Uncertainty over FG’s N24.6bn guarantee on housing fund

There are fears that the outgoing federal government may not be able to redeem the N24.564 billion guarantee on housing which is expected to mature on May 24, 2015 before it exits on May 29.

President of Real Estate Developers Association of Nigeria (REDAN) Rev. Ugo Chime gave this hint Thursday in Abuja, warning that it was wrong for the government to pass the buck on the Federal Mortgage Bank of Nigeria (FMBN).

Making a case for the payment, Chime said: “The FGN Guarantee for the Mortgage-Backed Bond is irrevocable and unconditional therefore Federal Government has to redeem its guarantee. Failure will cause the Nigerian bond market and FGN reputational damage.”

It may be recalled that President Olusegun Obasanjo initiated the federal government’s five-year N100billion mortgage-backed bond, in 2007 with a desire to ensure success of the sale of federal government’s non-essential residential houses in the Federal Capital Territory to public servants under the monetisation policy of that administration.

FMBN and its issuing house sold the first tranche of N26 billion in 2007. Impressed with the outcome, Messrs FMBN SPV Issuer Limited in 2012 issued another N6billion notes by way of private placement to qualified institutional investors.

The Series 2 Fixed Rate Notes issued under the N100billion Residential Mortgage Backed Securities Programme which is sponsored by FMBN, is 100 percent guaranteed by the Federal Government of Nigeria. An application will be made to list the Series 2 Notes on the Nigerian Stock Exchange.

The bond which matures on May 24, 2015, compels the federal government to pay a whopping N24.564billion to Note holders; and failure to so do at maturity, will lead to the call of FGN Guarantee that backed the transaction. Such an action will spell doom for the country in local and offshore financial circles.

Investigation by Ripples revealed that the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala has reportedly directed FMBN to sell off its assets to redeem the guarantee.

Chime however, warned that the federal government should think through the whole affair to avoid a scandal.

Raising a poser, Chime asked: “Where is the money? Was it injected into the NHF? This money should have been used as seed fund to assist the Federal Mortgage Bank of Nigeria (FMBN) to make houses more affordable.

“I don’t think that at a time when the government should be thinking of beefing up the capital base of FMBN it should be asking the bank to sell off its assets. It is gross dereliction of duty to the masses. This entire controversy is a distraction at this moment.

“The federal government should pay the money that is due in a few days as this date has not come to them as a surprise. There are no assets for the FMBN to sell off to be able to meet the deadline, even if there were. how many days will it take to do so and meet up with the deadline?”

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