Nigeria’s real estate sector is facing significant challenges due to a poor land tenure system, unclear property rights, and limited access to funds. These issues have led to the existence of dead capital, which refers to property that lacks legal recognition and cannot be effectively utilized for economic purposes.
The country’s land tenure system, regulated by the outdated 1978 Land Use Act, has contributed to the problem of dead capital. The process of obtaining land titles is complex and time-consuming, leading to many plots of land having little or no value. Experts estimate that the residential real estate and agricultural land in Nigeria currently have between $300 billion and $900 billion worth of dead capital.
PricewaterhouseCoopers (PwC) suggests in their report titled “Bringing dead capital to life, what Nigeria should do” that the real estate market holds even higher value, with the high-value segment worth between $230 billion and $750 billion, and the middle market segment worth between $60 billion and $170 billion. However, these estimates are based on certain assumptions about population and housing conditions in Nigeria.
The land tenure system in Nigeria is largely informal and communal, making the formalization of property rights a challenging task. Efforts by the government, such as the issuance of certificates of occupancy, have not been effective in addressing this issue. A large percentage of households in Nigeria, especially in rural areas, have no legal documents for their land, further complicating the situation.
The difficulty in registering a property and obtaining a construction license also creates obstacles to legality in the real estate sector. Nigeria ranks low in terms of ease of property registration and obtaining construction permits. This leads to informal construction practices and increases risks in the sector.
Lack of access to credit is another challenge contributing to dead capital. Without proper land titles as collateral, many financial institutions are hesitant to provide loans to landowners. As a result, valuable real estate remains undeveloped, hindering the growth of the real estate sector.
To address the issue of dead capital, structural reforms are necessary to convert the informal economy’s capital into the formal economy. This can help unlock the potential of the real estate sector and stimulate economic growth. Additionally, the corruption associated with obtaining certificates of occupancy needs to be addressed to restore investor confidence and encourage investments in the sector.
In conclusion, Nigeria’s real estate sector faces significant challenges due to a poor land tenure system, unclear property rights, and limited access to funds. The existence of dead capital hampers economic development and the growth of the sector. Structural reforms and improvements in land administration processes are needed to address this issue and unlock the sector’s potential.
Clayton County Register.