There are strong indications that the Central Bank of Nigeria (CBN) in an attempt to extend the ongoing consolidation exercise in the banking sector, may increase the capital base of Primary Mortgage Institutions (PMIs) to N2 billion.
PMIs operators confirmed to Vanguard that they have been receiving signals from the Other Financial Institutions Department (OFID) of the apex bank of a possible increase in their minimum paid up capital to N2 billion. It was reliably gathered that though there have not been any official directive to this effect, officials of the apex bank have made it known to PMIs operators of the intention of the apex bank in this regard.
In 2002, the CBN increased the minimum paid up capital of PMIs to N100 million from N20 million. However, as at December 31st, 2003, out of the 82 PMIs in operation only 47 had met this new capital.
Hence 35 PMIs might still be operating below the required minimum capital base.
Vanguard investigation revealed that the intention to extend the consolidation exercise to PMIs subsector might have been further enhanced by the application of three banks to convert to Mortgage banks.
The apex bank it was gathered said that more of such moves would occur as the consolidation exercise heightens, and in order to create a level playing field, thereby forestalling the collapse of existing PMIs due to competition from the banks converting to PMIs, it would be necessary to increase the capital base of operators in the sectors. This it was gathered would compel the weak and small PMIs to merge.
Alluding to this thinking, OFID director, Mr. Sesan Bamishile, while addressing the 4th PMIs chief executive retreat held recently in Port Harcourt, stated that “post restructuring of the banking system, the banks that emerge will be much stronger than most of today’s banks and have the financial muscle to develop into financial conglomerates and effectively crowd out small players in the housing subsector.” Consequently, he advised PMIs to, “seek ways of shoring up their capital base above the regulatory minimum to boost their capacity to do business, absolved possible loses from operations, and engender depositors, investors and regulators’ confidence in their institutions.
He noted, “for PMIs to survive the current wave of reforms in the financial system, the owners and managers of these institutions would need to adopt radical policy changes to strengthen the institutional framework and reposition to the subsector.
Vanguard investigation revealed that some of the PMIs that have met the N100 million minimum capital base have commenced moves to jerk up their capital base to N1 billion. While some have started reaching out to potential investors, some are said to be considering acquisition by the conventional banks.
Already, about seven PMIs have been acquired by banks in the last two years.
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