Government’s Intervention is greatly needed in the Mortgage Sector

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    Mr Kolawole Abdulis is an astute Banker with over 30 years of experience. He is a 1983 graduate of Business Management with Second Class (Upper Division) from University of Liberia. He holds an MBA in Business Administration from Ambrose Ali University, Ekpoma. He is a Fellow of Chartered Institute of Bankers of Nigeria (F.C.I.B). He is also an Associate of Institute of Capital Market Registrars (A.C.M.R). Being an experienced Banker, He had managed many branches of Afribank, defunct Assurance Bank Ltd and Nigeria Arab Bank in Lagos, Ogun and Oyo States before he left to form Optimal Banking Consultant Ltd, a company that handles banking/customer related challenges.

    He joined Skyfield Savings and Loans Ltd as MD/CEO in 2010; a Bank he metamorphosed into Brent Mortgage Bank Ltd. a State Mortgage Bank. He was the Chairman of Chartered Institute of Bankers, of Nigeria, Lagos State Branch between April 2017 and March 2019.

    In this interview with Our Economy Today, He x-rayed the opportunities and challenges in the Mortgage Industry and bares his mind on some major issues in the Banking Industry and the Infrastructure status of Nigeria. Except

    We know it has been a long journey to this point, briefly let us into your background

    My name is Kolawole Abdul, am a fellow of the Chartered Institute of Bankers of Nigeria. I hail from Isonyin in Ogun State. I attended Christ Apostolic Grammar School, Iperu, Ogun State. After my secondary education, I worked briefly with General Post Office, Marina in the middle of 70s after which I was invited to Liberia by my Uncle to further my Education. In Liberia, I had to attend AME Zion Academy and I was lucky to be among the few Nigerians that were admitted into the University of Liberia directly having passed English and Maths in first sitting. By the grace of God, I graduated before many of my colleagues; I did my program in 3 and 1/2 years. I returned to Nigeria in 1983 and did my Youth Service in Nigerian Arab Bank. I performed excellently well during the Youth Service and before the program ended I was interviewed and gainfully employed by the Bank and was sent to the foreign exchange department to commence my banking career. One year after, I was sent to one of the rural branches in Ogun State to assist the Manager and then to other branches until I became a Branch Manager of the Bank. When the Bank had challenges and was taken over by new owners, I was the only one absorbed out of 7 and was re-employed by the new owners. The Bank also had challenges later and luckily I was retained again by Afribank that took over the Bank. I left Afribank in 2010 January to become MD/CEO of Optimal Banking Consultants Ltd .

    We realized there was a gap in the industry; Bankers had account officers and relationship managers to protect interests of the Bank but non to protect the interest of the customers and we felt there was a need to fill the role. Some organizations signed us on and we started. 21 days later, I was appointed as the MD Skyfield Savings and Loans Ltd

    So I came into Skyfield Savings and Loans Ltd in 2010 and it was very rough and tough at the beginning. We were able to wade through many challenges and by the grace of God became one of the 36 PMBs that recapitalized out of 82. That is how far we have gone.

    From Skyfield with N200m capitalization to Brent with N2.5b Share Capital; what has driven this growth?

    Yes, we were very much determined in positioning the organization for emerging opportunities in the sector. Of course we all know there is a market for the mortgage sector. That is why we were so much determined to recapitalize the bank to enable us take advantage of these opportunities. God was on our side; we got new investors and we were able to raise the N2.5 billion CBN requirement.

    Currently there is a huge housing gap in Nigeria and one would expect Mortgage Banks to be in good business, yet some are locking up their shops. What could be the cause of this? This is not what is expected

    Yes, you are right. The reason is that some of our colleagues came into mortgage banking with the mindset of commercial banking. The two are completely different. Some of them mismatched funds. You cannot use the funds given to you by customers for 60 – 90 days to create mortgages for 5 years, you will experience illiquidity and once that happens there would be a big problem. In fact, the Bank is dead. You need to guide your liquidity jealously because it’s like the blood in the vein and once it dries up death is imminent. Commercial banking businesses are different from Mortgage banking. Tenor of deposits these days hardly go beyond 180 days because they believe interest rate can change any time. So that calls for carefulness.

