THE WORLD BANK NIGERIA HOUSING FINANCE PROGRAMME (CENTRAL BANK OF NIGERIA) FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2018 AUDITED BY OFFICE OF THE AUDITOR-GENERAL FOR THE FEDERATION Plot 273, Samuel Ademulegun Street, Central Business District, Abuja. NIGERIA HOUSING FINANCE PROGRAMME (NHFP) FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2018 TABLE OF CONTENTS Contents Page [able of Contents 1 Project Information/profile 2-6 Auditor's Report 7-9 Statement of Financial Performance 1 0 Statement of Financial Position 11 Statement of Changs in Net Assets/Funds 12 Statement of Cash Flow 13 Notes to the Financial Statements 14 1 NIGERIA HOUSING FINANCE PROGRAMME (NHFP) FINANCIAL STATEMENTS FOR THE YEAR ENIDED 31ST D)ECEMB3ER, 2018S PROJECT INFORMATION/PROFILE BACKGROUND The Nigeria Housing Finance Program (NI HFP) is an initiative of the Federal Government of Nigeria. central Bank of Nigeria (CBN) and the World Bank. The Program was funded by the international Development Association (IDA) loan of USD 300 million. The CBN is the Project implementinO Agency (PIE), with the Project Administration Team (PAT) domiciled in the Other Financial Institutions Supervision Department (OFISD)) of CBN. The Program spanned over five (5) years between 2013 to 2018. The agreement for the loan was signed on 18"' December 2013. but the effective date of commencement was March 5. 2014. The Project come to a close on December 31, 2018. OBJECTIVES The broad objective of the Housing Finance Program was to improve housing finance/mortgage industry in Nigeria. The specific objectives are: i. Establishment of a secondary mortgage Company. the Nigeria Mortgage Refinance Company (NMRC). ii. Provision of a Mortgage Guarantee Product 1i1. Development ol Housing Microfinance (HMF), and i\. Provision of Technical Assistance (TA) to facilitate the implementation of the three objectives mentioned above and build capacity in the industry. PROGRAM COMPONENTS The Program has four components, namely: 1 . Nigeria Mortgage Refinance Company - supporting the establishment and operation of Nigeria Mortgage Refinance Company through the provision of capital to support her or refinancing of mortgage loans of participating Mortgage lenders through a line of credit. 2. Mortgage Guarantee Product - supporting the Mortgage Guarantee scheme to iacilitate the issuance of Mortgage Guarantee Products to eligible lenders, through the provision of a line of credit to the Project Implementing Entity on account of the Mortgage Guarantee Agent. 3. Housing Microfinance - provision of housing microtinance loans to Housing Microfinance Providers to help strengthen their institutional and financial capacities for testing and providing housing microfinance products and services. 4. Technical Assistance and Capacity Building - carrying out of a technical assistance and capacity building program designed to support mortgage markets in the Federal Republic of Nigeria. This comprises of activities such as 2 Capacity building Support on housing mortgage, including training on underwriting. collateral valuation. mortgage risk management, housing finance policy and delinquent loans management. V Collection, collation, and dissemination of housing market information. including development of a house price index system and mortgage market database; NRCM support through the provision of technical assistance on bond issuance, etc. The amount allocated to each of the program component and actual disbursement is presented in table Table I NHFP Fund Allocation and Actual disbursement as at 31s December, 2018 ALLOCATION DISBURSEMENT PERCENTAGE PROGRAM COMPONENT 05/03/2014 31/12/2018 DISBURSED USD$' MILLION USD$' MILLION % Nigeria Mortgage Refinance Corn an 250 168.0 Company67.2 Mortgage Guarantee Product 25 0 Housing Microfinance 15 1.8 12 Technical Assistant & 1 . Capacity Building 102. Total 300 171.8 57.3 Source: OAuGF NHFP Audit 2019 (Note that $7.5 was initially disbursed under 1JMF but $5.7 million was refunded to the World Bank.) At the close of Program by December 31. 2018. the total disbursement was US$171.8 million. representing 57.3% of the loan. While $168 million was disbursed out of the US$250 million for Establishment of NMRC, there was no disbursement for Mortgage Guarantee product. The disbursement for Housing Microfinance was 12% in the sum of $1 .8 million out of the $15 million allotted. Technical but immaterial objections were raised by the World 13ank to refuse the issuance of no objection for the disbursement of the balance. A total of $2 million was disbursed out of the $10 allotted for Technical Assistance and Capacity building. The graphical representation of the disbursement is presented in chart 1. 