BPE, project advisory team in talks over FMBN’s reform, commercialisation

A NEW era is dawning on the mortgage industry, following a renewed interest by Federal authorities in expanding the ownership of Federal Mortgage Bank of Nigeria (FMBN) that allows private sector intervention and fresh injection of funds into the housing financial system.

  The move promoted by Bureau for Public Enterprises (BPE) is in line with reform and commercialization of public enterprises, started with the enactment of the Public Enterprises (Privatization and commercialization) Act of 1999, which classified the apex mortgage bank as one of the public enterprises for full commercialization.

    Senior officials of BPE announced last week during the inauguration of the FMBN Project Advisory Team (PAT) and first meeting of the organ that the proposed reform will enhance operational autonomy by removing bureaucratic bottlenecks and political interference through a clear separation of ownership and management such as Federal government/ sector ministry, the board of directors and the management of the public enterprise.

   FMBN had been accused of under-performing, and reneged in meeting its obligations to contributors of the National Housing Fund (NHF) by stakeholders, especially primary mortgage banks and developers. For instance, the bank had put on hold the estate development loan. The loan is given to estate developers to build residential housing estates at an interest rate of 10 per cent per annum and for tenor not exceeding two years.

    Infact, the World Bank had recommended that NHF, which is a major source of funds for FMBN should be scrapped. But the intervention of the Mortgage Banking Association of Nigeria (MBAN) made the global financial institution to change its position to re-structuring and re-invigorating of the NHF Scheme towards long-term objectives and goal of providing affordable housing to Nigerians.

  Specifically, The Guardian learnt the National Council on Privatization (NCP) in its fourth meeting on December last year approved the constitution of PAT drawn from relevant agencies of government and other stakeholders to propose new policy, legal and regulatory framework for the reform and full commercialization of the FMBN. 

     The development was apparently to boost the performance of the housing sector, which The Guardian learnt, will check the present absolute dependence on the treasury for funding by otherwise commercially viable public enterprises through realistic capital structures, which will enable them approach the money and capital markets to fund their operations.

   Members of the technical team, include BPE, Federal Ministry of Land, Housing and Urban Development, Federal Ministry of Finance, Central Bank of Nigeria, Federal Ministry of Justice, Primary Mortgage Institutions and Nigerian Labour Congress.

  The BPE Director General, Benjamin Dikki told PAT members “a full commercialized enterprise is subject to a recapitalisation process by the Federal Government, and is expected to operate profitably on commercial basis and be able to raise funds from the money and the capital markets without government guarantee. Such as enterprise is expected to adhere strictly to private sector procedures in its operations. However, government still retains her ownership.”

   He further explained that the objective is to restructure and rationalize public enterprises to make them more efficient, effective and cost conscious, under the charge of goal oriented management and staff whose future is linked with fortunes of the organisation they operate.

  Under the programme, Dikki said that FMBN will evolve a more result -oriented and accountable management, based on performance agreements and the provision of competitive compensation schemes for the employees; strengthen financial and accounting, controls at the enterprise level; upgrade the management information systems.

   Similarly, the BPE boss explained that the full commercialization will ensure financial solvency of the public enterprises through effective cost recovery, cost control and prudent financial management as well as ensure the viability and self sustainability of the public enterprise.

    He disclosed that PAT members are expected to submit reports, findings and proposals for the consideration of the Steering Committees on Development Finance Institutions and Housing Sector Reform chaired by the Minister for Finance/ Coordinating Minister for the Economy and Minister for Land, Housing and Urban Development respectively.