C002D5556 Sunday 08 April 2018 34 BDSUNDAY SundayBusiness Diversification through mortgage for economic growth There appears to be a slow down on the discourse on diversification through which the federal government seeks to refocus the economy towards non-oil sectors such as agriculture and manufacturing which are noted by the government as major growth areas with low hanging fruits. This is to be expected as oil price has climbed several steps up in the last twelve months. The country only thinks of alternatives when there is a drastic fall in oil prices which it has chosen to stay with as the mainstay of the economy. But that is simply a sure way of postponing the evil day. So good that agriculture and manufacturing top considerations for diversification, but it worries that the originators and promoters of diversification are yet to recognize that economic growth can happen when mortgage and/ or real estate, which is the fulcrum around which the mortgage system revolves, is factored in their calculation. In other economies, the mortgage industry makes significant contribution to economic development. In Nigeria, this is not the case because no consideration is given to its potential. This lack of consideration explains why mortgage finance as a percentage of Gross Domestic Product (GDP), till date, remains as low at 0.5 percent, leaving it several steps behind other emerging markets such as Mexico, Malaysia and South Africa where mortgage contributions to GDP are as high as 10 percent, 25 percent and 29 percent respectively. There is no-gain-saying that mortgage has all the potential to contribute to the growth of the economy, but for it to do that, all the obstacles to its own growth have to be tackled. The relative ‘newness’ of the industry, lack of understanding of its dynamics and operational models by many Nigerians, and poor appreciation of the need and the ultimate benefit of keeping money in a mortgage bank are some of the militating factors. Experts are of the view that a flourishing mortgage banking industry is an effective tool in the hands of the government as the industry will help in regulating the economy in the desired direction. But the federal government, in all the things that are being said about diversification of the economy to steer it away from the current challenges, doesn’t seem to pay attention to the mortgage sector. If government really wants to stimulate the economy, a reduction in the interest rate will be a master stroke as, all things being equal, more people will embrace mortgage loan to buy houses, leading to increased activities in the construction sector. Because of the identified obstacles, many primary mortgage banks (PMBs) are going through very difficult times, such that some are still unable to meet up with the capital requirements in the industry. “If government pays a closer attention to the PMBs by removing some of the obstacles that they have such as the drawbacks of the Land Use Act of 1978 which essentially vests land ownership in the hands of the state governors; the right to easily foreclose on delinquent borrowers, ease of creating a legal mortgage and perfecting titles and the ease of falling back on their collateral to recover bad loan etc, this sector will surely improve significantly”, a mortgage operator observed recently. The operator who did not want to be named, insisted that until all these issues are resolved in a way that encourages the provider of capital, in this case the mortgage bank, the sector will not grow as desired and he hopes that when these obstacles are removed, the supplier of mortgage will allocate more funds towards the provision of home loans while home buyers will better appreciate the implication of prompt interest and capital repayments as well as ensure discipline on the part of the people. Okika Ekwem, a US-based realtor, affirms that the poor capital Talking Mortgage with CHUKA UROKO (08037156969, email@example.com) base of the PMBs is inadequate. He however, dismissed the idea of a fixed capital base for mortgage institutions. To say that a mortgage institution should have a fixed base of, say N10 billion, is wrong because that amount is too meagre; even N100 billion is also meagre given the kind of projects they are to finance. “The Federal Government needs to come in, look at what is happening in other civilised world and copy. These days, copying is no longer an act of deception but actually something that is done even in the civilised world”, he said. In the civilised world, according to him, there is secondary market for real estate financing where commercial banks or individual brokerage banks lend money to people and thereafter sell the securitised certificate to the secondary market and come back again to lend to individuals. Given the size of Nigeria as a mortgage market, the growth of this industry is possible if the Federal Mortgage Bank of Nigeria (FMBN) plays the role of a regulator while the federal government, through the Central Bank of Nigeria (CBN), empowers the PMBs more. Arguably, the Nigerian mortgage industry needs more well established and well funded PMBs. Meckson Innocent Okoro, an estate manager, explains that this is to discourage the concentration of these institutions only in urban centres. “When the number of PMBs is increased to say five in each state, access to housing finance will also be increased. “The PMBs must be positioned to champion the