An Empirical Study Of Mortgage Banks Contributions To Housing Development In Nigiera A Case Study To Federal Mortgage Bank Of Nigeria

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This research work as believed is another contribution to mortgage banking literature which will be very usefully particularly to future researchers on this topic and those already engaged in the banking industry. The idea behind this project research work entitled Mortgage Banks  contribution to Housing Development in Nigeria is inherent from the crucial and very important nature of housing to every right thinking human being. Professor Abraham Maslow in his “hierarchy of needs – a most widely accepted description of human needs of the general population classified food, shelter and clothing as the basic needs of every man. Every human being is a born land lord: therefore house ownership is a birthright that must be enjoyed by every man. The contributions of mortgage banking to the housing development in Nigeria cant not be over whelmed. The federal mortgage bank of Nigeria (FMBN), the primary mortgage institution (PMLS) and other institutional bodies involved in housing delivery have performed numerous function in the general effort to provide affordable residential houses for the Nigeria population. However, a remarkable bottleneck facing the Nigeria housing finance sub-sector is the delay by the  apex mortgage institution to disburse the National housing fund loan through the primary mortgage institution for on-lending mortgagers. To increase the available hosing stock, the apex Bank (FMBN) should ensure the constant supply of loans to Nigerians for the purpose of buying building or improvement of residential houses. The research study therefore is going to show the actual contributions of mortgage banking to housing development in Nigeria. It will equally show the problems faced by the (PMLS) in their housing finance and delivery effort. In trying to state the problems and prospects the researcher utilized both primary and secondary data. The work is structured in times five distinct chapters and writhen in simple language to enable readers secure a true picture of the information transmitted.




Title page                                                                         i

Approval page                                                                 ii

Dedication                                                                       iii

Acknowledgement                                                           iv

Abstract                                                                          v

Table of contents                                                             vi


INTRODUCTION                                                   1

1.0      Background of the study                                        1

1.1      Background information of federal mortgage

bank of Nigeria                                                        2

1.2      Statement of problem                                             5

1.3      Purpose/objective of the study                               8

1.4      Research questions                                                 10

1.5      Research hypotheses                                              11

1.6      Significance of the study                                 13

1.7      Definition of terms                                                  13

References                                                               18


2.0      Review of related literature                                     19

2.1      Mortgage banking in the colonial period                19

2.2       Mortgage banking during the post

independence period (1960-1977)                           21

2.3      The strategic out look of federal mortgage bank

of Nigeria                                                                 26

2.4      Institutional framework for housing delivery         29

2.5      Function of the federal government                        30

2.6      Structure of the Nigeria mortgage market.            35

2.7      Trend in building materials and construction cost 38

2.8      An overview of land use degree                               42

2.9      Salient points in mortgage lending                         43

2.10    Hindrances to the contributions of mortgage

banks in housing development in Nigeria              46

2.11  Prospects of mortgage banks in the development

 of housing in Nigeria48

References                                                               50


3.0      Research design and methodology                         51

3.1      Area of study                                                           52

3.2      Population of study                                                 52

3.3      Source of data                                                         53

3.4      Primary sources of data                                          53

3.5      Secondary sources of data                                      54

3.6      Instruments of data collection                                54

3.7      Method of data presentation                                   55

3.8      Samples and sampling techniques                         56

3.9      Methods of data analysis                                        56


4.0      Data presentation and analysis                             58


5.0      Findings, recommendation and conclusion           79

5.1      Summary of findings                                              79

5.2      Recommendation                                                    81

5.3      Conclusion                                                              84

5.4      Suggestions for further researcher                         86

5.5      Limitations of the study                                         87

Bibliography                                                           89

Questionnaire                                                         90







The Nigeria building society (N.B.S) was established in 1956 as a federal savings scheme for members of the public. Under the popular saving scheme, the saver was required to deposit in the account on initial sum of N5 (five naira) at opening. The save may subsequently deposit in the account as much as he can from time to time.

The popular saver received interest of four percent on the account and could draw up to four hundred naira (N400.) per amount. Larger drawing would require a month notice to the society.

Other special packagers were equally handled by the Nigeria society. One important service rendered by the NBS was home purchase mortgage loans.

Under the loan scheme the NBS enabled Nigerians to acquire houses with loans payable over many years up to maximum of twenty (20) years. Applicants who benefits from the loan were expected to immediately bear a small portion of the interest was spread in such a way that the beneficiary completes the payment in not later than the age of 55 years. Repayment was usually in Monthly installments.

In 1977, the Nigeria building society was reconstituted and renamed the federal mortgage Bank of Nigeria (FMBN). The duty of the federal mortgages bank as the sole institution at the federal level for encouraging the flow of funds from various sources to the housing industry through the primary mortgage instructions (PMIs)

The FMBN was set up with an authorized and paid-up capital of N150 million.               


