The Federal Mortgage Bank of Nigeria (FMBN) is struggling with undercapitalization, a major hurdle preventing it from effectively financing affordable housing, says Managing Director Shehu Osidi.
Speaking in Abuja on Wednesday at an event marking his first year in office, Osidi called for a review of the FMBN and National Housing Fund (NHF) Acts, stressing that legal reforms are essential to addressing funding constraints.
He noted that the current framework limits the bank’s ability to fulfill its mandate and expand access to homeownership for Nigerians.
He argued that updating these laws would help address structural bottlenecks in housing finance and expand access to affordable homes for Nigerians.
“Our biggest challenge at FMBN is undercapitalization,” Osidi said. “Even the primary mortgage banks that we fund are better capitalized than we are.”
He also highlighted a major funding gap due to the non-compliance of commercial banks and insurance companies with statutory contributions to the NHF.
Some context
Under the current NHF Act, commercial banks are required to contribute 10% of their total loan portfolio, while insurance firms are expected to allocate 40% of their life insurance funds and 20% of non-life insurance funds to the scheme. However, since FMBN’s inception, these financial institutions have failed to meet these obligations.
Osidi revealed that in discussions with the Central Bank of Nigeria (CBN), officials argued that the law, as written, is difficult to enforce because commercial banks cannot unilaterally invest depositor funds into the NHF. To resolve this, FMBN is proposing an alternative approach that would require these institutions to contribute 10% of their profit after tax as part of their corporate social responsibility.
“This way, they can give back to the society from which they generate substantial profits,” Osidi explained.
What to know
Another priority for Osidi’s administration has been the recapitalization of FMBN to enhance its ability to finance homeownership effectively. With a current paid-up capital of just N2.5 billion, he described the bank’s financial position as inadequate compared to similar institutions worldwide.
“We have set a target of N500 billion in fresh capital. “N250 billion is expected from the Federal Government, while the remaining amount will be raised through debt capital,” he continued.
The proposal for recapitalization, championed by the Minister of Housing and Urban Development, Ahmed Dangiwa, has already been submitted to the Federal Executive Council (FEC). Following FEC’s directive, consultations are underway between FMBN, the Ministry of Finance, the CBN, and other relevant stakeholders.
Osidi also disclosed plans for full automation of FMBN’s operations, which will allow contributors to receive transaction alerts and access banking services digitally, marking a step toward greater transparency and efficiency.