whole issue of affordable or social housing for the low income earners in the country. Anything the country wants to do without a functional mortgage system that can guarantee homeownership for a good number of people will not succeed”, he reasoned. Continuing, he said: “We are talking about housing which is capital intensive and so must have capable institutions to finance it; increased homeownership will, one way or another, contribute to the country’s GDP which translates to economic growth”. Property Logic With Akhigbe Dominic A few years ago, I took a rent of an apartment somewhere in Mainland Lagos; I paid the sum of six hundred thousand naira as total incoming rent with four hundred thousand naira as recurrent rent. During one of the (then) Environmental Sanitation Saturdays; my Landlord and I were whiling away time after supervising the cleaning of Affordable housing and the run away cost of building material; a convenient paradox the surroundings and the drainages. My landlord was an accomplished man who was ready to share his experience anytime, anywhere and any day. He is a very educated man with a Ph.D in his field of endeavor. I still recall how he told me that he bought the entire two plots on which the imposing edifice situates for N4000 in 1982. He said the entire house comprising of six plats and a potter’s lodge from start to finish was built for N80,000 in all. In fact; he further informed me that this same land was his most expensive of all his landed properties. This is N120,000 put together! However, my rent for the Apartment which I rented in the same house was N400,000 then. The above scenario can be argued and situated within the corridor of time factor. After all; !980 is about four decades ago! Inflation and other determining factors can be adduced to wrestle this long past period. However, I can still remember that in 2015 or thereabouts; a bag of cement was hovering between N1100 and N1200. The 6 inches block was in the neighborhood of N90 and N100. Today, a bag of the same cement sells for between N2900 and N3000 . A 6 inches block sells for about N190 and N200 while 9 inches block sells for N200 to N210 depending on location. Other building materials have become very prohibitive. A square meter of Gerrard Steptile Roofing is about N2900. The long spam aluminum roofing sheets goes for between N19,000 and N20,000 a bundle of eighteen sheets. We are not talking of electrical fittings, ceiling or the other components. The situation has become very disturbing. Affordable Housing has become a mirage. Indeed, is it possible to make Housing affordable with this abominable cost of building imputes? The answer is very clear. You cannot expect a man to spend over N10,000,000 (excluding the cost of the land) to erect a two bedrooms flat and give such an apartment out for anything affordable. You do not give what you don’t have. The big question is, can this situation not be remedied? Am sure it can. This is possible if the government creates the enabling environment for investment. Regulations can be put in place to manage the activities of manufacturers who sometimes want to take advantage of the helpless consumers and make abnormal profits thereby pricing their products out of reach. Policies that tend to encourage monopoly in favor of specific classes of people should be repealed. When this administration came into power, it was said that the president invited one of the largest manufacturers of cement and cautioned him against bogus profits that are capable of undermining the Affordable Housing policy of government. It was further said that the president also threatened to direct a forensic audit of the business activities of this same company except prices were managed in a manner that would make cement affordable. Like magic, cement prices dropped with a huge quantum. After a while; the status quo returned. This same investor practically stifled the business activities of some other investors in this sub-sector by promoting monopolistic tendencies. Just every other unwholesome practice that has gone unchallenged in this country is attributed to this same business magnate. This manufacturer has become a colossus. He practically dictates the flow of prices of cement in Nigeria today. The popular excuse is that it is expensive to do business in our climate. A fifty kilogram of cement now sells for N3000 excluding logistics! ...to be continued.
Sunday 08 April 2018 C002D5556 35 Equity Market 8 banks, 7 insurance firms miss NSE’s 90-day compliance deadline Stories by TELIAT SULE Following the expiration of the 90-day grace period during which listed companies that have December as their financial year end are expected to have released their audited financial statements, eight deposit money banks, seven insurance companies, two mortgage banks, a paint manufacturer, and 6 others have missed this regulatory deadline. The deposit money banks are Unity Bank, FCMB, Sterling Bank, Diamond Bank, FBN Holdings, Fidelity Bank, Union Bank and Wema Bank. The insurance companies are Equity Assurance, Cornerstone, Stacco, Linkage Assurance, Mutual Benefits, Royal Exchange and Standard Alliance. Aiico Insurance released its audited financial statements on Friday April 6, 2018, a week after the expiration of the deadline. Others are International Breweries, Lafarge, Multiverse, Abbey and Omoluwabi Mortgage banks, Oando, Meyer and Tourist Company of Nigeria. The