3 Chart 1: NHFP Fund Allocation and Disbursement as at 3P' December, 2018 .Source: 4uGF NHFP Audi 2019 aThe actual disbursement in Naira to the seven (7) Microfinance Banks is presented in table 2 belowN and chart 2. Table 2 Schedule of Loan Offer and Actual Disbursement to MFBs By NHFP as at 31/12/2018 LOAN SN NAME OF MFB OFFERED AMOUNT UNDISBURS BY DISBURSED % ED% NHFP/CBN TO MFBs AMOUNT =N= =N= =N= I Baobab Microfinance Bank 458,700,000 68,805.000 15 390,200000 85 I lassal Microfinance Bank 458,700,000 68,805,000 15 389,895,000 85 3 NPF Microfinance Bank Plc 611,600,000 91 740,000 15 519,860.000 85 --4 Accion MIFB 611 .600.000 73 .392,00 0 12 538,208.000 88 5 AB Microtinance Bank 611.600,000 91.740,000 15 51 9,860000 85 6 LAPO Microlinance Bank 764,500,000 91,740,000 12 672,760,000 88 7 1rLnchinemere Microfinance Bank 458,700,000 68,805.000 15 389.895.000 85 otal3,975,400,000 550,027,000 14 3,425,373,000 86 4 Chart 2: Loan Offered by NHFP to MFBs and Actual Disbursement as at 31/12/2018 Source: OAuGF NHFP Audit 2019 Key Loan approved Loan disbursed 5 NIGERIA HOUSING FINANCE PROGRAMME (NHFP) FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2018 PRINCIPAL OFFICERS OF THE PROGRAM Adedeji Adesemove Project Coordinator/Head Project Admin Tearn (PAT) Jackson Imandi Project Accountant Lawali Bello Assistant Project Accountant Badung Gyang Admin/Procurement Officer Paul Ojeifo Team member Oriat Lawal (Mrs) Team Member All the Principal Officers held offices up to 31 s'December 2018. PROJECT HEAD OFFICE, 4h Floor, Wing A. CBN Building Other Financial Institutions Supervision Department (OFISD) Central Bank of Nigeria, Central Business District, Abuja. FINANCIER The World Bank, International Development Association (IDA) Washington DC 20433, USA PROJECT IMPLEMENTING AGENCY Central Bank of Nigeria (CBN) BANKERS 1. Central Bank of Nigeria, Central Business District, Abuja - Nigeria. 2. JPMorgan Chase Bank, Northeast Market, P.O. Box 182051, Columbus OH 43218-2051 AUDITORS Office of the Auditor-General for the Federation Plot 273, Samuel Ademulegun Street, Central Business District, Abuja. website: w .o ugfrig e-mail: infooaugf.ng 6 THE AUDITOR-GENERAL FOR THE FEDERATION Audit House, Plot 273, Samuel Ademulegun Street, Central Business District, RM.B. 128, Garki - Abuja, Nigeria. The National Project Coordinator, Nigeria Housing Finance Development Programme Other Financial Institutions Supervision Department, Central Bank of Nigeria, Central Area, Abuja. AUDIT OF THE NIGERIA HOUSING FINANCE DEVELOPMENT PROGRAMME (NHFDP) PERFORMED BY THE AUDITOR GENERAL FOR THE FEDERATION AUDITOR'S REPORT Opinion I have audited the financial statements of Nigeria Housing Finance Development Programme (NHFDP) for the year ended 31st December, 2018. These financial statements comprise the Statement of Financial Position, Statement of Financial performance, Cashflow Statement and Statement of Net Assets/Equity for the year then ended, and a summary of significant accounting policies and other explanatory information. In my opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Entity as at 31st December, 2018, and of its financial performance and its cash flows for the year then ended in accordance with International Public Sector Accounting Standards (IPSAS). Basis for Opinion I conducted the audit in accordance with International Standards for Supreme Audit Institutions (ISSAls). My responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements Section of my report. I am independent of the entity in accordance with the Code of Ethics for Supreme Audit Institutions together with the ethical requirements that are relevant to my audit of the financial statements and I have fulfilled my other ethical responsibilities in accordance with these requirements and the Code of Ethics. I believe that the audit evidences obtained are sufficient and appropriate to provide a basis for my opinion. 