Controversy continues as Okonjo-Iweala orders FMBN to sell off assets

folarin okunola

May 15, 2015 1:26 PM

The FGN guarantee on the mortgage backed is irrevocable and unconditional, hence the government is obligated to redeem this guarantee.

Finance minister, Dr. Ngozi Okonjo-Iweala

President of the Real Estate Developers Association of Nigeria (REDAN), Rev. Ugo Chime, has urged the federal government to redeem its guarantee on the series 3 bond which is maturing on May 24, 2015 with obligation to pay N2.564 billion to note holders.

According to Chime, passing the responsibility over to the Federal Mortgage Bank of Nigeria will not be good for the country.

The FGN guarantee on the mortgage backed is irrevocable and unconditional, hence the government is obligated to redeem this guarantee. Failure to do so could cause serious reputational damage to the Nigerian Bond Market and the FGN.

Former president Olusegun Obasanjo has initiated the Federal government’s N100 million mortgage-backed bond, with an aim to ensure success of the sale of the federal governments non-essential residential houses in the Federal Capital Territory to public servants under the administrations monetizaton policy.

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.

Coordinating minister for the economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala has reportedly directed the FMBN to sell off its assets to redeem the guarantee.

However, Chime insists that the government should get its act together and stand up to the challenge; going further to say that the government should inject more funds into the FMBN and even restructure it if possible.

“On this bond issue, we need to look at some aspects. 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?” he said.

The REDAN president explained that the current government had used privatization as a guise to strip the common Nigerian of all safety nets, adding that bond issue is yet another attempt to further hurt the average Nigerian.

folarin okunola