NSE rules state that companies must release their audited financial statements 90 days after their financial year has ended, in this case, on or before March 31, 2018. “This is to inform the Nigerian Stock Exchange (NSE), our esteemed shareholders and other stakeholders that Unity Bank Plc was unable to release its 2017 Audited Financial Statement (AFS) for the year ended 31 December 2017 by March 2018 as required by NSE rules. The AFS has been forwarded to the Central Bank of Nigeria (CBN) for review and will be filed with the NSE upon the conclusion of the CBN’s review”, Unity Bank Management said in a note to the NSE. “ This is to notify our esteemed shareholders and other shareholders about the delay in the filing of Wema bank’s 2017 Audited Finan- cial Statement for the year ended 31st December 2017. The delay arose from the need to obtain the necessary approval before going ahead to publish our 12 mouths Accounts and Financial Statements. We expect to have our results released before the end of April 2018”, Wema Bank said in a note to the NSE. But Saheed Bashir, a senior analyst with Meristem Securities, one of the leading investment banks in the country, while accepting that banks that operate a holding company structure, which allows such institutions to have many subsidiaries, have justification in delaying their results, he however attributed the delay in other firms to inefficiency. “Holding companies need time to prepare their audited financial statements because of their subsidiaries. There are issues they need to clarify and resolve with their external auditors. If these companies ask for more time to file in their AFS, that is justifiable. But such reason will not be accepted from companies that do not operate holding company structure”, Bashir said. “For smaller companies that do not meet this deadline, it is due to inefficiency”, he added. The NSE Rule 7.4 on the submission of financial reports to the Exchange sub sections A and B indicate that “Every Dealing Member shall submit to The Exchange its annual financial statements, within ninety (90) days of the end of the fiscal year and its quarterly financial statements within fortyfive (45) days of the end of the quarter; and any other periodic report within the period stipulated by The Exchange. All Financial statements shall be prepared in accordance with the requirements of the International Financial Reporting Standards (IFRS) applicable to the time period covered in such financial statement(s). “If a Dealing Member fails to comply with this provision, it shall be liable to the following penalties which are subject to review by Council and any change thereto shall be made public by way of a Circular: Failure of a Dealing Member to submit Quarterly Returns on the date due for submission shall attract a penalty of Five Thousand Naira (N5,000) per day of default and the Dealing Member shall be suspended from trading with effect from the first trading day after the due date. “ Failure of a Dealing Member to submit Audited Financial Statements on the date due for submission shall attract a penalty of Five Thousand Naira (N5,000) per day of default for a maximum of four (4) weeks; Where a Dealing Member fails to submit Annual Financial Statement after four (4) weeks of default, the Dealing Member firm shall forthwith be suspended from trading; Where a Dealing Member is suspended from trading under sub-rule (1) or (3), such suspension shall be lifted upon submission of the Quarterly Returns or Annual Financial Statements”, the NSE rules further stated. Every year, companies pay millions as penalties for different market infractions such as late filing of quarterly and audited financial statements. Quarter two opens with N240bn loss in market capitalisation Transactions in the first week of the second quarter of 2018 in the negative territory as the market capitalisation of listed stocks closed lower when compared with the its closing figure on the last week of the first quarter of 2018. The market capitalisation closed last Friday at N14.75 trillion representing a loss of N239.63 billion from N14.99 trillion which was recorded on Friday March 29,2018. Year to date, the market capitalisation closed higher at 8.40 percent. Similarly, the All Share Index (ASI) lost 663.37 points from 44,504.51 points recorded on the last trading day of the first quarter to close on April 6, 2018 at 40,841.14 points. Year to date, the NSE ASI closed at 6.79 percent. Last week, traders exchanged 1.76 billion shares valued at N26.56 billion executed in 20,265 deals compared with 2.32 billion shares traded in 25,530 deals worth N28.927 billion in the previous week. Expectedly, the financial services segment led the activity chart with 1.46 billion share worth N18.70 billion done in 12,850 deals and as such the segment accounted for 83 percent and 70 percent of the market volume and value respectively. The top three stocks in terms of volume are the shares of Zenith, Access and UBA. During the week, a total of 125,282 units of Exchange Traded Products (ETPs) worth N2.835 million were executed in 11 deals, as against 15,293 units worth N254,840.00 that were transacted in the previous week in 16 deals. Only few FGN bonds were traded as investors exchanged of 4,457 units of Federal Government bonds worth N4.247 million in 13 deals, as against a total of 21,583 units valued at N22.868 million done in 16 deals in the previous week.