THE ROLE OF FEDERAL MORTGAGE BANKER IN ACHIEVING ECONOMIC DEVELOPMENT OF NIGERIA

By

ENYINNAYA BEATRICE O.

Presented To

Department of Accountancy

PREFACE

The Role federal mortgage banker in achieving Economic Development in Nigeria" is a term paper presented by a student of Institute of Management and Technology (IMT). This term paper is arrange in such a way that one chapter flows and usually leads to another.

Organize in three chapters, the study starts in chapter one with the introduction of mortgage bank in Nigeria. This includes the definition, objectives, significance of the study etc.

Chapter two is talking about the reasons for the establishment of federal mortgage bank, its organizational structure mode of operation and the rest of the whole chapter three is all about summary of findings and conclusion.

However, this work is produce for everybody especially students in higher learning.

TABLE OF CONTENT

COVER PAGE I

TITLE PAGE II

APPROVAL PAGE III

DEDICATION IV

ACKNOWLDGEMENT V

PREFACE VI

CHAPTER ONE

INTRODUCTION 1

1.1 BACKGROUND 1

1.2 BACKGROUND OF THE STUDY 3

1.3 OBJECTIVES OF THE STUDY 6

1.4 SIGNIFICANCE OF THE STUDY 6

1.5 SCOPE AND LIMITATION OF THE STUDY 8

1.6 DEFINITION OF TERMS 9

CHAPTER TWO

LITERATURE REVIEW 12

2.1 REASONS FOR THE ESTABLISHEMENT

OF FEDERAL MORTAGE BANKS 12

2.2 OWNERSHIP AND CONTROL OF

FEDERAL MORTAGE BANK 17

2.3 THE MODE OF OPERATION 19

2.4 OPERATIONAL GUIDELINE 21

2.5 THE SOURCE OF FUNDS 22

2.6 CONTRIBUTION OF MORTAGE-

BANKS IN ACHIEVING ECONOMIC-

DEVELOPMENT IN AN ECONOMY 23

2.7 PROBLEMS AND PROSPECTS 26

CHAPTER THREE

3.1 SUMMARY OF FINDINGS 32

3.2 CONCLUSION 35

3.3 RECOMMENDATION 36

3.4 REFERENCE 38

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Mortgage banks are financial houses that act as specialist in providing money and facilities which encourage people, business firms to get their own houses without first saving the fund required. Housing is one of the important factors that determines urban firms and constitute the single most serous problems facing large cities in Nigeria today. In the 1950 ^s the need to finance housing in Nigeria remained so small, mainly because of lo urbanization level.

The buoyancy of the Nigeria economy in the 1970^s and the uneven spatial distribution of industrial development, accelerated the rate of urbanization in Nigeria. The hereto uncontrolled and unplanned urbanization forms. There exist today a yawning gap between the demand and supply of decent accommodation. The consequence of excess demand over supply, was high rent and the growth of informal rationing system which discriminated against the poor to the extent that over half of the urban population in Nigeria live in slump.

Against this background and considering the fact that housing provides the physical frame work in which man's, human, social economic and natural resources and realized, entrenched and integrate; it becomes obvious that adequate housing deserves great attention.

In realization of the importance attached to housing the federal Government of Nigeria established the federal mortgage back of Nigeria in the year 1977 to take over the Assets and liabilities of the Nigeria Building society (NBS), which had been in operation in the country. Perhaps the federal mortgage bank of Nigeria had the initial capital of N 20 Million and was later received to N 150 million in the year 1979.

1.2 STATEMENT OF PROBLEMS

Considering the fact that housing provide the physical frame work in which human, social, economic and cultural resources are realized, entrenched and integrated it becomes obvious that adequate housing deserved grate attention;

However, there are problems inhibiting the federal mortgage banks of Nigeria; such problems are as follows:

1. Lack of adequate

2. high rate of inflation

3. inadequate infrastructural facilities

4. Internal financial management constraints.

LACK OF ADEQUATE FINANCE: Lack of adequate finance constitutes a fundamental center-piece without as well organized an efficient housing system. Nigeria present housing financial system is severely under-developed and ill-equipped to mobilize and channel saving to the housing section. This is because it is difficult to mobilize substantial financial resources for channeling fund into housing sector.

