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2. Access to Credit
2.1 Banks
2.2 Other Sources
2.3 Credit Bureau
In-Country Assessment Information

2. Access to Credit – Weak

Goal – An efficient, transparent financial sector that provides a broad range of citizens with access to multiple forms of competitive credit so that they can start businesses, build wealth, and purchase property

 
2.1 Banks

Core Question: Are traditional banking services robust and extensive enough to serve the needs of the population to help them build wealth and purchase property?  No – Weak, although there are plenty of microfinance organization in Nigeria, it is difficult to get a bank loan and the country’s bank services are far from sound.

 

Access

2.1.1   How easy is it to obtain a bank loan? Very Weak – Ranking 121st out of 144; Score 2.14 out of 7, Trend ­

 

Soundness

2.1.2   How sound are the country’s banks? Very Weak – Ranking 129th out of 144; Score 3.94 out of 7, Trend 

Source: The Global Competitiveness Report 2012, World Economic Forum
http://www.weforum.org/issues/competitiveness-0/gci2012-data-platform/


2.1.3  Microlending

Status – Strong

2.1.3.1          Microfinance allows citizens without traditional creditworthiness to build a credit history. How many microfinance institutions are operating in the country? 76

LAPO-NGR                                                                                                          www.lapo-nigeria.org/web/
Fortis MFB                                                                                                         
www.fortismfb.com
Integrated Microfinance Bank                                                           
www.imfb-bank.com/
Grooming Centre                               
                                                           www.groomingcentre.org/
Self-Reliance Economic Advancement Program                  http://www.seapmicrofinance.org/index.php

 

2.1.3.2                    What is the number of active borrowers per institution?

LAPO-NGR                                                                                                 421,126
Fortis MFB                                                                                                   16,965
Integrated Microfinance Bank                                                    23,304
Grooming Centre                                                                                193,850

Self-Reliance Economic Advancement Program           266,967

Source: Microfinance Information Exchange www.mixmarket.org/mfi

 

 

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2.2 Other Sources

Core Question: Are entrepreneurs free to raise capital outside the banking system including venture capital and/or by issuing stock in a well-regulated stock exchange? No – Weak, although Nigeria’s financial system has undergone rapid transformation and consolidation, limited access to finance hampers entrepreneurial activity.

 

Financial Freedom

2.2.1   How much control does the government exert over financial services? Weak for entrepreneurs – Score 40 out of 100 – Considerable government control, Trend=

Source: 2013 Index of Economic Freedom, Heritage Foundation
www.heritage.org/index/Country/Nigeria

 

Venture Capital

2.2.2   How easy is it for entrepreneurs to find venture capital?
Weak – 72nd out of 144 Trend­; Score 2.53 out of 7

 

Equity Investors

2.2.3   How easy is it to raise money by issuing shares on the stock market? Strong – 51st out of 144 Trend ; Score 3.78 out of 7

Source: The Global Competitiveness Report 2012, World Economic Forum http://www.weforum.org/issues/competitiveness-0/gci2012-data-platform/

 

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2.3 Credit Bureau

Core Question:         Is comprehensive credit information available through public and private credit bureaus? Yes – Strong, strength of the Legal Rights Index is very high but implementation just began in 2009 which results in low public and private credit registry coverage.

Overall Ranking 23rd out of 185, Very Strong, Trend

 

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Coverage

2.3.1   What is the depth of information available in credit bureaus? Strong – Score – 4 out of 6 with a higher number indicating more information is available

 

Public

2.3.2   What is the extent of public credit registry coverage? Very Weak – 0.1% of the adults

 

Private

2.3.3   What is the extent of private credit registry coverage? Weak – 4.1% of adults

Source: 2013 Doing Business  – Getting Credit, World Bank
www.doingbusiness.org/ExploreEconomies/?economyid=143

 

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In-Country Assessment Information
FQ 4.              How available are mortgage loans for purchasing property, who is the typical user and what are the prevailing trends?

The Federal Mortgage Bank of Nigeria (FMBN) was created to serve as a wholesale and apex housing finance institution in Nigeria. Other institutions created with the responsibilities to serve as housing finance include the Primary Mortgage Institutions (PMI) such as Building Societies, Housing Associations and Credit Unions.

Among the major responsibilities of the FMBN are the provision of long-term credit facilities to mortgage institutions in the country; encouragement and promotion of development of mortgage institutions at state and national levels; supervision and control of the activities of mortgage institutions mobilization of savings particularly through the National Housing Fund; promotion of investment in the manufacturing of building materials and promotion of research on construction and mortgage finance.

The role of the FMBN has also been expanded to back the mortgage finance market with the capital market and develop the viable secondary mortgage market and to mobilize foreign funds into the housing finance sub-sector.

In a field survey, 97.5% of the PMI customers rated national economic climate as one of the most severe problem. Other results showed that 89.38% felt the National Housing Fund policy itself is a problem and 75% the structure of the PMIs. However all the customers (100%) indicated that the high cost of labor and building materials are major obstacles to the activities of the PMIs in housing finance in Lagos.

76.88% indicated that public apathy about PMIs and distrust as problem. 91.88% indicated that difficult access to land is a major problem while 88.75% indicated that the process involved in land documentation is a problem. Those with the view that poor saving habits of the public and the low capacity of the public to saving due to low income constitute 81.88%. Poor collateral and poor security to loan are obstacles from the view of 85% of the respondents.

Source: Challenges of Housing Finance by Primary Mortgage Institutions in Lagos Nigeria, University of Lagos, 2008, www.gla.ac.uk/media/media_129719_en.pdf

 

FQ 5.              What are the interest rates, term and loan-to-value ratios for available mortgages?

NATIONAL HOUSING FUND LOANS (NHF):

Interest rate is no more than 6%; the maximum repayment period shall be 30 years; loan-to-value ratio is based on the amount of loan

N15, 000,000.00 – 30%

N10, 000,000.00 – 20%

N5, 000,000.00 – 10%

Applicant must be a contributor to the National Housing Fund for a minimum period of six months.

Applicant must have satisfactory evidence of regular flow of income to guarantee loan repayment.

Estate Development Loan (EDL):

Interest rate is 10%; term is 24 months; loan-to-value ratio is based on the type of borrowers

Private developer: up to 70%

Housing Corporations and Government owned development projects: 100%

Membership of the Real Estate Developers Association of Nigeria (REDAN) is part of the conditions for accessing the EDL.

Source: http://www.fmbn.gov.ng/home/doc.aspx?mCatID=1195

http://www.fmbn.gov.ng/home/doc.aspx?mCatID=1194
FQ 6.              Are there any informal barriers to borrowing such as for women or minorities?

Where compensation is compelled to be the head or leader of the family or community as enshrined in the Land Use Act (LUA), to be disposed of in accordance with customary law and customs, the women’s rights in land is weakened as they have limited participation in customary land management institutions. In most Nigeria societies, chiefly authority is generally ascribed to patriarchal lineage, and most major decisions are taken by them. This is also true of the administration of the customary right of occupancy under the LUA defined as being administered according to nature, law and customs of the people. Thus, while women have ways of bringing their views to the attention of customary land management institutions, they usually do not participate in decision-making. As a result, community decisions are made without explicit reference to women’s knowledge or priories.
Source: Women and Land Rights Reforms in Nigeria, Bioye Tajudeen Aluko and Abdul-Rasheed Amidu, March, 2006 www.fig.net/pub/accra/papers/ts09/ts09_04_aluko_amidu.pdf