Critical Appraisal Of Mortgage Finance In Nigeria (A Case Study Of Federal Mortgage Bank Of Nigeria Ilorin Branch)

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Critical Appraisal Of Mortgage Finance In Nigeria (A Case Study Of Federal Mortgage Bank Of Nigeria Ilorin Branch)

Chapter One

1.0 General Introduction

Since the creation of man, he has been faced with three basic problems via: Food, Shelter and clothing. Man in an attempt to solve these problems has undergone serious of trials to which no end is tat sight. The problem of food is still the problem of mankind. The problem of shelter and clothing is still paramount to any given society. Shelter is universally accepted, as essential human needs that man cannot do without. Some people rank it second to food in the hierarchy of man’s needs.

Shelter is also paramount in the mind of every man that he is prepaid to give up other needs to have one, having one at least is seen and rightly too as a mission accomplished. In the bid to solve these problems, more and more problems are being encountered.

In any give society, the government takes it upon them to see that three basic needs of nature are handled so as to pose at least a minimum problem to the society. In Nigeria like any other developing nation, housing a monstrous problem. Particularly in our urban towns. Since independence in 1960, government policies have been directed towards effective housing delivery in order, to make life better and increase productivity, but the achievement are below expectation because of many other demands on the government resources.

The persists increase in population, devaluation of Naira through foreign exchange market, hyperinflation rural – urban migration have resulted into over crowded homes ,increasing pressure non infrastructure facilities, thus accounting for the regularly deteriorating environment and usually collect savings and deposits from the public but mainly depends state government budget allocation for direct housing development, local thrift institution are usually not mortgage finance institution as properties are rarely accepted as collateral. Thus mortgage banking, as specialized development banking becomes obvious.

Between 1987 and November 1993, the federal mortgage Bank of Nigeria licensed 251 primary mortgage institutions. Although, most of the PMIS were concentrated in the urban centre especially Lagos, this could however, finance landed properties in any part of the country.

This study shall discover how far the FMBN has been able to achieve its objectives, consider its contribution to the economy so far, its problems, way of solving them, its prospects and also recommend ways to improve its services or keep its existence.

1.1 Objectives of the Study

The reason behind the study of this type centers on the environment and the quality of human existence, which has a direct relationship with the environment in which we lives. This environment comprises mainly the devilling houses it is the intention of this research work to look into the finance of housing/ shelter, which should be the priority of every government, most especially where its supply is inadequate. The study of this topic is very essential considering the fact hat the mortgage institution are the pillar of the construction industry which of not well handled in an economy like our will lead to a downfall of the construction industry which if not well handled in an economy like our will lead to a downfall of the construction industry.

Housing, as a capital intensive project without private sector participation in provision of finance and other infrastructure to complement the efforts of the government made the achievement so significant until 1989 when primary mortgage institutions (PMIS) Decree 53 of 1989 was promulgated.

The major reason for the promulgation of decree 53 of 1989 and Decree 3 of 1992 were to address the paucity of long term work for housing delivery of segmentation in housing finance system, high cost of borrowing and of building materials. From available facts, 70% of Nigerian fall within the poor and, low income bracket, while, 5 million housing units were established to be required to meet the existing and future need of the urban area, 3 millions housing units estimated for people in the rural area up to the year 2000 A.D.

Decree investment in property can take several forms. The invested can invest in different types of property, it could be informed by factories, warehouses, moreover, in residential property, it could be in form of houses flats or agricultural.

Mortgage bank or institutions specialized in mortgage banking creation; they provide loans for this purpose. Mortgage Banking institutions can accept only interest inland as a security. Housing cooperative are housing finance institutions but not mortgage banking as they do not spending by the people, one is tempted to say that the mortgage institutions will have a difficult time in carrying out those objectives.

It is the intention of research work to study the following:

  1. The effect on loan repayment with regards is the unfavorable economic condition of our economy
  2. To appraise the operations of then federal mortgage bank of Nigeria in order to know whether there is nay operational Nigeria in order to know whether there is any operational charge in loan disbursement since inception.
  3. To appraise the need of mortgage finance and favourable conditions of the federal mortgage of Nigeria.

1.2 Hypothesis Formulations

Based on the complexity of our economic society historical background and interactive review three hypotheses will be derived and tested alternatively by the study.

