The West African nation of Nigeria has an acute shortage of Mortgage Banking Professionals. The recapitalization of the Industry a few years ago further worsened the dearth of skilled professionals. To give readers some perspective, I ask that you visit the website (for those institutions that have) of “leading” mortgage banks and check out their executive management, and even board of directors………then make your decision.
I have been very critical of the Federal Mortgage Bank of Nigeria in recent times, to the extent that I wrote an unsolicited memorandum to “Powers that be”, recommending a new Management for the moribund institution. I shared this on my page some weeks back. I would like to put it on record that the current executive management lacks the vision and skills to turn FMBN around. In my opinion, for FMBN to succeed, the management team will need to be complemented by executives who have credibility in both the capital markets and with regulators. They also need to have a very sound understanding of the entire mortgage banking environment. Mortgage banking stands at a turning point. Institutions that recognize the industry’s new dynamics can transform this challenge into an opportunity. Those that don’t recognize that the world has changed will likely be left behind.
At a recent Housing fair in Abuja, the CEO of a Mortgage Bank said “the challenges facing the industry is unique and should be handled with local content……….he got a lot of applaud for this……..It was at this moment that I came to the conclusion that the future of the industry, with the current players, is very very blink……In my hotel room, I wept and mourned the death of the industry.
Housing Finance Institutions operating in Nigeria need a different class of executives – those who have the experience and sophistication to work productively with regulators. Equally as important, the next generation of mortgage banking executives will need substantially more capital markets and regulatory experience. Mortgage banking executive teams will also be required to build robust risk management infrastructure and strengthen their commitment to best practices, which is almost nonexistent today, as evidenced with the high percentage of non perfuming loans, unauthorized advances and insider loans. For the avoidance of doubt, there is a high correlation between bank failure and lending to insiders.
I can say authoritatively that Hundreds of Millions of naira are loaned on cozy and potentially illegal terms to mortgage bank directors and their top lending executives. Scores of millions more have gone out the door in speculative real-estate loans, including tens of million-naira loans to questionable foreign amateur home builders recruited by the bank executives. It is on record that Mortgage Banks in Nigeria keep granting construction and development loans “Associated” Developers and business partner even after regulators’ repeated warnings to set limits on total loans for land acquisition, development and construction.
I should also point out that loans made to insiders does not single-handedly sink a bank, but these loans reflect a corporate culture obsessed with growth at any cost………Furthermore, Bank officers and directors are allowed to borrow money from the institution they oversee — so long as they follow the rules and don’t gain at the bank’s expense by abusing their power. The mortgage banking industry, as a career path, is grossly misunderstood, even by the broader financial services community. The mortgage banking problems over the past few years have created an impression of excessive risk from a professional development perspective. Consequently, executives with the necessary institutional and regulatory expertise not only have other choices in sectors with which they are more familiar, but also need to be better informed about this sector as a promising career path.
In addition to a CHIEF EXECUTIVE OFFICER, the following three “C’s” are very critical for a Mortgage Bank to be successful in Nigeria:
- CHIEF COMPLIANCE OFFICER: charged with instilling a company-wide compliance culture through employee training and education. The chief compliance officer will work closely with the general counsel to minimize regulatory risk. A key responsibility of the position is ensuring that employees adhere to appropriate processes and procedures to keep business activities in compliance with regulatory requirements each day.
- CHIEF FINANCIAL OFFICER: A CFO today needs to do more than accounting and tax work. This individual will act as a senior member of the executive team with the credibility to attract institutional investment and provide transparency in financial reporting and financial management. Access to the capital markets and deep experience with clients, regulators and investors is needed as the industry moves to a new normal.
- CHIEF RISK OFFICER: The CRO provides enterprise-wide visibility and assessment of risk usually inclusive of operational, enterprise and financial elements. By measuring risk across all aspects of the firm, better, more comprehensive decisions can be made by the CEO, board and other leaders. That will improve the allocation of precious resources and bring clarity to risk/returns of various options. A CRO is also an important member of strategy team for the reasons mentioned above.
Where does the Mortgage Banking Association of Nigeria stand in all of this? I will save this for another day. However, MBAN must as a matter of utmost urgency identify, recruit, build, train and retain talents. The mortgage banking industry needs to move quickly to develop a new generation of leaders. Subjective evidence from my personal experience suggests that mortgage banks face an uphill battle in finding the right talent. Moreover, the repeated nature of the mortgage business will continually challenge boards and executives to invest in the next generation of talent when they inevitably face short-term cost pressure due to changes in the housing market or economy……..
Finally, Sonnie Ayere remains the prime candidate for the CEO position in Federal Mortgage Bank of Nigeria.
