizens to fulfill their aspirations of owning decent and affordable houses.

In an attempt to achieve this goals or objective the government gears towards the attainment of the following policy objectives, which includes

Ø    Active participation in housing development by all tiers of government and private sector (s).

Ø    Institutions within the system to render operations more responsive to mortgage demand.

Ø    Housing investment which satisfy basic needs

Ø    Greater participation by private sector in housing delivery especially through the primary mortgage institution.

Meanwhile, the objectives of this study are as follows:

Ø       Mobilization of funds for the provision of affordable residential houses for Nigerians.

Ø    Encourage programs that would enhance housing financing among how and medium income earners. The fund is also to service that non-salaried informal sector.

Ø    Provide long term loans to mortgage institutions for lending to contributors of the fund.