7 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with IPSAS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Entity's_ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the project or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the entity's financial reporting process. Auditor's Responsibility for the Audit of the Financial Statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with (ISSAls), will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Financial Audit Methodology (FAM), which is consistent with the Fundamental Auditing Principles (ISSAls 100-999) of the International Standards for Supreme Audit Institutions, I exercise professional scepticism throughout the audit. I also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. * Evaluate the appropriateness of accounting policies uses and the reasonableness of accounting estimates and related disclosures made by management. * Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence, obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit 8 evidence obtained up to the date of my auditor's report. However, future events or conditions may cause the Entity to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit. I also provide those charged with governance with a statement that I have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be brought to bear on my independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, I determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. I describe these matters in my auditor's report unless law or regulation precludes public disclosure about the matter or, when, in extremely rare circumstances, I determine that a matter should not be communicated in my report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. A. M. AYINE, FCA Auditor-General for the Federation June 17, 2019 9 NIGERIA HOUSING FINANCE PROGRAMME (NHFP) STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED) 31ST D)ECEMBER, 2018 NOTES 2018 2017 NGN NGN 000 REVENUE 3 262,177.29 61,990.00 EXPENDITURE 4 405,231,918.03 285,926,410.00 SURPLUS/(DEFICIT) (404,969,740.75) (285,864,420.00) 10 NIGERIA HOUSING FINANCE PROGRAM STATEMENT OF FINANCIAL POSITION AS AT YEAR ENDED 31ST DECEMBER 2018 Notes 2018 2017 NGN NGN 000 Current Assets Cash & Cash Equivalents 5 1,951,409,456.38 2,612,241,170.00 Non-Current Assets Loan to NMRC 6 37,390,372,660.23 22,855,000,000.00 Loans to MFBs 7 555,027,000.00 Total Assets 39,896,809,116.61 25,467,241,170.00 Current Liabilities Non-Current Liabilities Loan from World Bank 8 40,453,913,917.01 25,633,006,820.00 Foreign Exchange Difference 9 267,154,587.56 252,350,900.00 Accumulated Expenditure 10 (824,259,387.96) (418,116.550.00) Total Liabilities 39,896,809,116.61 25,467,241,170.00 Adedeji J. Adesemoye (Project Coordinator) Jackson Imandi (Project Accountant) The Notes to the financial statement on pages 16-19 form integral part ofjthese financial statements NIGERIA HOUSING FINANCE PROGRAM ACCOUNTS 2018 NIGERIA HOUSING FINANCE PROGRAMME (NHFP) STATEMENT OF CHANGES IN NET ASSETS AS AT 31,"" DECEMBER, 2018 EXCHANGE IDA CREDIT SURPLUS/DEFICIT DIFFERENCE TOTAL N'000 N'000 N'000 N'000 As at 1st January 25,633,006.82 (418,116.55) 252,631.66 25,452,247.92 *Adjustmt for NMVRC loan recognition (165,399.85) (165,399.85) Additions during the year 14,986,306.95 (404,969.74) 14,522.93 14,595,860.14 As at 31st December 40,453,913.92 (823,086.29) 267,154.59 39,897,982.21 *Adjustment for NVRC loan that was recognised at offer rate against the central rate used by CBN in disbursing the loan to the Institution. 12 NIGERIA HOUSING FINANCE PROGRAMME (NHFP) STATEMENT OF CASH4 FLOWS FOR THE YEAR ENDED 3r I) ECEMBER, 2018 2018 2017 N N Cash Flow From Operating Activities Technical Assistance top up 285,908,761.20 2,396,104,348.15 Deficit for the year (405,763,369.73) (270,590,419.25) Add refunds made 10,657,282.87 6,557,559.05 Exchange difference 1,065,592.14 (12,814,831.20) Interest received 261,321.62 Net cash Flow from operating activities (107,870,411.90) 2,119,256,656.75 Cash Flow From Investing Activities Property Plant and Equipment Cash Flow From Financing Activities Net cash changes for the year Cash and cash equivalent at the beginning (107,870,411.90) 2,119,256,656.75 of the year 2,612,241,165.46 492,984,507.86 Cash and cash equivalent at the end of the year 1,951,409,260.75 2,612,241,164.61 13 NIGERIA HOUSING FINANCE PROGRAMME (NHFP) NOTES TO THE FINANCIAL STATEMIENTS FOR THE YEAR ENDED 31s' DECEMBER, 2018 1. Statement of Compliance with IPSAS The Financial Statements have been prepared in accordance with International Pblic Sector Accounting Standards (lPSAS) cash basis, except that the Statement of Budget and Actual Perfrmace o th Prject was excluded because it has not been mnadpbilyaiabes Prlnormadc by th P roS I4 dec publicly. avilbl a reurd yWAS2.Secondly, the Prjc patn Manial paragraph 1 07 provides that IDA funds should be accounted for on cash basis. 