    Then the chunk of the housing deficit which is currently put at 17 million units is within the low income bracket who cannot afford majority of properties that are all over the place. For instance, those who earn one hundred thousand naira monthly can only set aside about thirty-three thousand plus monthly and that for 20 years is still below N8 million. How many properties these days can go for as low as Eight Million Naira? Many of these people most times hardly pass affordability test. This is a major challenge.

    What is the way out?

    The challenges are multifarious. Government’s intervention is greatly needed. The structure to drive the growth has not be properly put in place by regulators and government. For example, we saw it today in a circular that the CBN have removed the interest rate cap which was imposed before.

    The problem of liquidity is being addressed with the emergence of NMRC (Nigerian Mortgage Refinancing Company) through which mortgages that are conforming can now be refinanced so we can have more money to do our business. If not, even if you have N50 billion, how many mortgages of N60 million each can you create? At a point you will go dry. This is one problem that the emergence of NMRC has come to address.

    However, other problems like cost of building materials is still very much a challenge. The issue of foreclosure (when mortgagor refuses to pay) is there; the law is still not friendly with Mortgagees when it comes to taking possession of the property.

    Our people are alien to the word mortgage. Everybody wants to build his or her house on incremental basis, i.e doing it bit by bit from the foundation. But my people say that “why sit by the river bank and wash your hands with spittle?” There are opportunities that can make you to build a house with Mortgage loan so long you have good title to the Land or you can buy already built one and pay later. A lot of us still pay rent to landlords and at the same time looking for money to build a house. Is it not economical to pay for the loan with the money you should have used to pay for rent? A lot of people can differentiate between mortgage and microfinance.

    Another challenge is the issue of unstable jobs. It is like a job per day these days. If you lend to a group in an organization and the organization experiences challenges and they are not able to pay, such debt will turn bad and be regarded as lost which you are expected to write off from your capital. Once you go below the threshold of the minimum capital and you do not address it in time, the regulators will revoke your operating license. This is why managing risk using the enterprise risk framework is very important, if such risks manifest and they are not managed, they can sound a death knell on an organization.

    Now we are stepping into the wider range. Still on the housing deficit, one would expect that like in other countries government would provide housing at cheaper price. To buttress it, especially when new government comes on board, you hear ‘housing for all’ and they go into developing housing units, at the end of the day these houses would come with prices even higher than the privately developed. Of course we know that most of the State Governments develop theses houses through the Mortgage Banks. What is your take on it?

    One major challenge is the cost of building materials. We are not manufacturing anything in Nigeria. If Government attempts to build houses with local material, you and I will condemn them and would not want to patronize them. We are still used to this brick and mortal approach to housing; everybody wants fabricated material to be used for the sake of standard and yet we cannot pay for it. Lets come over to skills, there is death of artisans because our youths are not learning carpentry and building related skills these days. We get foreigners; from Togo, Ghana and other neighboring countries to do the jobs. With all these, the real cost will be very high. Government needs to ensure that housing projects are not hijacked by individuals who hold these properties down for family members and relations with the hope of selling later and making superfluous gains.

    I know that in US to be precise, there are houses built with wooden material and these houses look good and are durable as well. Why can’t that technology be tried here?

    Even if you build houses with planks, the cost will still be high. For example, the population of Lagos is over 20 million and 85 percent of the population is concentrated on 40 percent of the land mass and so the cost of land is very high. At the end of the day the cost of the land will still impact on the total cost of the project to the point that a lot of people will still not be able to afford it and those that will be able to afford it may not be happy living in a wooden house at that cost. Come to think of it, how developed

    is our timber industry? we may end up with substandard wooden materials or still resort to importing the wood which will further kill our local industries. What about the risk to the end users? We have bad attitude to very many things.

