In every credit business, the major questions on the mind of any financier are “how do I get my money back?” and “how seamless is it to do so?” As simple as the questions appear, they are not so easy to resolve in practice.
The answers to the foregoing formed the outcomes of the World Bank-Central Bank of Nigeria’s Two-Day Workshop on Model Mortgage & Foreclosure Draft Bill at the Rock View Hotel Royale in Abuja on 9th and 10th July 2018, themed “Creating an enabling Environment for land and law reform in Nigeria.”
Just recently, the National Collateral Registry was created in Nigeria as a web-based collateral registration system to enable lenders to determine prior security interests (if any), as well as to register their security interests over movable assets provided as collateral for loans in accordance with Part III of the CBN’s Regulations on Registration of Security Interests in Movable Property by Banks and other Financial Institutions (Regulations No, 1, 2015) (“Collateral Registry Regulation”). This collateral registry system has boosted access to finance especially for SMEs who can now obtain loan using moveable assets (tangible or intangible) like car, stock or shares, equipment or machine as collateral up to the maximum value of the security.
However, there continues to be a huge deficit in the credit system that can be filled through mortgage system because of the limitation of the Collateral Registry Regulation which is inapplicable to certain transactions. For instance, the right of set-off, charges registrable with the Corporate Affairs Commission and any transaction creating interest or transfer or assignment of interest or right of payment in land as well as mortgage in moveable property governed by an existing law for which a registry has been established such as ships, aircraft and other vessels are not registrable under the Collateral Registry Regulation.
Therefore, the role of mortgage transactions in the Nigeria credit system will continue to be relevant if properly explored. Mortgage represents about 50% of the GDP of several developed countries as against Nigeria where it is less than 10%. Like other transactions relating to land in Nigeria, the Land Use Act of 1978 was identified as a major impediment to the success of credit system through mortgage transactions.
Apart from the cumbersome administrative process and bureaucratic delays, there are also huge costs of land acquisition, survey fees, charting fees, stamp duty, consent fees and title registration fees associated with titling, perfection and administration of real property in Nigeria.
Also, the challenges inherent in the justice administration system of Nigeria, including the present regulatory framework, the attitudes of some lawyers and judges, were also considered especially with regard to the use or misuse of judicial process, including injunctions, as a weapon or shield in the enforcement of mortgage transaction rights and obligations.
Interestingly, Lagos and Kaduna States are already blazing the trail on the necessary regulatory reforms to bypass the clogs of the Land Use Act in the wheels of mortgage system. The regulatory reforms are the Mortgage and Property Law of Lagos State 2010 (amended in 2015) and the Kaduna Mortgages and Foreclosure Law 2017. These States’ laws provide ample guidance on the way to go for the other 34 States in the Federation and the Federal Capital Territory, with minor modifications in accordance with local peculiarities.
At the end of the second day, there was a communique agreed to by all attendees. Some of the highlights of the recommendations for the various States’ delegates at the workshop include:
– Decentralization of powers to a registry to be created with a registrar to exercise delegated authority of a State Governor in respect of the mandatory consent and other regulatory approvals for perfection of mortgage transactions.
– Creating a Mortgage Board as a one-stop-shop for all mortgage transactions to take over the roles of registering mortgages by the Land Bureau and the Corporate Affairs Commission.
– The need for special legal provisions on priority of rights in the enforcement of rights and obligations in mortgage transactions.
– Creating fast track civil procedure rules for the respective State’s high courts to accelerate judicial proceedings in respect of mortgage transactions.
– Creating special conditions for injunction regarding enforcement of mortgage transactions.
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