Hypothesis I
  • Ho: The contribution of housing by FMBN is not well known to the people
  • Hi: The contribution of housing by FMBN is well known to the people
  • Decision rule: Accept Ho and reject Hi, if calculated value is greater than tabulated value.
Hypothesis II
  • Ho: The terms of mortgage loan by FMBN is not suitable to it customers
  • Hi: The terms of mortgage loan by FMBN is suitable to its customers.
  • Decision rule: if the calculated value is less than the tabulated value, accept Ho and reject Hi.
Hypothesis III
  • Ho: Disbursement of mortgage loans has no impact on mortgage in Nigeria.
  • Hi: Disbursement of mortgage loans had impact on mortgage finance in Nigeria.
  • Decision rule: if the calculated value is less than the tabulated value accept the null hypothesis and reject the alternative hypothesis.

1.3 Limitation of the Study

Due to non-availability of data and other costs involved in a research of this nature, if of interest to limit this study on the structural and operational aspect of the mortgage bank of Nigeria.

Particularly attention will be paid to mortgage loans advance, to customers and the effect of the economic condition of Nigeria on repayment, the federal mortgage bank of repayment, the federal mortgage bank of Nigeria. Was chosen as the case study, due to the scope and dimension of its operation and its long range of contribution to the economic development.

It is of interest to note that prevalent government policies of privatization and commercialization and temporary closure of parastatals thus threatening job efficient and productivity.

The former problem would be tacked by making do with available statistics from the records of the FMBN while the letter would be dealt with by critical examination of the decree itself.

1.4 Organization and Plan of the Study

This research will has been divided into five

  • Chapter one deals with the introduction and other peripherals of the research.
  • Chapter two reviewed the existing literatures in the banking industries to know the evolution of government intervention in the sector and the reason for the intervention.
  • Chapter these focused in the research methodology the source of data collection method of collecting information the data presentation and analysis, method of testing hypothesis and the questionnaires.
  • Chapter four deals with the historical background of FMBN, the organizational structure of FMBN, role of FMBN in solving housing problems in Nigeria and then loan administration of FMBN.
  • Chapter five contains the summary, conclusion and recommendations.

Chapter Five

5.0 Summary, Conclusion and Recommendation

5.1 Summary

The result of the experimental research shows that although quite a number of people are aware of the housing contribution scheme of the federal mortgage loan, many of them would at one time or the other had applied for the loan seems not to have satisfied with the terms of the loan as stipulated by FBN. It also shows that the FMBN has not been able to satisfy peoples application for loan by disbursing funds that would be sufficient to meet the application for loan. From this research. It further shows that there is still much to be done in this aspect of loan disbursement over this years 2008, the PMIS was able to provide 40% of the total demand for loan which was far below average. All these findings shows that the PMIS nee to improve upon its loan policy and increase the disbursement of funds for it. In order to perform efficiently it mortgage financial functions.

5.2 Conclusion

In chapter one, an in depth introduction was given and this gave an overview of the subject matter which is all about Mortgage finance in Nigeria with emphasis on the activities of hypothesis. The purpose was justified and the limitation encountered was stated.

In chapter two, interactive review i.e. works of authors that have dealt with this topic in the past were also examined the need for housing finance was viewed from different perspective the structure of the Nigeria mortgage market was viewed from different perspective. The structure of the Nigerian mortgage market was scrutinized. Also, the working finance was considered under the various authors were discussed in relation to one another and they all seem to share the same opinion that something needs to be done to the issue of mortgage finance in Nigeria.

Chapter three of this study deals with the research methodology. The data obtained from both the primary and the secondary sources were analyzed using some descriptive and inferential statistical tools to test the various hypothesis stated and the result of the study were obtained.

Chapter four reveals the historical background of them FMBN, which is the apex institution in the mortgage finance sector was examined in view of how to carried out its operation. The National housing fund which was established primarily for facilitating the collection and disbursement of the national housing fund was also examined in view of their functions.

5.3 Recommendation

These are the recommendation put forward in order to ease the persistent problems of mortgage finance in Nigeria.

The government can also make land available for sale at highly subsidized rate in order to encourage the citizens.

Also, the cost of building materials should be subsidized more fund should be allocated to the housing sector to increase the disbursement of mortgage loans being carried our by the FIMBO.

The use of locally produced building materials should be encouraged.

Conclusively, if the about mentioned steps are taken into consideration mortgage finance in Nigeria will witness a positive change in the nearest future.

Critical Appraisal Of Mortgage Finance In Nigeria (A Case Study Of Federal Mortgage Bank Of Nigeria Ilorin Branch)

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Critical Appraisal Of Mortgage Finance In Nigeria (A Case Study Of Federal Mortgage Bank Of Nigeria Ilorin Branch)


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