Forty years ago, (precisely March 29, 1978) a tipping point was reached in how land was thenceforth to be owned and administered in both urban and non-urban areas in Nigeria. The Land Use Decree (now Act) of 1978 came into being.
Consequent to this Act, “all land comprised in the territory of each State in the Federation is hereby vested in the Governor of the State and such land shall be held in trust and administered for the use and common benefit of all Nigerians in accordance with the provisions of this Act” the opening paragraph of the Act reads – Section 1 (i)
Land, worldwide is a critical factor of existence & production making its ownership, allocation, distribution and utilization critical issues in the creation of wealth, social and economic wellbeing for both individuals and societies and in effect, making it a subject matter that cannot be overlooked.
Among key objectives of the Act were to remove the bitter controversies that arose over title to land, to assist the citizenry, irrespective of status to realise the ambition and aspiration of owning land within the country, to assist the government in the exercise of power of eminent domain or power to compulsorily acquire land for public purposes. The Act also intended to curtail the activities of speculators over land.
Forty years afterwards, can it be said that the Act has achieved its objectives? The continuous numerous calls from many quarters to amend the Act with plausible arguments that it has apparently failed in its objectives is an indicator as to the success or otherwise of the Act. In fact, one of the seven-point agenda of late President Umaru Yar’adua’s short-lived government was an amendment of the Land Use Act.
It is worth showing how the Act has failed in its objectives and made land ownership and title transfer even tougher. For starters, bitter controversies and conflicts still arise or exist over title to land; the Act has definitely not made it any easier for citizens to own land.
Sections 21 – 22 of the Act prohibits the alienation of either a customary right of occupancy or a statutory right of occupancy via an assignment, mortgage, transfer of possession, sublease, or otherwise without the consent of the Governor. The above stated provisions have resulted in a plethora of issues relating to transfer of property transactions. Coupled with this is the confusing provision that the Consent of the Governor should be obtained before the transaction is consummated.
Firstly, the process of obtaining the Governor’s consent is expensive. Many States have seen it primarily as a revenue generating activity and so the total cost of that exercise is sometimes as high as 15 percent of the deemed value of the subject property.
Further, even though there have been improvements to the process in some States, it still takes a long time to obtain the consent, which significantly delays the completion of land related transactions.
Additionally, the requirement to seek the Governor’s consent for mortgage transactions has also proved to be an impediment in the introduction of financial tools such as mortgage backed securitisation, which requires an element of certainty in terms of the rights to the underlying securities in the mortgages to be securitised.
As a result of the above stated issues, amendments have been proposed to alleviate the burdens currently faced by investors in the real estate market and to provide property investment incentives but not much has been achieved in this regard.
According to a survey carried out in 2012, the second greatest challenge facing 22% of Nigerians that wanted to invest in real estate was reported to be the difficulty in obtaining titles. This is followed by 18% that cite cost and time involved in regularizing real estate transactions.
This lack of understanding of the laws and procedures surrounding real estate and real estate transactions is borne primarily out of the poor workability of the Land Use Act.
Data from the World Banks Ease of Doing Business 2017, indicate that regarding property registration in Nigeria, it takes an average of 77 days to achieve. 59.7 days in sub-Saharan Africa and 22.4 days in high income Organization for Economic Cooperation and Development (OECD) countries. Registering properties in sub-Saharan Africa in general and Nigeria in particular is evidently tough as demonstrated by the Report.
At an average of 10.10%, Nigeria is among sub-Saharan Africa countries with the highest cost of registration as a percentage of property value. The average in sub-Saharan Africa is 8.00% and 4.20% in high income OECD countries.
A quick scan of the report further reveals that property registration in some select countries – Nigeria ranked 182 out of 190 in 2016 and 182 in 2017, which shows there has been no appreciable improvement in the ease of registering properties in Africa’s most populous nation.
Still on property registration, in 2016, Kenya ranked 122 of 190, China 42, South Africa 100, Ghana 76, India 140, and Brazil 130. In 2017, Kenya moved a step up to 121, China stayed same at 42, South Africa went southwards to 105, Ghana came down to 77, India improved by two places to 138 and Brazil also improved by two places to 128. A cursory study indicates how much work needs to done to improve and make the regulatory framework conducive for registering property.
Yet, this is a country, based on United Nations data, has a housing deficit of over 17 million units. To bridge this shortfall, 900,000 units must be added to the housing stock annually. But based on available data (National Bureau of Statistics) less than 100,000 are supplied.
The true and committed resolution of these issues must start with amendments to the Land Use Act. Section 15 of the Act provides that during the term of a Statutory Right of Occupancy, the holder shall have the sole right to and absolute possession of all the improvements on the land. Such right and possession only relates to improvements that the holder still cannot transfer, assign or mortgage without the prior consent of the Governor or would lose if in breach of terms and conditions of the Certificate of Occupancy.
