Nigerian Real Estate Sector And Government Control

Since we became a republic, the real estate sector in Nigeria has been fighting for survival. Its stunted growth, development and dwindling fortunes over the years remain a major source of worry. This article aims to address the problems that arise from the role of government in the real estate sector.

Real estate has continued to play a significant role in man’s evolution.  It is not a coincidence that food, shelter and clothing believed to be the three essentials that sustain mankind, also have some linkage to land. Food grows out of land while shelter is affixed to it, and man’s clothing is made largely from what grows out of land.  Indeed, whether in ancient times or today’s modern system, land constitutes a significant index for man’s wealth, and as economic activities have assumed more sophistication over time, land has continued to play a central role in their development.  There is hardly any business venture that does not require to be supported by some form of real estate: from the small business that requires real estate as offices from where its business can be organized, to the major venture that needs it for its factory.  Economics and management studies have long established that production is dependent on four factors, out of which land is one, along with labour, capital and machinery.  It therefore simply stands to reason that to be true to his professional responsibility every commercial/business lawyer ought to have a proper grasp of real estate law. The client needs advise on this in one form or the other.

It is therefore not difficult to understand why there is a lot of demand for land.  Elementary economics teaches us that where there is a lot of demand, prices are bound to go up.  What has further complicated the graph is the fact that, although a natural endowment, land is not finite.  It accounts for only about 30% of the whole surface of the earth.   Consequently, against this backdrop major economies through some very robust and well thought out land policies comprehensively address challenges they encounter in the real estate sector.

This is not exactly our situation here in Nigeria and the result is that there is a myriad of problems in our real estate sector.  Going down memory lane, Mallam Nasir El Rufai the incumbent Governor of Kaduna state and former FCT Minister in 2004 announced the withdrawal of Certificates of Occupancy in the Federal Capital Territory.  Without really drawing aspersions to the pronouncement that was made more than 10 years ago, whether for good or evil, this is indicative of some of the challenges the real estate sector in Nigeria faces.

As was discussed earlier, land is intrinsically connected to the economic development and well-being of any nation, thereby necessitating some intervention by prudent governments.  Such interventions vary in degrees, depending on the nation.  In Nigeria our land tenure system is a mixed story.  In Southern Nigeria, under customary law land was organized largely around the community or the family.  The individual could rarely lay claim to any part of it as owner and therefore could not alienate it without the consent of the head. This land tenure system was however whittled down following the introduction of received common law principles.

In Northern Nigeria the situation was markedly different as land was held and administered for the use and common benefit of the people who held a right of occupancy over it and such rights were subject to the control and disposition of the native authority.

Read also: LAND USE ADMINISTRATION AND E-GOVERNMENT

State ownership of land in Nigeria can be traced to the 1861 Treaty of Cession which ceded the colony of Lagos to the British Crown, subject to the customary rights of the local people.  Before 1963 land was vested in the Queen, and when Nigeria became a Republic in 1963, it was vested in the Federal Government.  Thus, under customary law, land was generally vested in communities and families in the South, whereas in the North land was vested in authorities for the use and benefit of the people. However, it all changed when Nigeria became colonized and land was vested in the Queen until 1963 when Nigeria became a Republic.

Consistent with the economies of industrialized nations, the colonial government in Nigeria needed land for developmental purposes, specifically for agriculture and industrialization.  As land at that time was vested in the communities and families, government was forced to compulsorily acquire these lands from them and today we have a rash of acquisition statutes in Nigeria beginning with the Public Land Acquisition Act of 1917, through to the Public Land Acquisition Law Cap 105 of Western Region, 1959, to the Public Land Acquisition Act of 1976.  States have their separate Public Land Acquisition Laws.

This was the position with our land tenure system up till 1978 when the Land Use Act (“the Act”) was introduced.  The Act was promulgated to bring about uniformity in Nigeria’s land tenure system, ensure that land was available for agricultural and industrial development, and importantly address our socioeconomic problems.

Our immediate past history reveals that in nearly every facet of our society we feel government’s overbearing, suffocating role. Whether in the provision of telecommunication, electricity, energy, etc, government saw it as its ordained responsibility to provide these facilities.  This do-it-all, economic monopolistic philosophy was adopted from the welfarist economic philosophy which the Labour Party Government that our colonial masters, Great Britain, adopted after the second world war.  It was believed that it was well suited for a developing nation that was anxious about equitable wealth distribution, and that it protected its economically weak consumers from profiteering investors. Although this overbearing stance is not as bad as it was anymore especially in the telecommunication sector, unfortunately government’s extension of this philosophy to our land policies has not changed.

As with other sectors at that time, Government believed its role was to develop the real estate sector.  We would recall that the central programme of the National Party of Nigeria led Federal Government of the Second Republic was housing, which led to the development of residential houses across the country in selected cities and towns. Not only was that Government unable to sustain the development at that time, today the houses that were built share an unenviable place in our growing list of abandoned projects in this country.

Read also: Why Building Projects Are Abandoned In Nigeria

And today, many years after, that philosophy largely remains.  Virtually every government has either an Authority/parastatal or a property development company with the objective of developing the real estate sector.  At the Federal level we have the Federal Housing Authority (“FHA”), at Federal Capital Territory level, we have the Abuja Investment and Property Development Company (AIPDC), at state level, the Lagos State Development Property Company (LSDPC) is an example.  Though these companies are doing a marvelous job developing property and creating income for their governments, but inspite of these efforts real estate development remains painfully low.

If we look around us more private property development companies are engaged in property development.  But lest we be deceived, there is still so much to be done.  Our real estate development is limited largely to residential and to some extent hotel, office and shopping complexes.

By comparison, in developed economies the private sector is engaged in the development of stadia, airports, hospitals, roads, rail, bridges, tourist and entertainment centres, museums, theaters etc. and some of these structures are truly gigantic.  Though there has been recent improvements in the absorption of the private sector in infrastructural developments take for instance in the aspect of entertainment and tourism

The point to be made is that the role of our government ought to be to create the enabling environment for the private sector to drive real estate development.  It is regrettable that this has not completely been our experience in Nigeria.  Although Government has since accepted the failure of the monopolistic market and is moving towards a free market economy through the introduction of some statutes, amidst so many calls for the reform of the Act, the Act is yet to be changed.