The federal mortgage bank of Nigeria (FMBN) was established in 1956, known then as the Nigeria building society (NBS), a joint venture of the common wealth development corporation and the federal and Eastern Government of Nigeria.

Following the introduction of the indigenization policy, the federal government, by indigenization Act 1973, under took 100 percent ownership acquisition of the NBS and consequently renamed it the federal mortgage banks of Nigeria (FMBN).

The Bank operates as an effective vehicle for increasing the mobilization of long-term funds lending volume and expansion of mortgage lending services to all segments of the Nigeria population.

The FMB started the management and administration of the contributory savings scheme known as the national housing fund (NHF) established by Act 3 of 1992.

The NHF is a pool that mobilizes long-term funds from Nigeria workers, banks, insurance companies and the federal government to advance loans at soft interest rates to its contributors.

 In 1994, the federal mortgage Bank of Nigeria with the promulgation of the FMBN Act 82 (1993) and the mortgage institutions Act 53 (1989) was accorded the status of the Apex mortgage institution and thus ceded its retail function to an autonomous company, federal Mortgage finance limited (FMFL) which was carved out of the FMBN, itself fully owned by the federal government of Nigeria.

Under the reform of the housing sector based of the FGS 2002/2006 National policy on Housing and Urban development the FMBN was restructured into a federal government sponsored enterprise (FGSE) with more focus on secondary mortgage and capital market functions. It plays the critical role of developing a robust mortgage finance on secondary mortgage and capital market functions. It plays the critical role of developing a robust mortgage finance system for the country.

To meet its mandate, the FMBN has shifted operation, emphasis to expand its functions from only social housing on-lending under the NHF to include commercial no-lending for housing commercial mortgage refinancing mortgage purchasing and ware housing and mortgage-backed securitization.

Under this mandate FMBN finances mortgages created by primary mortgage institutions (PMI) under the National Housing fund scheme and also gives estate. Development loans (EDL) to real estate developers.

The Banks overall mandate is to promote the delivery of affordable and modern houses to Nigerians.                                 


Shelter has been universally accepted as the second most important essential human need after food.  Housing in its entire ramification, is more than shelter since it embraces all social services and utilities that go to make community, a neigbourhood a livable environment.

The problem of housing in Nigeria are enormous and exhibit apparent and marked regional difference. In most of our urban center the problem is not only restricted to quantity but also the poor quality of available hocusing units and the environment.

The scenario is only slightly different in the rural areas where the problem is primarily that of quality of hosing and inadequate infrastructural facilities like road, drawings, water supply and so on.

From available statistics, the magnitude of housing problem in the urban areas of the country is such that five million new housing units will be required to meet excising and future needs up to the year 2010 A.D.

The housing situation in the rural areas of the country reside is ever more statistics shows that about thirty-two million (32, million) new housing units are required to meet the housing needs in the rural area of Nigeria by the year 2010 A.D. however, it is observed that the housing problem in the rural areas in mainly that of housing problem in the rural areas in mainly that of qualitative improvement in terms of sanitation and infrastructure for existing housing stock in these areas.

The amount of the essential services may be approximated to new housing need of the areas to some eight million housing units.

At this juncture, one would like to know if the current increase in mortgage banking business is actually contributing to the housing development in Nigeria.

Again, one would like to know the types of person that can apply for the national housing fund loan and what the purpose of the loan is like.

Following the high cost of building or purchasing a residential house/home, people may like to ascertain the maximum limit loanable under the National Housing fund scheme.

Equally, information to how the loan is repaid will be beneficial to potential mortgage and readers alike.

It will be interesting equally to indicate the extent reached by various levels of government in contributing to the housing development in Nigeria.

The contributions made far by the FMBN towards housing delivery in Nigeria shall be examined and besides the relevance of the National Housing policy towards the development of housing in the country shall be analyzed.

Finally, this work will reveal other information a reader or a potential mortgage may inquired for in the general mortgage business in Nigeria.                       


The objective of this study is to locate how far the establishment of federal mortgage Banks of Nigeria has achieved its purpose of aiding Nigeria citizens to fulfill their aspirations of owning decent and affordable houses.

In an attempt to achieve this goals or objective the government gears towards the attainment of the following policy objectives, which includes

Ø    Active participation in housing development by all tiers of government and private sector (s).

Ø    Institutions within the system to render operations more responsive to mortgage demand.

Ø    Housing investment which satisfy basic needs

Ø    Greater participation by private sector in housing delivery especially through the primary mortgage institution.

Meanwhile, the objectives of this study are as follows:

Ø       Mobilization of funds for the provision of affordable residential houses for Nigerians.