Again, this clearly creates a problem of security of title because though it is conventional in Nigeria to grant a Certificate of Occupancy for a period of ninety-nine years. There is nothing in the Act that prevents the Governor from granting an interest of a lesser period. Section 8 of the Act only enjoins the Governor to grant a right of occupancy for a definite or fixed term. Where the right covers a short term then it amounts to economic risk to embark on massive improvements because of the atmosphere of uncertainty induced by the Section 16.
The Act has equally failed to curtail the activities of land speculators, as one of its objectives. Large tracts of undeveloped lands are still not under the control of the Governors of the States and land speculators are cashing in on this seeming lapse by holding down vast lands out of use until such a time as it would be very profitable to dispose on the market – a practice that hampers development in diverse ways.
Ruling family members in many communities (popularly called omo oniles) who control large traditional lands engage in land profiteering. They also create undue conflicts that result in costly land litigations and in many cases, physical clashes leading to deaths and sacking of villages. This a situation the Act was meant to curtail but has not helped in any way. The result is that the cost of land continues to rise astronomically and land speculation has become even more rife.
Concurrently, the harsh economic climate in the country with rising cost of living has put Nigerians in dire straits such that many who have access to land whether by inheritance, previous purchase, or by family or communal allotments and are more readily inclined to disposing them to meet immediate survival needs cannot easily do so because of lack of access to title. Though the land belongs to them they still have to approach the Governor of the State in which their land is situated to obtain title to facilitate a sale.
The same thing applies to using the land for economic activity. Many who own land cannot pledge them to the financial institutions for facilities to engage in commercial or manufacturing activities because of the torturous process of obtaining a Certificate of Occupancy as spelled out by the Land Use Act.
Thus, the rich continue to accumulate more and more lands to the detriment of the dominant poor.The situation has been complicated by the politicisation of almost all public affairs and institutions in the country.
The fact that all land in the state is vested in the Governor of the State makes it very easy for land and title revocation (Section 28) to be used as a political weapon not minding the investments on same or the adverse consequences of such a decision on the investment climate of the country, state, economy or financial sector.
This singular power in Sections 1 and 28 of the Land Use Act has made many financial institutions wary of accepting real estate as a collateral asset in extending facilities to their customers.
The amount of compensation and method of calculation of same under the Land Use Act also leaves a lot to be desired. Section 29 (4) (a) allows for an amount equal to the rent paid to the Government as well as cost of improvements to the land. This negates or ignores the fact that the allottee could have acquired the land from its original allottee at a huge cost on the open market.
Even more, costly improvements may have then been undertaken on the land to increase its value from which ordinarily, the land holder should benefit.
Section 6 of the Act which states that the Local Government authorities can grant land for agricultural purposes is in reality not practicable. Many local governments exist today in Nigeria and function as appendages or extensions of the Governor of the State. They cannot grant such lease as envisaged by the Act to any agricultural concern without the consent of the Governor. Where such leases are granted, and a Customary Right of Occupancy is granted virtually no financial institution in Nigeria recognizes same as a legal document strong enough to use as a collateral.
The impact of the current policy on land may directly or indirectly be one of the major reasons why agricultural production has not moved from its current subsistence and basic level after nearly 60 years as a nation. The statistics indicate that nearly 80% of land in Nigeria is agricultural land and are being put into various types of agricultural production. Of this 80%, less than 5% is held by large scale farmers or farm holdings. The rest are owned by small families and individual holdings engaged in small scale cultivation of the lands using very archaic technology and sometimes no technology at all – just the basic hoe, cutlass and hired labour.
Output is therefore very limited and even with that low level of output, nearly 70% of harvest is lost before it reaches the markets and targeted consumers.
Yet, each of these small farm holdings own their farm lots but because of the Land Use Act they can hardly obtain proper legal registered title to same to enable them access credit facilities with the financial institutions using these same farm lands as collateral. As a result of their inability to access financing they cannot employ technology by way of tractors etc to farm larger expanses of land, improve and increase output. Because of the lack of access to finance the small farm holdings cannot invest in technology to preserve harvest until it reaches consumers and the result is huge wastage and losses annually.
In conclusion, the objectives of the Land Use Act were no doubt lofty and well-intentioned but it has turned out to be defective in many respects. The time for a review in tune with current realities is long overdue. Fettered with institutional failure, dearth of political will and inherent defects, the law has not been able to achieve most of its set objectives.
Notwithstanding, the desire for economic development through effective, fair and equitable utilisation of land and land resources can still be attained if the law is holistically amended to overturn certain anachronistic and antithetical provisions and replaced with realistic and effective policies that would put Nigeria on the part of economic progress.