VZCZCXRO1442
RR RUEHCD
DE RUEHOS #0553/01 2161454
ZNR UUUUU ZZH
R 041454Z AUG 07
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC 9299
INFO RUEHUJA/AMEMBASSY ABUJA 9088
RUEHWR/AMEMBASSY WARSAW 0487
RUEHIT/AMCONSUL ISTANBUL 0465
RUEHCD/AMCONSUL CIUDAD JUAREZ 0466
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 LAGOS 000553 
 
SIPDIS 
 
SIPDIS 
 
STATE PLEASE PASS TO DOT, EX-IM, OPIC, AND USTDA 
 
E.O. 12958: N/A 
TAGS: ECON EINV EFIN PREL NI
SUBJECT: BANKS' CREATIVE SOLUTIONS ALLOW MORTGAGE EXPANSION 
 
REF: LAGOS 472 
 
¶1. On June 19, Debra Erb, Overseas Private Investment Corporation 
(OPIC) met with representatives of First City Monument Bank (FCMB) 
to discuss ongoing collaboration on a housing construction and 
mortgage financing project. FCMB was one of several banks expanding 
its consumer banking activities into the housing sector. Because of 
the challenges in this sector, including high interest rates, lack 
of housing stock, and high titling fees, FCMB had developed a number 
of solutions allowing it to invest in the sector in the absence of 
legislative reform. 
 
¶2. On June 19, Debra Erb, Overseas Private Investment Corporation 
(OPIC) met with Oloyede Obatoyinbo, Vice President, Head Home Loans, 
First City Monument Bank (FCMB); Anurag Saxena, Chief Operating 
Officer (CEO) FCMB; and Asan Eric, Home Loans, FCMB. Also present 
were Benny Ukah, Assistant Vice President, Home Loans, FCMB; Ayoleke 
Adu, Vice President, Project and Structured Finance; and James 
Brenner, CEO, Broad Cove Partners, Inc. Participants discussed their 
ongoing collaboration on a housing construction and mortgage 
project. 
 
¶3. The Nigerian housing sector faced considerable challenges, 
including high interest rates; consumers' lack of awareness about 
mortgages; lack of housing stock; and high costs and delays in 
perfecting property titles. As a result, Nigerianbanks had 
developed a number of "workaround solutions" that enabled them to 
invest in the sector with greater security. The FCMB representatives 
described plans for overcoming some of these challenges. 
 
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Financing 
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¶4. FCMB aimed to make mortgages affordable to the middle-income 
borrower by offering home loans between naira five million and naira 
50 million, with a tenor of five to 25 years. The loans, for home 
purchase and refinancing, would be offered to developer financers. 
Some financing would also be available for equity release and 
buy-to-let schemes. Given current market constraints, the target 
interest rate would be a 15-year naira loan with 16 percent 
interest. Eventually, FCMB would like to offer dollar loans to 
capture the diaspora market. The only Nigerian bank currently 
offering dollar loans is UBA. 
 
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Workaround Solutions For Perfecting Property Titles 
--------------------------------------------- ------- 
 
¶5. Residents rarely perfected titles to property because of the high 
cost (reftel). In Lagos State, perfection of title cost 16 to 19 
percent of the property value. Together with other fees, a borrower 
spent approximately 20-25 percent of the total value of the 
property. Securing a mortgage meant the borrower would need 50 
percent of the purchase price. As a result, few legal titles 
existed. (Note: In a July 17 meeting with representatives from the 
U.S. Department of Treasury, Osaze Osifo, Chief Executive Officer, 
Travant Capital, said only 8,000 to 10,000 legal titles existed in 
Nigeria. End Note). Lenders were wary of providing mortgages in 
cases where titles were not perfected, since property disputes in 
the case of default often lasted years in the courts. 
 
¶6. To address this problem, FCMB had developed a tripartite legal 
mortgage agreement that would create a more secure lending 
environment in the absence of legislative reform, such as the 
amendment of the Land Use Act. This agreement would consist of the 
vendor handing the original title documents, with the deed of 
assignment signed in the borrower's name, to FCMB in exchange for 
the full purchase price. The space for the assignee's name would be 
left blank, and the title would be held unregistered by the Bank. 
 
¶7. Debra Erb asked whether an amendment to the Land Use Act would be 
prejudicial to the mortgages under this arrangement. FCMB assured 
her the mortgages would not be adversely affected, as they were 
fully legal. This solution would allow FCMB to exercise the right of 
sale as a legal mortgage without recourse to litigation. It would 
also reduce by 17-19 percent the cost of purchase. 
 
-------------------------------- 
Housing Stock Is In Short Supply 
-------------------------------- 
 
¶8. Housing stock, especially for middle- and lower-income groups, 
was in short supply. Banks have been unwilling to lend for lower 
cost housing, but this was slowly changing. FCMB was partnering on 
housing construction projects, such as a 1700-unit project in the 
Lekki area of Lagos. Obatoyinbo also expressed interest in 
 
LAGOS 00000553  002 OF 002 
 
 
partnering with the Lagos State Government to provide housing and 
mortgages to civil servants. 
 
--------------------------------------------- - 
Investment Should Reach Beyond Lagos And Abuja 
--------------------------------------------- - 
 
¶9. Debra Erb observed that, in an earlier meeting with President 
Umaru Yar'Adua in Abuja, the President underscored his desire to see 
investment in housing not only in Lagos and Abuja, the two areas 
currently receiving most investment, but in other areas as well. 
Providing underserved areas with investment could serve as leverage 
to push for legislative reform, Erb noted. 
 
¶10. Debra Erb cleared this cable.