Ø    Encourage programs that would enhance housing financing among how and medium income earners. The fund is also to service that non-salaried informal sector.

Ø    Provide long term loans to mortgage institutions for lending to contributors of the fund.  


The research questions here would serve as guide in the search for the solution to research problem. As a map that guides this work, the following research questions calls to mind:

ü    Do you think that the incorporation and activities of your establishment has helped to alleviate the problems of shortage of housing in Nigeria?

ü    Has there been an increase in your bank’s deposit since the inception of the National Housing fund loan scheme?

ü    Would you attribute the increase to the launching of the new national housing policy?

ü    To what extent have people applied for NHF loan through your mortgage bank?

ü    Has the non-disbursement of the NHF loan by the federal Mortgage bank of Nigeria (FMBN) for on-lending through the primary mortgage banks negatively affected the mortgage hope and aspirations of building or buying their own residential houses before the year 2010 AD?

ü    Has the FMBN enhance facilities to absorb the expected rush by applicants in the event of the on-coming disbursement of National Housing fund loans?

ü    Has the hopes and aspiration of Nigerians towards building or buying their own houses made work at your bank (FMBN) more burden some?        


Hypotheses is a prerogatives of the researcher by which the researcher makes certain absorption about the subject of the research in Null and Alternate statement with which the researcher goes to the field of study to ascertain the position on the ground.

A critical analysis and review of the problem associated with the mortgage banks contributions to housing development in Nigeria have led to thee hypotheses which will be tested in the course of the research.

The following hypotheses are to be considered

Hi: Mortgage banks have helped to solve the housing problems in Nigeria.

Ho:   Mortgage banks have not helped to solve the housing problems in Nigeria.

Hi:   The inception of the National housing fund loan scheme has brought an increase in mortgage banks deposit.

Ho:   The inception of the National housing fund loan scheme has not brought an increase in mortgage banks deposit.

Hi:   Mortgage banks have helped to promote and support responsive credible housing services in Nigeria.

Ho:   Mortgage banks have not helped to promote and support responsive credible housing services in Nigeria.         


 This work will be of great use to varying group of people. The result or findings of this research work will benefit the following group of people.

ü    Nigeria in need of residential houses

ü    The case organization (FMBN)

ü    The government at different levels and

ü    The reading public alike. 


(a)      Mortgage:

A mortgage is an agreement in which money is lent by a building society, a bank for buying of house or other property, the property being the security.

The document containing the particulars of this transaction is called mortgage agreement of mortgage Deed.

Sometimes, the term mortgage is descriptive as the sum of money payable monthly under the transaction. Also you can speak of mortgaging something. When used this way, mortgage then mean to give somebody the legal right to take possession of (a house or some other property) as a security for payment of money lent.    

(b)      Mortgage

A mortgages is person or firm that lends money in a mortgage agreement.

(c)       Mortgage

A mortgage  is one who borrows money in a mortgage agreement. However mortgage of lend may either be

v    Legal

v    Equitable

i.            LEGAL MORTGAGE

A mortgage is legal when it vests the estate in the mortgage with qualification for recoverance on repayment. That is, the lender has title to the properly until the mortgage is repaid, when title reverts bank to the borrower


A mortgage is termed equitable when title deeds are deposited with the lender but interest in the title does not pass per se (by itself)

(d)      Issues worthy of note mortgage transactions.

(i)          A mortgage family land by ammeter who has improved on it is void in law.

ADAGU V FABBOZA (1952) HNLR 110. He can only mortgage his own portion after due partitioning 

(ii)         A mortgage property cannot be sold until mortgage deed is registered. However, the registration of mortgage deed can be done at any time provided mortgage pays penalty for late registration. ANUKWU V. STANDARD BANK (1972) ULR 106

(iii)      You cannot prevent a mortgage from redeeming the mortgage at any time he deems fit provided he pays back the borrowed sum plus related interest

(iv)       The mortgage can foreclose and sell the property if the mortgage fails to perform his part of the contract.

(v)         Once the mortgage’s power to sell becomes  due, he does not require the assistance of the court to sell the mortgaged property as long as the right is exercised in good faith.   

(e)        Federal Mortgage bank of Nigeria (FMBN) this is the mortgage bankers bank sponsored by the federal Government. It was established in 1977 with an authorized and paid up capital of N150 million. It function as the sole institution at the federal level is encouraging the flow of funds from various sources  to the housing industry through the primary mortgage institutions.

(f)        Primary mortgage institutions (PMIS)

They are the other institutional components of the finance market in terms of mortgages. They includes: the mortgage banks, building societies etc.      

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An Empirical Study Of Mortgage Banks Contributions To Housing Development In Nigiera   A Case Study To Federal Mortgage Bank Of Nigeria