There is an indication that dead capital in Nigeria’s residential real estate and agricultural land has risen from $300 billion to $900 billion.
Dead capital is a property which is informally held and not legally recognised even as the uncertainty of ownership decreases the value of the asset.
A recent report released by Pricewaterhousecoopers (PwC) indicated that high value real estate market segment holds between $230 billion and $750 billion value, while pegging the middle market between $60 billion and $170 billion.
The report highlighted that oil revenues contributed more than two-thirds of the nation’s revenue and constituted 9 percent of the Gross Domestic Product (GDP).
It pointed out that the informal economy accounted for 65 percent of GDP, which it described as among the highest in the world.
The report hinted that Nigeria’s economy had in 2017 recovered from a recession as global oil prices recovered and export production increased, adding that the economy recorded real GDP growth of 0.82 percent compared to 1.56 percent in the previous year.
It indicated that International Monetary Fund’s (IMF’s) most recent report on Nigeria concluded that the country would soon experience incremental decline to income per capita over the next 8 years through 2022.
“This decline is as a result of slow GDP growth exceeded by a population growth rate that is not expected to slow in the near future as the population is expected to reach 263 million by 2030”, it added.
In order to circumvent the projected crisis, PwC suggested that Nigeria required more investment in critical areas that directly impacted economic growth.
This the report believed that heavy investment in infrastructure coupled with structural reforms would loosen domestic and foreign capital, thereby allowing more businesses to thrive.
It hinted that in the long run, that investment in human capital would yield economic prosperity by overriding high unemployment in a large population, adding that land tenure system in Nigeria is still largely in the communal and informal sectors.
The report highlighted that sporadic efforts by the government on formalisation of property rights through certificate of occupancy in cities like Lagos are yet to meet the intended goal, adding that land ownership has been rigid as a result of complex land tenure system.
It submitted that 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.
Pwc however expressed worry that the Act failed to establish a uniform land tenure system that governed ownership in the country.
“More so, most citizens, especially in the rural areas where land is not scarce, do not comply with legal provisions of the Act and have no certificates on their land while issues around proper land registration and omo’nile also makes it difficult to ascertain proper land ownership”, the report indicated.
The report informed that about 97 percent of land in Lagos is unregistered, a situation that made it difficult for banks to validate claims to land or for land occupants to use their land to create wealth.
According to the Act, all lands in urban areas, except federal government owned land, transferred ownership to the state Governor who then has the right to grant statutory right of occupancy to individuals and organisations.
Land in other areas of the state belong to the local government who would issue a customary right of occupancy.
Also, its illegal to mortgage, sublease or engage a transfer of possessions on land with a customary or statutory right of occupancy without permission of the governor.
To this end, the report posited that the restricted ownership and unregistered land created dead capital as people cannot easily leverage their assets to create wealth.
It suggested that Nigeria needed to invest in establishing proper and seamless land administration and implement policies that would improve land accessibility.
The report blamed the land tenure system as one of the major reasons for dead capital in the country, adding that difficulty in registering a property and obtaining a construction license created obstacles to legality.
The report added, “With regards to registering a property, Nigeria ranks 184 but in Lagos, it takes an average of 12 procedures and 105 days to register a property, costing up to 11.1 percent of the property value”.
It pointed out that the process worsened due to the low quality of land administration in Lagos, as it discouraged formal declaration of assets and people away from registering their properties.
The report hinted that Nigeria ranked 149 on the Ease of obtaining a Construction Permit that required 17 procedures, 118 days, and 27.5% of property value, adding that the procedure encouraged more construction of informal properties and increased risks in the real estate sector.
It indicated that in urban land markets, that it’s expected that pricing systems, demand and supply, information systems as well as social interactions should increase the level of accessibility to land.
The report however stated that increasing population and multifarious land needs of urban households put pressure on demand, leaving the pricing system to dictate solely the allocation and distribution of land in the market.
It highlighted that property owners that violated expressed prohibitions and which lacked updated registry records left the formal market and switched to informal market.
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