* Fund will aim to spur a secondary market for mortgages
* Nigeria faces 17 million housing shortage
* Mortgage lending just 0.5 percent of GDP
By Tim Cocks
ABUJA, Jan 22 (Reuters) - Nigeria has put $300 million worth of World Bank aid money into a mortgage-backed guarantee that it hopes will boost lending via the creation of a secondary market, the finance ministry said on Wednesday.
Africa’s most populous country and second biggest economy suffers a woeful housing shortage, with somewhere between 16 and 20 million new homes needed just to keep up with current demand, according to official figures.
Mortgage lending is a small portion of the overall property market. There are about 20,000 mortgages open in Nigeria, the finance ministry says, none of which are tradable because of a lack of liquidity. None extend beyond 10 years.
The mortgage debt-to-GDP ratio in Nigeria is under 0.5 percent, compared with 72 percent in the U.S. and over 30 percent in Malaysia and South Africa, government figures show.
A Federal Mortgage Bank was launched last year to provide mortgages to those who can’t get them from banks, but this new fund will aim to spur lending by banks to improve liquidity.
Finance Minister Ngozi Okonjo-Iweala wants the fund, which is modelled on U.S. agency Fannie Mae, to unlock mortgage lending by enabling mortgages to be securitised and sold.
Of the total $300 million fund, $250 million will be held in reserve to guarantee mortgages in case of default. Another $50 million is reserved for lower income, poor households.
The fund also aims to lower mortgage lending rates -- currently around 20 percent for a 10-year loan or up to 30 percent for households with lower credit ratings.
“The $300 million is a drop in the ocean but it’s a move that is important to activate the secondary market,” said Francis Ikenga, head of research at Nigeria’s Fidelity Bank.
He said that in the commercial hub of Lagos the average cost of a mortgage is 40 to 70 million naira ($439,400), with most buyers expected to put down a 30 percent deposit.