Dollar-denominated Banana Island property transactions are illegal

Providers of luxury apartments in Nigeria’s high-end neighbourhoods usually advertise the sale or lease of their properties in foreign currencies, especially the US dollar.
Banana Island in Lagos is one of such exclusive neighbourhoods where the sale or lease of property is denominated in dollar. The island is the most expensive place in Nigeria and one of the most expensive in Africa to own a house.
According to Nigerian Property market,”Property on Banana Island is dollar-denominated. The average cost of buying a three bedroom apartment is $2 million. However, if you’re just looking to hang around the island for some time, and not to buy property, you can rent the same apartment for about $150,000 per annum. But there’s a clause: you must pay for an initial minimum term of two years – in advance. And there are no refunds.

Also, the tenant is mandated to pay a ‘service charge’ of $17,000 per annum. A typical plot of land on the island usually goes for between $4 million and $6 million, and the cheapest building on the island costs upward of $8 million.

But because of the ridiculous prices of property on the island, about 60% of the completed buildings are currently unoccupied”.

It was against this backdrop that the Central Bank of Nigeria, CBN, four months ago, vowed to deal with those who transact property business in the country in dollars.

The Managing Director of the apex bank, Mr. Godwin Emefiele who gave the warning at the end of a two-day monetary policy committee, MPC meeting in Abuja, maintained that the legal currency for doing business in Nigeria remained the Naira, hence it is illegal for anyone to transact business in dollars in the country.

His words: “We are looking for people who are making demands for foreign currency as payment for services, landlords who are asking for rents in dollars, schools that are asking for school fees in dollars, or those transacting business in dollars.

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“It is illegal in Nigeria and we will like to advise those who are involved in these practices to desist from them because the CBN will in due course come after them”.

Real estate stakeholders who spoke to Vanguard Homes & Property last week, drummed support for the new CBN policy.

The Chairman of the Nigerian Institution of Estate Surveyors and Valuers, NIESV, Lagos State branch, Pastor Stephen Jagun described the policy as perfectly in order. He posited that the United States of America used its currency (the dollar) as the world benchmark because of its stability.

“Today, many people want to denominate their merchandize in dollar because it is stable. The rate at which the Naira is falling has caused crisis in the industry. For instance, if I rented a house for $100,000 dollars two years ago, it would be around 16.5 million Naira. The same house at today’s exchange rate would be going for N23.3 million.

“What it is means is that if I collected my money in dollars, I would be better of. Secondly, many of these people (property owners) brought in foreign investors. These foreign investors agreed to come because they are sure of their investments because it would be dollar-denominated.

“No investor wants to lose, so they would not come if they are to be paid in Naira. That notwithstanding, we should all rally round the CBN to ensure that the directive works,” he said.

He advised estate surveyors and valuers and others engaged in property business to advise their clients (landlords) to abide by the CBN requirement.