2000年-世界发展银行全球_Nigeria___Financial_Sector_Review_Volume_3_Non-Bank_Financial_Institutions_and_Markets_92页_410kb

Nigeria Financial Sector Review - Volume 3: Non-Bank Financial Institutions and Markets (May 2000)

Core Content Overview

This document provides an in-depth analysis of the Nigerian financial sector, focusing on non-bank financial institutions and markets. It examines the housing finance sector, the insurance and pension industry, and the money and capital markets, highlighting their structural issues, performance, and policy recommendations.

Key Information and Main Points

7. Housing Finance

A. Overview and Institutional Background

• Pre-1976: Mortgage lending was limited to the Nigerian Building Society (NBS), which was converted to the Federal Mortgage Bank of Nigeria (FMBN) in 1976.
• Post-1991: FMBN was mandated to refinance mortgages, and commercial banks were required to allocate 7.5% of their loans to real estate or fund FMBN.
• Reforms: Decree No. 53 of 1989 introduced Primary Mortgage Institutions (PMIs), modeled after British building societies, to develop a competitive housing finance sector.
• NHF Creation: Decree No. 3 of 1992 established the National Housing Fund (NHF) to subsidize affordable mortgages and support PMIs.
• Funding and Interest Rates: NHF is funded by 2.5% of employees' basic wages, with 4% annual returns. Banks were supposed to fund 10% of their loans into the NHF, and insurance companies 20% and 10% of their premiums, respectively.
• Performance: The NHF has not been effective, with low disbursement rates and high administrative costs. It is seen as an unsustainable "lottery" due to the limited number of beneficiaries compared to contributors.
• Challenges: PMIs have not been viable, with many being dormant or insolvent. They face high costs of funds, inadequate regulation, and lack of deposit insurance. The housing sector has not contributed significantly to economic growth, with housing investment representing only 1.7% of GDP in 1994.

B. Primary Mortgage Institutions (PMIs)

• Role: PMIs were meant to be specialized institutions to mobilize household savings and originate mortgage loans.
• Status: By 1999, only 74 PMIs regularly reported to the CBN, and fewer than 20 were actively operating.
• Capital Requirements: Minimum paid-in capital was set at N100 million in 1999, with a two-year compliance period.
• Lending Practices: PMIs mainly offer short-term, high-interest loans (often over 30%), with limited mortgage lending. They rely heavily on current accounts and short-term deposits.
• Regulatory Issues: There is ambiguity in the regulatory framework between CBN and FMBN. CBN has taken over supervision, but the process is slow and lacks coordination.
• Recommendations:
  • Revise the 1989 PMI Decree to align with CBN's regulatory framework.
  • Expand authorized PMI activities in the housing sector.
  • Avoid imposing minimum mortgage loan proportions in total loans.
  • Consider deposit insurance for PMIs if they are to survive.
  • Accelerate de-licensing of dormant and non-compliant PMIs.
  • Improve PMI supervision through off-site and on-site inspections.
  • Transfer statutory reserves from PMIs to CBN.
  • Close the FMFL due to its poor performance and lack of legitimacy.

C. FMBN and the National Housing Fund (NHF)

• NHF Function: The NHF was created to subsidize affordable mortgages and support PMIs, but its performance has been disappointing.
• Funding Sources: NHF is funded by mandatory contributions from employees, but the system has not achieved its goals due to low disbursement rates and high administrative costs.
• Performance Metrics: By end-1999, NHF had only disbursed N75 million in loans, with many applications pending for over a year.
• Eligibility and Distribution: Most NHF contributors are high-income individuals, with lower-income workers indirectly subsidizing them.
• FMBN's Role: FMBN is the manager of the NHF and has been criticized for its poor financial performance and inefficient use of NHF funds.
• Recommendations:
  • Reform the NHF and FMBN to improve efficiency and sustainability.
  • Address the mismatch between NHF contributions and loan disbursements.
  • Improve the regulatory and supervisory framework for PMIs and FMBN.

8. Contractual Savings: Insurance and Pensions

I. Insurance Industry

• Insurance Penetration: Low, with gross premium income/GDP at 1.7% in 1994.
• Market Profile: The industry is dominated by a few large companies, with limited growth.
• Players: Private and state-owned insurance companies, including the National Insurance Trust Fund (NSITF).
• Regulation and Supervision: The CBN and FMBN have overlapping regulatory responsibilities, leading to inefficiencies.
• Problems: High administrative costs, low returns on investments, and lack of deposit insurance.
• Recommendations:
  • Improve the regulatory framework for insurance companies.
  • Address the issues of low insurance penetration and poor performance.
  • Consider deposit insurance for sound PMIs and insurance companies.

II. Pension System

• Structure: A two-tier system with mandatory contributions and company-sponsored plans.
• Reforms: The system was reformed in the early 1990s to improve sustainability and coverage.
• Benefits: Summary of benefits is provided in Appendix 8.1.
• Problems: Low participation, poor investment returns, and lack of coordination between different pension schemes.
• Recommendations:
  • Enhance the pension system's efficiency and coverage.
  • Improve investment returns and management.
  • Ensure better alignment between pension funds and long-term housing finance needs.

9. Money and Capital Markets

I. Money Market

• Structure: Composed of short-term instruments like treasury bills and commercial paper.
• Recent Trends: Growth in treasury bill offers and sales.
• Role of Discount Houses: They play a key role in facilitating short-term liquidity.
• Problems: Limited depth, high costs, and regulatory inefficiencies.
• Recommendations:
  • Strengthen the regulatory framework for the money market.
  • Promote greater participation and depth in the market.

II. Capital Market

• Structure: Includes stock exchanges, investment institutions, and regulatory bodies.
• Recent Trends: Limited growth and development.
• Problems: Poor infrastructure, lack of investor confidence, and regulatory constraints.
• Recommendations:
  • Enhance regulatory oversight and transparency.
  • Improve market infrastructure and investor confidence.
  • Encourage institutional investment in the capital market.

10. Term Finance and Leasing

I. Term Finance

• Supply and Demand: Limited supply of long-term financing for housing.
• Problems: High cost of funds, short-term deposit base, and regulatory constraints.
• Recommendations:
  • Develop a more stable and long-term funding mechanism.
  • Improve the financial sustainability of PMIs through better regulation and supervision.

II. Leasing

• Problems: Limited development and lack of institutional support.
• Recommendations:
  • Encourage leasing as a viable alternative to mortgage financing.
  • Support leasing through appropriate regulatory and financial mechanisms.

Conclusion

The Nigerian financial sector, particularly in housing finance and contractual savings, has faced significant challenges due to inadequate regulation, poor performance, and misalignment of policies. PMIs and FMBN have not been effective in mobilizing savings or providing affordable mortgage finance. The NHF has not met its goals, and the pension system remains underdeveloped. The document emphasizes the need for comprehensive reforms in both policy and regulatory frameworks to improve the performance of the housing finance sector and promote sustainable development in the broader financial system.