On mortgage refinancing loan for civil servants

The Minister of Finance, Kemi Adeosun’s recent launch of a N1.3 billion refinancing loan scheme for civil servants in which the Federal Government is said to be collaborating with the Nigerian Mortgage Refinancing Company looks, on the surface, a good step towards addressing the problem of having deficit in Nigeria. The refinancing scheme which will involve, in the first phase, 5635 federal civil servants and for which state governments would be required to provide land for housing development, also addresses on the surface, the need to make states partners in the programme. But there are many issues arising there from.

Although the sources of the loans to be refinanced for the civil servants and terms of the loan refinancing arrangement were not disclosed, the programme is aimed at improving the living conditions and welfare of the work force and to generate employment. The programme has been described as “a financing solution that will bring money from the private sector, pension and insurance funds, multilateral and international agencies to drive an intervention in the areas of development finance and mortgage provisions.” Indeed, N40 billion has reportedly been provided in the 2016 budget to address housing needs.

However, the pronouncements of the minister are unclear as to whether the scheme is purely a loan refinancing one or a creation of new mortgage finance programme. A loan refinancing programme presupposes the existence of a loan which is to be refinanced most probably, to take advantage of better conditions especially in terms of the duration (tenor) of the facility, its pricing and even installment repayments. Refinancing a loan simply means that money is being sourced or borrowed from some other financier other than the initial lender to repay the existing facility so that the new facility created will become more beneficial to and conducive for repayment by the debtor(s), in this case, the civil servant(s).

If the scheme is indeed a refinancing arrangement, why would state governments that would be partners in it be required to provide or contribute land for housing development? Why would the Federal Government call on the “private sector, pension and insurance funds, multi-lateral and international agencies” to be involved in raising funds for the programme? Again, how would the loan refinancing create employment opportunities?

Government’s involvement in the refinancing of mortgage loans of civil servants is difficult to justify. By its intervention with a huge amount of N1.3 billion, government would be using tax payers’ money to repay the debts of its workers to enable them to secure better credit terms. At best description, this is a form of subsidy. A sure bet, however, is that this is an avenue for corruption. It is also self-serving as majority of the 5635 so-called initial beneficiary civil servants are most likely to be those within the ranks of Assistant Directors and Permanent Secretaries. This scheme ought to have nothing to do with the government and vice-versa. It is another way of injudiciously deploying government’s finances for the interest of a few privileged citizens.

It is necessary to recall that a few years ago, the Federal Government came out with the monetisation policy which made it possible for government-owned houses occupied by civil servants to be sold, at give-away prices, to the occupants. Whether those purchases were paid for via mortgage loans is not public knowledge. Even if they were, the mortgages were contracted, under private and personal arrangements, by the civil servants who purchased the houses. It is therefore, inconceivable that the government is contemplating taking N1.3 billion from public purse to pay off the personal liabilities of some debtor civil servants. The government is not a bank and even, given its present very lean revenue, to contemplate using such a huge amount of money to fester the nests of some of its workers at the exclusion of all other Nigerians is irrational and irresponsible. It is indeed, devoid of good corporate governance and thus, against the well being of other stakeholders in the Nigerian project.

Apparently, the government is trying to fool the Nigerian public as it indirectly sets up a new and separate mortgage arrangement for federal civil servants. This so called “financing solution” evidently signifies that the government has lost confidence both in its Federal Mortgage Bank (FMB) (the regulatory body in the mortgage finance sector) and all the mortgage finance institutions (MFI) operating in the country. If the government lacks confidence in its own institution, who should have any confidence in them? This inaugurated scheme is clearly an example of how government, instead of building, is destroying institutions and dragging the economy backwards.

Rather than deploy the money the minister said was provided in the 2016 budget to address housing needs towards recapitalising and perhaps, addressing other needs of the FMB to enable it effectively serve its purpose, the amount is being depleted in search of solutions where none exists. How will refinancing civil servants’ loans solve the problem of housing for Nigerians?

It is therefore important to make it clear that, whether the said scheme is for refinancing or creation of a new mortgage scheme for civil servants, the government should retrace its steps. It will amount to policy reversal given the subsisting monetisation policy put in place by former President Olusegun Obasanjo’s administration.

The way for the government to go is to address whatever weaknesses exists in the FMB and the MFIs, promote the organisations and encourage, not just civil servants but all citizens needing house finance to patronise these institutions. In a similar way, attracting local and international investments into the housing sector for the development of houses should be promoted and encouraged. These measures promise, in a substantial manner, the way out of the housing deficit in the country and reduction in youth unemployment. Refinancing individual civil servants’ mortgage loans has no role to play in these and should not be the concern of the government.