FG urged to redeem guarantee on housing fund



The Federal Government has been urged to redeem its guarantee on the Series 3 Bond which is maturing on May 24, 2015 with obligation to pay N24.564 billion to Note holders.

According to the President of Real Estate Developers Association of Nigeria (REDAN) Rev. Ugo Chime passing the buck to Federal Mortgage Bank of Nigeria (FMBN) at this stage will not augur well for the country.

The FGN Guarantee for the Mortgage-Backed Bond is irrevocable and un-conditional therefore Federal Government has to redeem its guarantee. Failure will cause the Nigerian bond market and FGN reputational damage

It would be recalled that President Olusegun Obasanjo initiated the much-celebrated Federal Government’s N100billion mortgage-backed bond, the desire was to ensure success of the sale of Federal Government’s non-essential residential houses in the Federal Capital Territory to public servants under the monetization policy of that administration.

The five-year bond was initiated in 2007 to ensure success of the sale of federal government’s non-essential residential houses in the Federal Capital Territory (FCT) to public servants.

FMBN and its issuing house sold the first tranche of N26 billion in 2007. Impressed with the outcome, Messrs FMBN SPV Issuer Limited in 2012 issued another N6billion notes by way of private placement to qualified institutional investors.

The Series 2 Fixed Rate Notes issued under the N100billion Residential Mortgage Backed Securities Programme which is sponsored by FMBN, is 100 percent guaranteed by the Federal Government of Nigeria. An application will be made to list the Series 2 Notes on the Nigerian Stock Exchange.

Come May 24, 2015, the Series 3 Bond will be maturing with obligation on the Federal Government to pay a whopping N24.564billion to Note holders; and failure to so do at maturity, will lead to the call of FGN Guarantee that backed the transaction. Such an action will spell doom for the country in local and offshore financial circles.

Already, Co-ordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala has reportedly directed FMBN to sell off its assets to redeem the guarantee.

But Chime posits that the government should get its acts together; make sure it stands up to this challenge and also go further to inject more funds into the FMBN and even restructure it if they so deem fit.

He said “On this bond issue, we need to look at some aspects. Where is the money? Was it injected into the NHF? This money should have been used as seed fund to assist the Federal Mortgage Bank of Nigeria (FMBN) to make houses more affordable.

“I don’t think that at a time when the government should be thinking of beefing up the capital base of FMBN it should be asking the bank to sell off its assets. It is gross dereliction of duty to the masses. This entire controversy is a distraction at this moment. Government should

“The Federal Government should pay the money that is due in a few days as this date has not come to them as a surprise. There are no assets for the FMBN to sell off to be able to meet the deadline, even if there were how many days will it take to do so and meet up with the deadline?”

Chime said the government has used privatisation to remove safety nets from the common man and describes the bond controversy as another attempt to further make the common man suffer adding, “People are contributing 2.5 per cent to the National Housing Fund and over 90 per cent of these people cannot access the NHF loans due to poor funding by the same government. Government should live up to its responsibility as far as this bond issue is concerned”.

Source : SunOnline

Tags: No tags

Comments are closed.