2. Statement of Accounting Policies The following is the SUmmary of the significant accounting policies adopted in the preparation of the Project's Financial Statements: a) Basis of Preparation The financial Statements have been prepared nnder the historical cost convention and in accordance with the cash basis of International Public Sector Accounting Standards (IPSA S). h) Principal Activities The project which does not have profit motive was principally engaged in the folloving act iv\ities: i) Supporting the Establishment and operation of Nigeria Mortgage Refinance Company ii) Provision of hoUsing microtinance loans to microfinance Banks. To help strengthen their institutional and financial capacities for testing and providing housing microfinance products and services. iii) Carying out oft technical assistance and capacity building activities to support the mortgage markets. c) Funds All contributioIs by the i-inancier are only recognized when they become received and capitalized as IDA Credit/Fund. These funds are SUbseCILenuly increased or reduced by surplus or deficit from the Statement of Financial Performance. 14 d) Recognition of Revenue & Expenditure Revenue is recognised when cash is received, and expenditure recognised when payment is made in line with IPSAS cash basis of accounting. e) Non-Current Assets 1. The Project has two investment projects, namely i) Loans to NMRC which has a fixed interest of 0.75% and interest is paid into CB3N since it is the obligor of the Loan. n) Loans to Microfinance Banks have five years tenor and interest and repayment are made into CRN's account. 11. Depreciation Depreciation is not provided on the investment Projects as they would be repaid over time. III. Non-current assets will be transferred to the Implementing Agencies - Central Bank of Nigeria at the end of the Project's life. f) Reporting/Foreign Currency The Financial Statements were prepared using the Nigeria Naira as the Reporting currency Transactions in foreign currency were translated at the rate of exchange ruling at th transaction date while all foreign accounts balances were translated at the rate of exchange at the reporting dates. Exchange difference arising from the translation was recognised as either addition or reduction to the existing one. At the end of the Project's life, balance, if any. shall be written off to the statement of financial performance. g) Deferred Taxation No provision was made for deferred taxation because the Project is exempted from payment ofIncomne tax by law. 15 NIGERIA HOUSING FINANCE PROGRAMME (NHFP) NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 3 Is'DECEMBER, 2018 Notes NGN =N= 3 Revenue This is the interest received on the JP Morgan's Account Total amount was US$855,67 x N306.4 262,177.29 Interest on Loans to MFBs are yet to be received. - So far, the sum of N1.160 billion was paid to the CBN account number 4041060 by NMRC. Interests received by the CBN were accounted for in CBN's books. 262,177.29 4 Expenditure 2018 Add: Expenditure for 2018 Training 50,018,115.20 Consultancy 293,095,685.88 Advocacy 45,955,501.95 Operations 16,162,615.00 Charges in respect of HMF disbursement 910,919.92 406,142,837.96 5 Cash & Cash Equivalents JP Morgan Chase 1,951,349,274.83 CBN Naira Account 60,181.55 1,951,409,456.38 6 Loan to NMRC 1st Tranche- Naira Equivalent of $20,000,000 3,094,600,000.00 2nd Tranche- Naira Equivalent of $100,000,000 19,595,000,000.00 3rd Tranche- Naira Equivalent of $48,136,125 14,700,772,660.23 37,390,372,660.23 16 7 Loans to MFBs AB Microfinance Bank 91,740,000 Accion Microfinance Bank 73,392,000 Baobab Microfinance Bank 68,805,000 Hasal Microfinance Bank 68,805,000 LAPO Microfinance Bank 91,740,000 NPF Microfinance Bank 91,740,000 Umuchinemere Microfinance Bank 68,805,000 555,027,000.00 8 Long-term borrowings Initial draw-down - Technical Assistance 315,500,000.00 1st Tranche Loan to NMRC 3,094,600,000.00 Replenishment - Technical Assistance 26,709,260.00 2nd Tranche Loan to NMRC 19,595,000,000.00 Replenishment - Technical Assistance 45,970,154.93 Replenishment - Technical Assistance 102,327,551.85 Housing Microfinance 2,287,500,000.00 3rd Tranche Loan to NMRC 14,700,772,660.23 Replenishment - Technical Assistance 285,534,290.00 40,453,913,917.01 9 Foreign Exchange Difference Balance b/d 2017 252,631,660.62 Gain/Loss for 2018 14,522,926.94 267,154,587.56 10 Accumulated Expenditure Balance b/d 2017 418,116,550.00 Add: Expenditure for 2018 406,142,837.96 Total 824,259,387.96 17