From Cement Price Of N4,200 To N420,000 For Iron Rod, How Inflation, Govt Policies Frustrating Mortgage Banks

Nigeria’s inflationary pressure and weak government policies are slowing down mortgage business in the country, the Managing Director of Living Trust Mortgage Bank, Adekunle Adewole, has said.

The MD said this at an event, ‘Facts Behind the Figures – Living Trust Mortgage Bank’ organised by the Nigerian Exchange Limited on Monday.

Prices of commodities are currently at five years high as inflation has risen to 18.9 per cent, according to the National Bureau of Statistics.

Adewole believes that the setbacks could hamper lenders’ effort to close the 20 million housing deficit suffered in Nigeria.

He said, “Our environment is volatile. Palpable fear remains over insurgency in the North Eastern parts. While remaining expansionary plans, terrorism continue to affect the economic participation of a large section, safety of lives and products, limitations of movements/operational time and cost of security.

“Government policies have really slowed down our growth. Elongated justice process; prohibitive cost of securing land titles; non-de-risk of financial service sector; complex administration system affects sub sector.”

The Central Bank of Nigeria set a Cash Reserve Ratio of 27.5 per cent for the banking sector and any infringement could lead to 40.24 per cent interest charge.

But the MD said, “The Cash Reserve Requirement that we are expected to meet up with even though unlike the commercial banks, we don’t derive any benefit by keeping our cash with the CBN and there is no overnight window if we need to borrow overnight, yet we keep our funds there and it is static. It is sterile and we don’t derive any benefit from it.

“Of course, price instability cannot be overemphasized. Sky-rocketing costs affecting cost management, customers’ projects and loan repayment.”

The Osun based mortgage bank seeking to expand beyond the state through a recapitalization exercise explained how cement prices have risen from N1,000 in 2014 to N3,900 and N4,200 in June 2022.

Adewole lamented that natural materials such as sharp sand (20 ton) has surged by 218 per cent from N22,000 seven years ago to N70,000 in June. Also, iron rod (12mm per ton) rose from N140,000 to N420,000, while finishing materials like porcelain tiles (40×40) rose N3,000 from N1000, the mortgage bank highlighted.

But the bank said it surmounted the numerous challenges by growing its revenue from N255m in 2014 to N1.1bn by the half year of 2022.

Profit rose to N531m from N62.7m in 2014, while deposit rose from N196m in 2019 to N7.53bn in June 2022.

The mortgage bank said it gave out N9.35bn by 2022, up from the N670m mortgage loan in 2014, while asset base rose from N2.85bn in 2014 to N11.72bn in 2022.