Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC) and the Federal Mortgage Bank of Nigeria (FMBN) have reached agreement on a strategic collaboration that will see the development of a robust non-interest mortgage framework. The agreement, reached at the weekend in Abuja, seeks to create and regulate viable, Sharia-compliant financing structures that will enable millions of Nigerians, particularly those excluded from conventional interest-based loans, to access affordable homeownership. With Nigeria’s housing deficit estimated to be over 28 million units, the initiative is a potential game-changer. It directly addresses a key barrier to homeownership: the affordability and religious compliance of mortgage products for a significant segment of the population.
Director General, Securities and Exchange Commission (SEC), Dr. Emomotimi Agama said the SEC would provide the necessary regulatory guidance and framework to facilitate the issuance of Sukuk and other non-interest capital market products to fund mortgages. He said: “Our collaboration with FMBN is pivotal to unlocking long-term financing for the housing sector. By creating a clear regulatory pathway for non-interest mortgage-backed securities, we can attract ethical investors, both domestic and international, to channel funds into this critical area. This will create a virtuous cycle of funding, construction, and ownership”.
Managing Director, Federal Mortgage Bank of Nigeria (FMBN), Mr. Shehu Osidi, said the collaboration marked a critical step in fulfilling the bank’s mandate to provide affordable housing for all Nigerians.
“For a long time, a substantial number of our citizens have been unable to participate in the National Housing Fund (NHF) scheme due to the interest-based nature of conventional mortgages. This partnership with SEC is a strategic response to that gap.” We are committed to developing non-interest mortgage products that are not only ethical and inclusive but also financially sustainable,”Osidi said. Also commenting, housing and finance expert, Mr Ebilate McYoroki , welcomed the development describing it as “long overdue.”
He said: “This is a masterstroke in financial inclusion. It taps into a vast pool of potential homeowners and investors who have previously been on the sidelines. If implemented transparently, it could significantly accelerate the pace of housing delivery in the country”. He said the successful implementation of this framework is expected to not only reduce the housing deficit but also stimulate the construction industry, create jobs, and foster greater financial inclusion, ultimately contributing to national economic growth. Unlike conventional mortgages that charge interest, non-interest financing is based on principles of risk-sharing, asset-backing, and equitable returns.
The models under consideration include Musharakah or Diminishing Partnership, under which the bank and the customer jointly purchase a property. The customer gradually buys out the bank’s share through periodic payments, eventually becoming the sole owner. There is also Ijara or Lease-to-Own, where the bank buys the property and leases it to the customer for a fixed period. A portion of the rental payments goes towards the eventual ownership transfer and Murabaha or Cost-Plus Sale, through which the bank acquires the property and sells it to the customer at a pre-agreed markup, payable in installments.
Source- The nation.ng
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