CBN To Launch New Framework On Mortgage Lending

The Central Bank of Nigeria plans to introduce a framework to boost mortgage lending in the country.

According to the apex bank, a lot of equities are currently tied down in mortgage assets, which are entirely cash backed.

The bank said in its effort to support the growth of Nigeria’s real estate industry, it would work in developing a framework that would enable banks to securitise mortgage loans, which could then be sold in the capital markets.

It stated, “Adequate safeguards will be put in place to reduce the risk of delinquency in the mortgage backed assets that will be sold in the capital markets.

“These measures will reduce the credit and liquidity risk to banks holding these assets on their balance sheets and improve the amount of funds available to support mortgage loans. It will also reduce the high cost of obtaining mortgages for banking customers.”

Also, in a recent letter to the Deposit Money Banks, as part of its efforts to boost growth in the Nigerian economy through investment in the real sector, the CBN introduced some measures to boost lending.

Part of the letter read, “All DMBs are hereby required to maintain a minimum Loan to Deposit Ratio of 60 per cent by September 30, 2019. This ratio shall be subject to quarterly review.

“To encourage small and medium enterprises, retail, mortgage and consumer lending, these sectors shall be assigned a weight of 150 per cent in computing the LDR for this purpose.

“The CBN shall provide a framework for classification of enterprises/businesses that fall under these categories.

“Failure to meet the above minimum LDR by the specified date shall result in a levy of additional Cash Reserve Requirement equal to 50 per cent of the lending shortfall of the target of the LDR.”

The CBN said it would continue to review developments in the market with a view to facilitating greater investment in the real sector of the Nigerian economy.