National Housing Fund (Establishment) Act, 2018: Analysis & Recommendations For Legislative Review

2. Investment in the Fund by Banks (Commercial & Merchant):

   Commercial and merchant banks are required, by the new NHF Act, to invest a minimum of ten percent (10%) of their profit-before-tax (“PBT”) in the Fund at an interest rate of one percent (1%) above the interest rate payable on current accounts by banks[10]. The 10% of PBT to be contributed by banks is required to be collected at the end of every year by the Central Bank of Nigeria (“CBN”) for onward remittance to the FMB, in the prescribed manner, for investment in the Fund[11]. The new NHF Act prohibits failure of any bank to make available to the CBN at the end of a year the stipulated contribution for investment in the Fund[12], and empowers the CBN to apply sanction on any erring bank which may include cancellation of the operating licence of the bank[13].

   We note that the proposed statutory contribution by banks is a clear departure from what is currently applicable. Under the 1992 Act, banks are only required to invest in the Fund 10% of their loans and advances at an interest rate of 1% above the interest rate payable on current accounts by banks. Also worthy of note is the fact that no sanction is contained in the 1992 Act in respect of failure of a bank to comply with the provisions on contribution to the Fund. 

3. Investment in the Fund by Insurance Companies registered under the Insurance Act: 

   Similar to the prescribed investment by banks, every registered insurance company is required by the new NHF Act to invest a minimum of 10% of its PBT in the Fund, at an interest rate not exceeding 1% above the interest rate payable on current accounts by banks[14]. The stipulated investment by an insurance company shall not be affected by any provisions contained in the Insurance Act (Cap I17, LFN, 2004) or relating to investment of insurance companies in real property[15]. The new NHF Act gives the insurance industry regulator, National Insurance Commission (“NAICOM”), the duty to collect at the end of every year the 10% of PBT required to be contributed by insurance companies[16], for onward

10 Section 6(1), ibid.
11 Sections 10(1) & (2), ibid.
12 Section 10(3), ibid
13 Section 10(4), ibid
14 Section 6(2), ibid.
15 Section 6(3), ibid.
16 Section 11(1), ibid.