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.”
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
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