The National Pension Commission (PenCom) is set to issue new guidelines on how pension contributors under the Contributory Pension Scheme can utilise part of their contributions for mortgage financing. This is with a view to boosting home ownership in the country.

The Director- General, PenCom, Mrs Chinelo Anohu-Amazu, disclosed this at a stakeholders’ sensitisation conference on the 2014 Pension Reform Act (PRA) in Abuja. The PRA 2014 which was signed into law on July 1, 2014 by President Goodluck Jonathan, repealed the 2004 Pensions Act that was enacted to reform the Nigerian pension industry. Anohu-Amazu noted that there is a provision in the 2014 Pension Reform Act (PRA), signed into law by President Goodluck Jonathan on July 1, 2014, which allows contributors seeking to own their primary homes, to apply for part of their account balances as equity for residential mortgage. She however said that access to the funds was subject to guidelines stipulated by the commission, adding that moves to issue the guidelines were already at an advanced stage.

Anohu expects that full implementation of the Act would assist in bridging the housing deficit gap in the country. The PenCom boss noted that the new Act allows Pension Fund Administrators (PFAs) to invest directly in real estate, which was not permitted under the old pension law. She noted that the new development will enable majority of the over six million contributors to utilise part of their funds as equity contributions for residential mortgages.

“The most important thing is the allowances of the utilisation of the retirement savings balance for the provision of a primary home. For the first time, you are now able, as a contributor, to utilise part of your balance to secure your own primary home in accordance with the guidelines to be issued by the commission.

And I think this is fantastic in a country where we have over 15 million housing deficit; at least, those who are contributing – over six million contributors under the Contributory Pension Scheme – can now for the first time be able to utilise the money rather than just leaving it there. The process of issuing these guidelines is already at an advanced stage and it is our expectation that as soon as it is implemented, this will assist in bridging the housing deficit in Nigeria,” she stated.

Stakeholders see the development as a step in the right direction, having identified the inability of potential homeowners to readily come up with the required equity mortgage contributions as one of the factors slowing down the mortgage process in Nigeria. Equity contribution is the initial amount of money to be paid by a potential home owner towards the purchase of a property. Under the National Housing Fund (NHF) scheme, managed by the Federal Mortgage Bank of Nigeria (FMBN), borrowers are expected to make equity contribution ranging from 10 to 30 percent, depending on amount of loan applied for. Applicants under the Lagos State Home Ownership Mortgage Scheme (Lagos HOMS) are required to make 30 percent down payment as equity contribution.

Also, for potential homeowners applying for mortgages under the Nigeria Housing Finance Programme launched by the federal government, initial payment of 20 percent of total cost of house is mandatory. Prof. Charles Inyangete, CEO, Nigeria Mortgage Refinance Company (NMRC), attested to the fact that the slow take-off of affordable mortgages scheme under the National Housing Programme is partly due to the equity deposit requirement.

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