Urgently, Nigeria, Africa’s largest economy, needs comprehensive reforms in its land and property ownership systems just as it needs to develop more infrastructure across sectors.
These actions have become not only urgent but also necessary because experts estimate that only 5 percent of the country’s housing stock, which is less than 20 million units in total, are in formal mortgage. This means that 95 percent of these houses are dead assets because they are neither tradable nor bankable.
Andrew Nevin, Partner and Chief Economist for PwC, who spoke at the just concluded West Africa Property Investment Summit (WAPISummit) in Lagos, explained that it was only land and property ownership reforms that could unlock this huge stock of dead assets whose value he estimated at N307 billion or 81 percent of the country’s GDP.
Nigeria has a rigid traditional land tenure system coupled with the current land titling system which is onerous and excludes many people from formal land ownership, hampering full scale economic activities, especially real estate which happen on land.
Nevin, in his presentation on ‘The Global View On Geopolitics, Oil & Macro-Economics: How are These Impacting Investment in West African Real Estate?’ underscored the importance of land, especially in an emerging economy like Nigeria where population is fast outstripping GDP growth.
In Alfred Marshall’s Principles of Economics written in 1890, it is stated that land, labour, capital and organisation were the four factors of production, but land is so important that the other factors would be redundant without it. Land is the bedrock upon which the satisfaction of all human needs is built. Food, clothing and shelter are all human needs met from resources derived from land.
Land reportedly accounts for 20 percent of the earth’s surface, and consequently, every economy requires comprehensive land regulations and policies to guarantee the effective usage of its land and the maximisation of resources attached to it.
From traditional, economic and industrial perspectives, experts see land as very unique and strategic and its availability plays a pivotal role in the development of any economy as it increases investment inflow. Industrialisation, housing development, agriculture, mining, oil exploration and other economic and productive activities that lead to improved standard of living, job creation, economic growth, among others, are possible only when land is available and harnessed for such purposes.
A World Bank Report on ‘How Africa Can Transform Land Tenure, Revolutionise Agriculture and End Poverty’ says Sub-Saharan Africa is home to nearly half of the world’s usable, uncultivated land but, so far, Africa as a whole has not been able to develop these unused tracts to dramatically reduce poverty and boost growth, jobs, and shared prosperity.
Another World Bank report on ‘Securing Africa’s Land for Shared Prosperity’ argues that if African countries and their communities could effectively end ‘land grabs and modernize the complex governance procedures that govern land ownership and management over the next decade, it would bring about improved well being and standard of living of their people.
Based on these facts, Nevin said that land and property ownership reforms were needed, especially for real estate which is one of the most critical sectors that, if reformed, would propel growth and alleviate poverty in Nigeria, explaining, “real estate makes up 60 percent of the world’s global assets and in developed countries, real estate buttresses the financial sector, enabling for the creation of asset-backed loans and securities”.
Besides these reforms, Nigeria also needs to build more infrastructure, particularly for its growing population which is projected to grow faster by 2020 even as poverty outlook remains dire.
“IMF 2018 report on Nigeria concludes that the country is set to experience incremental decline in income per capita as from 2025”, Nevin revealed, meaning that housing affordability issues would worsen, just as standard of living would decline rather than improve.
He pointed out that Nigeria’s yearly demand for property was about 1 million, but the yearly supply was just 100,000 units. He noted that the real estate sector was still in recession and that is threatening the country’s ability to close its housing deficit.
Chii Akporji, an executive director at Nigerian Mortgage Refinance Company (NMRC), blamed the housing deficit on the country’s infrastructure deficit. “Infrastructure is all encompassing and remains the bedrock of the economy”, she posited, stressing that it contributed to the cost of housing.
“Infrastructure constitutes about 25 percent of construction cost; it is the major cause of housing deficit” ,insisted Akporji who also spoke at the WAPISummit, suggesting that government should initiate an infrastructure fund that should specifically be focused on housing.
Source: Chuka Uroko