Experts see inflow of fund in securities with CBN-backed mortgage loan

CBN building

The pronouncement by the Central Bank of Nigeria (CBN) that it would develop a framework to enable banks securitise mortgages loans has continued to gain wide commendation, as stockbrokers, at the weekend, said the implementation would create mortgage backed assets that can be listed on the Nigerian Stock Exchange (NSE). The Governor of CBN, Godwin Emefiele, at a world press conference held recently, said the apex bank, in the next five years would work in developing in developing a framework that would enable banks to securitise mortgage loans, which can then be sold in the capital markets.
According to them, securitisation of mortgages would unlock funds that have been tied down in that sector over the years and ultimately provide opportunity for expansion in that sector.
They pointed out that with the opening up of the mortgage sector, tradable mortgage backed securities would be created and subsequently be listed on the nation’s bourse.
A mortgage-backed security is a type of instrument, which is secured by a mortgage or a collection of mortgages. The mortgages are sold to a group of individuals (a government agency or investment bank) that securitises, or packages the loans into a security that investors can buy.
Furthermore, the operators added that this form of instrument would help to grow the capital market, and address the nation’s housing deficit challenges, because it would lead to the creation of more tradable securities, while money raised in terms of structured bond can be deployed for more housing projects.
He said the move to boost lending to the real estate sector of the economy through the securitisation of mortgage loans, which will then be sold at the capital market, is said to have the capacity to open up the economy for growth in areas of employment, investment and market deepening.
A stockbroker with the Royal Guaranty Trust Limited, Paul Uzum, said the implementation would provide opportunity for creation mortgage bank securities that would subsequently list on the exchange for increased participation.
“The essence of securitisation is to create an asset class, which can be listed and tradable. When listed, it attracts investors who know that if they invest in this assets, they can also sell them and get proceeds from these investments.
“Most of the mortagae companies are struggling and having a very tough time, funds have been tied down on this assets for a long time which can now be readily dispose especially due to the 2016 recession. Securitisation will open up that mortgage sector as well as creating underlining asset class, which would help to deepen the capital market.
“It would help to deepen the capital market with the mortgage backed securities which would serve as alternative asset class for investors. They can do an IPO with the fund going to private mortgage institutions and these assets would subsequently find its way to the exchange,” he said.
Another stockbroker with Calex Capital Limited, Tunde Oyediran, said the execution of the scheme would strengthen and empower the institution to operate in line with international best practice and create long-term investment for the private mortgage institutions through the capital market.
“By the time CBN executes the plan, it will strengthen and empower the institution to operate in line with international best practice that for 30 years and 40 years you can still be paying for your mortgage so by the time it happens, some of them will come and be listed on the exchange because it will no longer be one man show, more companies would be formed and come to the market for fund raising.
“Beyond that, the ungodly pursuit of illicit money to build houses will reduce because Nigeria can leverage the opportunity and build houses and become more confortable. It would help reduce corruption in civil service.”