By Jeph Ajobaju, Chief Copy Editor
Real estate is one of worst conduits for corruption in Nigeria, says the Economic and Financial Crimes Commission (EFCC), which is also carrying out fraud risk assessment on federal agencies as part of efforts to tackle greed and graft.
A separate report by the National Bureau of Statistics (NBS) shows that bank loans to real estate hit a five-year low in the first quarter of 2019 (Q1 2019), and is now made worse by the sector’s N226.62 billion bad loan burden on banks.
EFCC Chairman Abdulrasheed Bawa said the focus is on gatekeepers in money laundering with the re-boosting and improving of the Special Control Unit (SCU) against money laundering.
Gatekeepers are non-designated financial institutions in the Money Laundry Prosecution Act and include tax consultants, car dealers, real estate managers, lawyers, and accountants, he explained, reported by NAN.
Then Bawa told Channels Television that “one of the problems we have in the country is the real estate. Ninety to 100 per cent of the resources are being laundered through real estate.
“Of course, they are being regulated but they are not enough in terms of how they give their returns to the Special Control Unit.
“We investigated a matter in which a bank MD marketed the property to a minister and agreed to purchase it at $37.5 million. The bank then sent a vehicle to her house to evacuate $20 million from her house in the first instance.”
EFCC recovers $20m cryptocurrency
Bawa had disclosed elsewhere that the EFCC recovered about $20 million worth of cryptocurrency loot from cybercriminals and saved it up in the e-wallet of the EFCC, per Nairametrics reporting.
To the EFCC, cryptocurrency is an avenue fraudsters use to launder the proceeds of crime.
Bawa expressed support for the ban by the Central Bank of Nigeria (CBN) on cryptocurrency transactions, saying it helps to limit avenues through which criminals launder proceeds of crime.
“As it is today, there is nowhere in the world where cryptocurrency is being regulated. The EFCC is looking at an avenue in which people are laundering and receiving proceeds of crime and that is our worry.
“We have seen time and time again where cybercriminals are using this avenue to get their proceeds of crime. Before it used to be through money transfer agencies like Money Gram and of cause Western Union. Now they have gone E.
“They will defraud somebody. They will get gift cards, exchange them on the dark web, and they will use the proceeds to buy crypto, and they can get it to their e-wallet, and then, of course, they can sell and get their money.”
Banks neck deep in N226b real estate bad loans
Total Non-Performing Loans (NPL) recorded by banks for real estate and construction sectors rose 66.57 per cent to N226.62 billion in 2020 from N136.05 billion in 2019, says data from the NBS.
Selected Banking Sector Data released by the NBS covers headings such as Sectorial Breakdown of Credit, ePayment Channels, and Staff Strength report.
The report, articulated by Nairametrics, shows that
· Loans in the real estate sector rose 12.87 per cent to N56.03 billion in 2020 from N49.65 billion in 2019
· NPLs in the construction sector surged 97.44 per cent to N170.59 billion in 2020 from N86.4 billion in 2019
· Construction sector contracted -7.68 per cent in 2020 compared to 1.81 per cent growth in 2019 and 2.33 per cent in 2018
· Real state sector shrank -9.22per cent in 2020 against 2.36 per cent contraction in 2019 and -4.74 per cent in 2018
Causes of real estate bad loans
Experts cited challenges facing real estate, especially with the pandemic, and urged Abuja to pay more attention to the sector.
Infinity Trust Mortgage Bank Managing Director, Olabanjo Obaleye, said many companies affected by the pandemic have folded up, as housing subscribers find it difficult to service mortgage payments.
“There are two companies that have just collapsed due to the inability of their owners to get foreign exchange for the importation of raw materials,” he told Nairametrics.
“On the level of government support on COVID-19, there is nothing visible we have seen. We have read so many pronouncements on that from the government but we haven’t got any palliative in that respect.
“We have made proposals to government through our relevant authority but there is a need for certain funds to be set aside for this.”
Real estate practitioner and Lagos Chamber of Commerce and Industry (LCCI) Vice President, Gbenga Ismail, said: “Now, people won’t be able to pay rents or buy houses as planned.
“We are not sure of where the monetary issues are going now and not sure if lending will continue in the real estate sector. We are yet to see some of these things going on.”
Bank loans to real estate in 5-year low
NBS data shows that total bank credit to real estate sector declined by N26 billion in Q1 2019, a five-year low dating back to 2015, and has not recovered up to 2021.
Banks granted a total N593.3 billion loan to the sector in Q1 2019, which was 4 per cent lowest than N615.3 they granted in Q1 2015.
Out of 17 sectors that received credit facilities from banks in Q1 2019, real estate ranked 10th while oil and gas got N15.2 trillion, the highest.
Bankruptcy fears
Operators and stakeholders have expressed fears that if Abuja does not intervene, more real estate companies may be forced to shut operations.
Obaleye told Nairametrics that the government has not provided financial succour and other support to mortgage banks and the housing sector, even in the heat of the pandemic.
In his view, the government appears focused on raising taxes to boost revenue without providing succour to cushion the impact of coronavirus on businesses.
Ismail added: “Even in inventories, where developers have put houses out for rent, the concern is who is going to rent them? Before COVID-19, we waited 6 months before houses got rented or leased but now it may not be less than 12 months.”
