Govt orders sale of FMBN assets in default of N24.6b bond
THE Federal Government has ordered the sale of assets of the Federal Mortgage Bank of Nigeria (FMBN) over its inability to pay the sum of N24.564 billion bond, which would be maturing on May 24 this year.
The amount is part of the N100 billion FMBN received from the Federal Government which guaranteed the bond on March 27, 2007 to support its multi-tranche issuance programmes aimed at enabling Nigerians, especially career public servants acquire residential houses in the Federal Capital Territory (FCT).
Indeed, the sale of the houses was an initiative by government to encourage home ownership through mortgage finance to stimulate the housing market and thus provide affordable housing to Nigerians. The total value of the Federal Government of Nigeria (FGN) guarantee that has been utilised so far is N32 billion.
In a circular dated May 5, 2015, President Goodluck Jonathan approved the recommendations of the Coordinating Minister for the Economy and Finance Minister, Dr. Ngozi Okonjo-Iweala, that FMBN should sell some of its assets and provide any other credible solutions to raise funds to pay it’s maturing obligation of N24.564 billion on May 24 this year to forestall imposing a crisis on the economy.
The directive, to be carried out by the Minister of Land, Housing and Urban Development, Mrs. Akon Eyakeni, stipulates that she must ensure that Aso Savings and Loans Limited immediately remit the collections of N4.54 billion which “it has failed to remit to the FMBN.”
The FMBN is also directed to immediately recover all the non-performing loans (NPLs), including use of foreclosures (where the Certificate of Occupancies) of the properties are in the custody of the security trustees of assets of the defaulters.
In its recommendations to the Finance Minister dated April 24, 2015, the Abraham Nwankwo-led Debt Management Office (DMO) noted inter alia: “As the institution with adequate mandate and professional competence, we expect that FMBN has the appropriate kit of instruments it should use to effectively manage its portfolio.
“We observed from the documents submitted by FMBN that they have some low-hanging fruits, some of which include unremitted collections of N4.54 billion owed by even very prominent mortgage loans originator (MLO) like Aso Savings and Loans Limited and non-performing loans (NPLs) in the sum of N3.64 billion.”
But in its response, FMBN, in a circular dated April 29, 2015, signed by the Director General, Mr. Gimba Ya’u Kumo, described the DMO’s position on the issue as misleading, adding that the bank cannot be held liable for the bond.
Justifying the position, Kumo noted: “We consider it misleading your assertions that FMBN as the transaction sponsor is responsible for the successful operation of the programme and by implication, should bear the liability arising from the bond.
FMBN was just a facilitator of the programme through special purpose vehicles incorporated at Corporate Affairs Commission, namely FMBN SPV Issuer Limited, FMBN SPV Funding Limited and FMBN Mortgage Trustee Limited.
“There were 23 other parties that participated in the transaction and the role of FMBN was that of sponsor (on behalf of FGN) and transaction servicer. FMBN only earned a fee for the role it played. It was in the light of this that Federal Government guaranteed the bond. Please note that the FGN Guarantee that supported the bond transaction is between the Federal Government of Nigeria as the guarantor and UBA Trustees Limited as the notes trustees.
“The guarantee is irrevocable and unconstitutional which requires the guarantor to make good its obligation under the guarantee in the event of shortfall or default. Also note that we have had several meetings with your office on this over the past 18 months and made available to you documents and reports on the problems and challenges with the bond transaction.
“Therefore, we wish to state that “The Mortgage -Backed Bond floated to finance the acquisition of non-essential residential housing units in the FCT to federal civil servants was entirely a Federal Government initiative. The FGN guarantee for the mortgage-backed bond is irrevocable and unconditional. Therefore, Federal Government has to redeem its guarantee. Failure will cause the Nigerian bond market and FGN reputational damage.
“The Mortgage-Backed Bond was issued under special purpose vehicles incorporated at Corporate Affairs Commission, namely FMBN SPV Issuer Limited, FMBN SPV Funding Limited and FMBN Mortgage Trustees Limited, distinct entities from FMBN, hence it is wrong and misleading to say that the bond is FMBN bond.
‘‘Federal Government can redeem the guarantee to meet the matured obligation and subsequently recoup from unremitted collection by Aso Savings and Loans Plc (N4.54 billion), non- performing loans (N3.64 billion) and outstanding mortgages.
“It is our view that passing the buck at this time that the bond is almost maturing is unhelpful. Efforts need to be directed at finding solutions to the problems. The Debt Management Office, being the Federal Government agency that manages national debt, should take the lead in advising the government on appropriate options.”
No Comments yet