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PROPOSAL ON HOW TO GROW
A NEW PRIMARY MORTGAGE
BANK IN NIGERIA
A FIVE YEAR STRATEGIC PLAN

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TABLE OF CONTENT
CONTENT:
 Introduction
 An Overview of Mortgage Banking/ Real Estate
Sectors in Nigeria.
 Business Focus.
 Strategic Plan for Five years.
 Operational Effectiveness and Efficiency.
 Corporate Governance.
 Conclusion.

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1. Introduction
Itis very imperative for promoters of the Mortgage Bank to first define and set
their business objectives. Conventionally, the promoters would desire a well
formidable Mortgageinstitution, renowned for its cutting-edge servicedelivery,
high ethical standard and profitable and with effective returns on their
investments.
This write-up intends to propose, strategic drives that would position a newly
established MortgageBank to achieve a 5% to 10% marketshareof the
Mortgage finance marketwithin the next 5 to 10 years.
2. Overview of Mortgage Banking/ Real Estate Sector in Nigeria.
The Nigeria Real Estate Sector of the nation’s Economy remains highly
untapped. With an estimated population of 168 million, Nigeria housing deficit
is glaring, particularly in the urban centers. The federal Ministry of Works and
Housing in year 2013, estimated the housing deficit at 17 million units. These
would require over N68 trillion to finance at an average of N4 million per unit.
This means, Nigeria need to produceabout 850,000 housing units annually for
the next 20 year, in other to close the gap.
The Federal Housing Authority (FHA) revealed that it has only been able to
produce8,000 units of housing units between 2010 and 2013. Itis therefore
obvious, that there is a critical housing condition in Nigeria. Put in proper
prospectiveshows thatthere are markets for Real Estate housing development
and immense opportunities for Mortgage finance in Nigeria. That is a “GOLD
MINE” for serious mortgageBanks to explore.
Despite the hugepotentials, the Real Estate and Mortgage Banking Industries in
Nigeria still remains relatively underdeveloped and has failed to contribute
significantly to closing the country’s housing deficit. The main reason for this, is
the paucity of long term loan able funds in the systemof drive housing
developments and to empower the buyers of these houses to access
convenience and affordablemortgages to acquire houses of their own.
The Mortgage Banking Industryhas a remarkabledevelopment impact, both in
terms of providing affordablehousing and in promoting economic development.
However, Mortgagepenetration remains low, contributing less than 1% of the

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nation GDP in 2010. Thelevel of penetration is lower than the estimated rates in
other selected emerging markets and continues to provi8deopportunities for
growth for currentand potential players in the sector.
The Mortgage Banking sector is being regulated by the CBN act of 2007 (as
amended) and the Banks and other Financial Institution act (as amended)
BOFID. TheCentral Bank of Nigeria through the recent reforms (2011)
transformed the primary mortgageInstitution to Primary MortgageBank.
3. BUSINESS FOCUS
Itis hereby suggested that for the Bank to carvea niche in the Industry, and
capture a relatively portion of the market, Management should havea clear and
strong focus in the following areas of its operation within the permissible scope
as prescribed by the Central Bank of Nigeria.
 Investand finance Real Estate Properties for the provision of residential
Houses and commercial properties, such as shops, Malls and office
Complexes
.
 Providemortgage and real estate finance to the buyer of these
properties.
 Participate in the provisions of the National Housing Fund Mortgage.
 Collaborate with off-shoreor local financiers to participate in Syndicated
Real Estate finance for multi-billion projects.

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4. STRATEGIC BUSINESS PLAN FOR NEXT 5 YEARS.
With a view to achieve the desire marketpenetration and establish a strong,
visible and profitable MortgageBank with its firstfive years of operation; with
clear business focus, managementwould strive to adopt the strategic as
outlined before-:
KEY OPERATIONAL PROJECTIONS FOR THENEXTFIVE YEARS:
NAIRA IN BILLION
Accounts Years Year2 Year3 Year4 Year5
Banking Mortgage Portfolio 4 8 10 12 25
NHF Mortgage Portfolio 2 4 6 8 10
Real Estate finance Portfolio 0.75 2 3 5 8
Deposit Base 0.5 0.75 1 1.5 2
Assumption-:
i. Itis assumethat the Bank will start-up with N5billion as National Bank
and maintain the regulatory prudential rates.
ii. The Bank will grow its capital base to N10billion overtime.
iii. A strong marketing team, goal oriented and target driven will be in place.
A. MORTGAGEPORTFOLIO- N25billion
To grow the mortgage portfolio baseto N25 billion at the end of 5 years, the
following strategies should be adopted.
1) Pursea well structured and defined collaboration arrangementwith
foreign and local Developers to build mass and affordablehousing
estates, strategically in state capitals, such as Abuja, Lagos and Port
Harcourt. Theselocation are strategic for the Bank five year business
expansion plan, as they havea good mix of high and middle income
earners who can afford to buy properties and also access mortgage. This

