PricewaterhouseCoopers, an accounting firm, has disclosed that Nigeria currently has between $300bn and $900bn worth of dead capital in residential real estate and agricultural land.
The is contained in the latest report of the accounting firm titled ‘Bringing dead capital to life, what Nigeria should do’
According to PwC, 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.
In the report, the firm said 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.
“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,” PwC stated.
The accounting firm noted that the difficulty in registering a property and obtaining a construction license created obstacles to legality.
“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,” it added.
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.
“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, 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.
“A strong example is the problem of centrality in the administration of land leading to bureaucracies and corrupt practices. Stemming from the above market and socio-economic situation, there has been a shift by urban households to access lands through the informal property market,” the accounting firm said.
According to PwC, properties with owners, who have violated expressed prohibitions and who do not have updated registry records, have left the formal market.
“Therefore, as a result of bureaucratic challenges, such as red tape and inertia, and the high cost of registration, businesses and households that have left the formal market are comfortable staying informal,” it explained.
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.