    Let us come back to Brent; Why did you change the name from Skyfield to Brent and what would Brent look like in the next 10 years

    The truth is that at first we had some challenges especially when I first took over and gradually we overcame the challenges. Then, we felt we need for a new corporate identity and we decided to pick the name Brent. B-R-E-N-T is an acronym of Building Relationship on Efficiency ‘N’ Trust. Brent is also the best grade of crude oil. We want to be the best in the sector. We just don’t want to be the biggest; we want to be the best managed Mortgage Bank. That is why we refuse to join the bandwagon. We don’t do what we are not comfortable with. Since we changed the name, we have been embraced like a new baby by many customers and our stakeholders are happy for it.

    The world is going digital, in the next 10 years, I want Brent to become the one of the best players in the industry manned by hardworking and experienced professionals who did not take actions that were not properly dimensioned.

    Fitch, an international credit rating organization just released a statement that Nigeria may end up in more crises due to policy incoherence. Do you agree with that?

    This is international politics. We must know that no man is an island. Sometimes we might feel we are doing something right not knowing we are stepping on toes. Some international organizations are honest, some others biased while many others may be selfish. The fundamental thing we must know is that any nation you depend on to survive, you may be at their mercy of that nation. Once there are policies that don’t favor them, they will do everything to engineer negative commentaries against you as a country. The advice is that we should remain focused.

    The closure of the borders is saving our fuel, which was being smuggled across the border. Very soon fossil fuel will receive less attention with electric cars coming on board. The earlier we tighten the noose the better.

    We know the role critical infrastructure play in developing the economy which we all know the nation lack right now. The present government is doing something; but how best do you think the government can approach infrastructural development in Nigeria?

    The only best option open to us is public – private partnership. But it must be done carefully because Nigerians like to play smart. The agreement must be well crafted to ensure that the government and private partners play their parts as agreed. The other issue with infrastructure is maintenance. For example, roads; instead of waiting for them to get bad, why not make the users contribute N50 or N100 through tolls for their maintenance?

    (Cuts in) but toll didn’t work in the past and that is why it was removed.

    It was because the government was majorly involved. For instance, we are in partnership with an Agency of the government which had a building that was idle and dilapidating. We approached the agency and struck an agreement to allow us renovate the property and put into use for a period of time within which we would recoup our money and hand over the property back to them, which they agreed. Now the building is in good shape and in use. In the same way, such partnership can be established to allow private organizations maintain government infrastructure instead of allowing them to go bad and start to spend huge amount to repair them. The old secretariat is there lying fallow because of some issues; the position of that property is strategic which would have provided accommodation for Lagosians or acquired through mortgages.

    I will prefer to pay a toll of N500 to take alternative road that will take me to Ijebu-ode within 1hr instead of getting stuck at Redeem Camp for hours and burning fuel worth more than N2,000. That is the only way I see that we can fix infrastructure in Nigeria because government income level is reducing by the day.

    There is this allegation that Bank staff now connive with Fraudsters to defraud customers. With your experience in banking, how would you advice Banks to check the alarming rate of fraud in the Banking Sector?

    Bankers should create forum to regularly share experiences. Keeping secrets doesn’t help the industry in checking fraud. Banks even hardly report fraud to regulators. If a married woman fails to tell her husband about advances from his friend so he can be embarrassed, the man will do the same to other another friend’s wife. If fraud is committed in one bank and the bank refuses to report it, it will happen in another bank. If those who commit fraud in the Bank through connivance or other means are not punished other bank staff will repeat the same thing.

    Also, Banks should monitor their staff’s lifestyles. Once a staff makes more money illegally, most times he will flaunt it and once you notice it, take action. Another measure is to move your staff round. Don’t allow them to stay on one desk or in a branch for too long.

    Outside work, what do you do? how do you unwind?

    I listen to good music, I play tennis and I sit with my friends and gist.

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