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could be achieved by either collaborating with the Developers on Joint
Venture Arrangements or by outright financing of the Project.
2) Partner with viable Government levels (federal, State and local
government) in financing real estate projects; particularly in mass housing
developments for civil servants to acquireon mortgage.
3) The Bank should continually explore emerging markets for real estates
and Mortgageservices for groups, such as Co-operation societies, private
and public corporatebodies, trade unions etc with agenda for staff
housing schemes and to providemass housing for their members.
4) Introduceand market extensively a HOMEOWNERSHIP CONTRIBUTION
SCHEME this would be a product, which involvesaving over a period of
time to access mortgages. Itwill be targeted at to Private business
entrepreneurs to saveand have access to mortgages.
An extensive investment in Real estate and Mortgagefinancing as proposed
would
 Increaseearnings for the bank, enhance returns on investment and
increase shareholders fund.
 Enhance the bank’s cash flow and turnover.
 Facilitate strong customers’ base, visibility in the Market and institute a
strong operational basefor the bank.
 Meet the bank’s vision of being a world class Mortgage and Real estate
provider, and a leading primary mortgagebank in the country.
B. Real Estate Finance PortfolioBase
As outline above, Real estate financing will be pursued with vigor and with high
level of professionalism. Realestate financing within the permissiblelimit of

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CBN would be pursued to develop mass housing, commercialcomplexes and
mall for out night sale to the public. This would be achieved by.
I. Joint venture arrangementwith serious and tested Developers or
II. Real estate financial loan.
A target Real estate Portfolio of N 8billion is being proposed to achieve a good
Risk asset portfolio mix, enhance income generation and expand the banking
operational base.
C. NATIONAL HOUSING FUND (NHF) LOAN. PORTFOLIO N 10 BILLION
The National Housing Fund scheme, being managed by the Federal Mortgage
Bank of Nigeria, is available to all members’ contributors to access through the
Primary MortgageBanks. This fund is the most cheapest and attractive to
prospectHome owners as it has a long repaymenttenor of maximum of
30years.
The bank would striveto leverage on this window of opportunity to expand its
operations and market share. To this end, the bank should
I. Open up a strategic alliance with the management of FMBN; apply and
obtain accreditation to access the funds on behalf of Developers and
Prospectivehomeowners.
II. Since the NHF has a loan limit of N 15billion, the bank should seek for
group off takers with verifiable and stable income source, preferably on
stable paid employment.
III. Collaborate with foreign and local Mass Housing Estate Developers to
deliver the houses to the off takers.
D. DEPOSIT MOBLISATION
The Bank should introduce unique and tailored made products and service
packages to drive its marketing for deposits and maintain adequate liquidity
.Consented efforts should be made to mobilize cheap and stable fund to deepen

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income base. The strategy to achieve this would be team approach, which would
be target driven, with periodic performanceevalution and review.
5. OPERATIONAL EFFECTIVENESS AND EFFICENCY-KEY
PERFORMANCEFACTORS.
I. Risk Asset Quality- i.e. to maintain a high-risk assetquality and low non-
performing loan.
II. Remedial/Recovery Team-Management should striveto maintain a high
risk quality asset. However, a strong and formidable team would be put in
place to monitor loan performances and promptrecovery, to minimize loan
losses.
III. Appropriateloan loss provisioning in line with the prudential guidelines
would be maintained
IV. Collateral security and Documentation- Should ensure all risk assets are
properly documented and full collaterised.
V. Business Development- there should be concerted efforts to continually
review and expand all income generating services and Bank products to
ensuremarketability and patronage.
VI. Minimize operation cost.
VII. Staff Quality-Should hire experienced and committed staff, embank on
staff continuous staff training and retraining to have a well motivated and
dedicated human capital to drive the operations of the bank and achieve
set targets.
VIII. Information Technology - A robustinformation Technology structureBE
place to facilitate speed, accurateand timely information for management,
customers and regulatory authorities purposes.

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6. CORPORATE GOVERNANCE
The Bank would strive to maintain a good corporateGovernancefor effectiveness
and efficiency in the Bank policy formation supervision and control at all level of
decision making. This could be achieved at the Board and management level. Itis
proposed that there should be a strong board oversighton management key
decision areas of operations. For example, The Bank management decisions and
approvals could be generated at the sectional committee levels, reviewed at the
management committee level before final approvalfromthe appropriateBoard
committee.
7. CONCLUSION.
Itis envisioned that in the overall operations of the Mortgage Bank, the Board of
Directors and Management guiding principles would be centered on creating
values, trust, respect, fairness, co-operation, compliance, sound corporate
governancesocial responsibilities and creating wealth for all stakeholders,
customers and shareholders.
JOHNSON AKHIDENOR, B.SC, ACIB, MBA.