The poor land tenure system, unclear property rights, and limited access to funds have made many lands in the country dead capital. JOSEPHINE OGUNDEJI writes that this has stifled the development of the country’s real estate sector

Despite Nigeria’s revenue challenges, there are numerous untapped assets that could be utilised. The country’s real estate sector is plagued by a poor land tenure system and a tedious process obtaining of titles for land. As a result, many plots of land have little or no value, contributing to the issue of dead capital.

Dead capital refers to property that lacks legal recognition and, as a result, cannot be effectively leveraged for economic purposes.

Experts have argued that Nigeria’s 1978 Land Use Act, which regulates landownership in the country, was obsolete. They said the government needs to review to address the challenge of dead capital and the torturous process of obtaining land titles.

PricewaterhouseCoopers recently disclosed Nigeria currently had between $300bn and $900bn worth of dead capital in residential real estate and agricultural land.

In a report titled ‘Bringing dead capital to life, what Nigeria should do’ PwC stated that the high-value real estate market segment held between $230bn and $750bn of value, adding that the value of the middle market was worth between $60bn and $170bn.

“Several underlying assumptions were made to support this estimate, like the estimate assumes that the total population of people in Nigeria is 200 million, and 40 million households, with five members each. The typical house in Nigeria is over capacity with an occupancy rate of seven people to a room, and approximately 95 per cent of household dwellings in Nigeria have no title or a contestable title,” it noted.

According to the firm, the land tenure system in Nigeria is still largely in the communal and informal sectors, adding that sporadic efforts by the government on formalisation of property rights through certificate of occupancy in cities like Lagos were yet to meet the intended goal.

It stated, “Land ownership has been quite a stressful process as a result of this complex land tenure system. The current legal status overseeing the formalisation of land ownership is the Land Use Act, which was created to support fair access to land by establishing a certificate of occupancy system with fees and taxes.

“The Act has failed to establish a uniform land tenure system that governs ownership in the country. More so, most citizens, especially in rural areas where land is not scarce, do not comply with the legal provisions of the Act and have no certificates on their land. Issues around proper land registration and omo’nile also make it difficult to ascertain proper land ownership. About 97 per cent of land in Lagos is unregistered. This makes it difficult for banks to validate claims to land or for land occupants to use their land to create wealth.”

The report noted that the difficulty in registering a property and obtaining a construction license created obstacles to legality.

It stated, “With regards to registering a property, Nigeria ranks 184. In Lagos, it takes an average of 12 procedures and 105 days to register a property, costing up to 11.1 per cent of the property value. This process is made difficult due to the low quality of land administration in Lagos. This does not encourage formal declaration of assets and discourages people from registering their properties. Nigeria ranks 149 on the ease of obtaining a construction permit and requires 17 procedures, 118 days, and 27.5 per cent of property value. This encourages more informal construction of properties and increases risks in the real estate sector.”

On the ease of obtaining construction permits, the report noted that Nigeria ranks 149 in the ease of obtaining a Construction Permit and requires 17 procedures, 118 days, and 27.5 per cent of property value, adding that this encourages more informal construction of properties and increases risks in the real estate sector.

It stated, “In urban land markets, it is expected that pricing systems, demand and supply, information systems as well as social interactions should increase the level of accessibility to land.

“However, the increasing population and multifarious land needs of urban households have put pressure on demand, hence leaving them a pricing system to dictate solely the allocation and distribution of land in the market. At current low-income levels, the urban household is prone to market segregation. The state’s intervention in creating and sustaining equilibrium and equitable access to land through the Land Use Act has created a myriad of problems.

The firm advised that the conversion of dead capital to live capital through structural reforms would help convert most of the capital in the informal economy, valued at 65 per cent of GDP, into the formal economy.

Meanwhile, real estate operators have decried the corruption that characterises the process of obtaining Certificate of Occupancy, which gives a land value. According to them, this has stalled investments in the real estate sector.

Landowners are often skeptical about investing in land that is without legal recognition. Consequently, swaths of valuable real estate have remained underdeveloped, stalling the sector’s growth.

Lack of access to credit has also been identified as one of the challenges giving rise to dead capital in the country. With much property lacking titles that could serve as collateral, many financial institutions are unwilling to extend credits to landowners. So, the land lies fallow for years, making them dead capital.

The lack of clarity in property rights complicates pricing mechanisms, making it challenging for buyers and investors to accurately assess the value of a property. As a result, market transparency suffers, investor confidence dwindles, and the overall fluidity of property transactions diminishes.

Land Use Act barrier

The Chief Executive Officer, Ace hi-teck Construction Company Limited, Adewunmi Okupe, said the Land Use Act had been an impediment in awakening the dead capital in the country.

He said, “This is owing to the cumbersome land administration processes put in place by most state governments. The Land Use Act vests the authority on land in the state governments, and most state governments see the issuance of Certificate of Occupancy as a gold mine.

“The officials make it practically impossible for people to go through the process successfully on time, even with the very high fees charged.

“This is a disincentive to prospective Certificate of Occupancy applicants. Hence, very few titles come out yearly. It should be noted that without a good title, the land cannot be unlocked.”

The Chief Executive Officer of Fame Oyster & Co, Femi Oyedele, told The PUNCH that all lands in the world are dead capital until they are titled and used as live capital.

According to him, with less than three per cent of Nigerian land titled, Nigeria has a very large dead capital.

He claimed that the Land Use Act 1978, which was promulgated to awaken the dead capital in Nigeria, had failed.