HIGH RATE OF INFLATION: High rate of inflation is a problem to federal mortgage finance. Inflation has effected all sector of the economy especially building materials. It also happens that when a customer applies for a housing loan from federal mortgage finance, this will take more than six month before approving loan to the loan applicant. This cumbersome process for obtaining housing or property loan from most of the mortgage finance houses in Nigeria leads to increase in the value of the project so that the loan sector will be tempted to divert the loan to another purpose.

INADEQUATE INFRACTRUCTURE FACILITIES: inadequate infrastructure facilities create a very problem to federal mortgage finance. Some state in Nigeria most of the branch offices are located in places where there is no accessible road, no electricity etc. in view of these, most of the workers refuse going on transfer to such areas.

INTERNAL FINANCIAL MANGEMENT CONSTRAINTS

Internal to the bank, was lack of central cash flow in the area of Assets management and accounting operation which always restricted the banks ability to maintain a sound financial position. There was unregulated disbursement of funds which affected the liquidity position of the bank adversely.

1.3 OBJECTIVES OF THE STUDY

There are reasons that motivate the establishment of federal Mortgage bank of Nigeria. These reasons helps to improve the existence of mortgage institution Nigeria.

(1) To provide credit facilities to all mortgage institutions for transmission to individual borrowers at subsidized rates.

(2) To finance the implementation of government housing programmes

(3) To accept deposit from the public through savings account facilities.

1.4 SIGNIFICANCE OF THE STUDY

The federal mortgage institution plays a vital role in the economy especially in financing housing. In realization of the importance attached to housing. In realization of the importance attached to housing, the federal government of Nigeria established the federal mortgage bank of Nigeria in the year 1977 to take over the assets and liabilities of the Nigeria Building society which was the first mortgage bank in the country.

The provision of long term facilities to mortgage institution in the country at such rates and upon such terms as may determine by the board in accordance with the policy directed by the federal executives council being rates and terms designed to enable the mortgage institution to grant comparable facilities to Nigeria individual desiring to acquire houses off their own.

To make provision with the approval of the commissioner, at competitive commercial rates of interest of credit facilities to commercial property developers, state developers and developers of others and other specialized type of building.

1.5 SCOPE AND LIMITATION OF THE STUDY

The process of deposit or credit creation of banks have been examined, but that does not imply that the banks have unlimited power to create credit. The mortgage finance institutions are faced with some constraints while creating deposit. The federal mortgage bank has the ability to provide on lending facilities on long-term bases for estate developers. They also provide direct funding to Nigerian who is interested in estate development. Thus, some of restrictions faced by mortgage banks are as follows:

1. Banking Habits

The banking habits of the people govern the power to banks to create credit. Banking habit means the willingness to use the facilities of banking system to lend money to people.

(2) The level of income of the bank determines the ability of the bank to create credit.

(3) Willingness of the bank to lend: all banks participating in the banking system must be willing to make loan available to needy and qualified borrowers of the credit creation process is to function effectively unwillingness on the part of the federal mortgage bank to lend money will unit the credit creation capacity of the bank.

1.5 DEFINITION OF TERMS

1. The federal mortgage Bank: This is a financial houses that act as specialist in providing money and facilities which encourage people, business firms to go their own houses without first saving the fund required.

2. Mortgage: This simply means a home loan. A legal agreement by which a bank or similar organization lend money to an individual to buy houses etc. and should be repaid back over a particular number of years. Thus, this means the sum of money borrowed.

3. The Mortgagee: Is a person or an organization that lends money to people o buy houses etc,

4. Mortgagor: A person who borrow money from the federal mortgage bank of Nigeria or a similar organization to buy a house, etc.

5. Urbanization: This simply means an area having a lot of cities, towns where people is living and working.

6. Disbarsement: This means to pay money to somebody from the amount that has been collected for a purpose.