Land and national development
“In the west… every parcel of land, every building, every piece of equipment or store of inventories is represented in a property document that is the visible sign of a vast hidden process that connects all these assets to the rest of the economy. Thanks to this representational process, assets can lead an invisible parallel life alongside their material existence. They can be used as collateral for credit.”
The above quote taken from the book by the Peruvian economist, Hernando De Soto, aptly titled “The Mystery of Capital, why Capitalism succeeds in the west and fails elsewhere” appropriately captures the missing link between our vast land resources and our capacity to create wealth through them. The fundamental issues have to do with lack of title to the bulk of our real estate assets and the expensive and very cumbersome process of obtaining title or obtaining Governor’s consent for properties already covered by a registered title.
As efforts are being made to jumpstart our economy, it is vital that the government should take a second look at our land administration processes.
Interestingly, in the United States and most of the developed world, the single most important source of funds to an individual or company is a mortgage on his or its property. The process is relatively easy and straightforward because the title registration/land administration system has created an efficient representational process that can convert real estate assets into capital. This conversion process is crucial for creating wealth through real estate assets and its lack thereof is a major contributor to the high poverty level in our society.
Our present land policy is predicated on the Land Use Act of 1978, which technically vested all land in the territory of each state on the Governor of the State to administer for the benefit of all Nigerians. The Act coalesced the pre-existing land tenure systems in various parts of the country into one and created the statutory and customary rights of occupancy over land, which should be evidenced by a Certificate of Occupancy.
The key objectives of the Act were to remove the bitter controversies that usually arise over title to land, to assist the citizenry, irrespective of status realise the ambition and aspiration of owing 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 and to curtail the activities of speculators over land.
It is submitted that none of the key objectives of the Act has been achieved as bitter controversies and conflicts still arise or exist over title to land, the Act has not made it any easier for citizens to own land, governments power to compulsorily acquire land based on the strict provisions of the Act has been resisted by land owners and the government is now compelled to negotiate compensation payable for all such acquisitions; and the incidence of speculators and their activities over land remain rife.
Since its promulgation, there have been strident calls for amendments of some of its key provisions to remove the undue bottlenecks therein. Some of the sections of the Act for which calls have been made for their amendments are the consent provisions, the compensation provisions and the rather tedious process of obtaining a Certificate of Occupancy.
The requirement for obtaining governors/ministers consent to land transactions is perhaps the single biggest problem with the Act as the cost and time associated with it are enormous across the country. A process that takes just hours or days and cost very little in most developed countries, costs so much and takes an uncertain period here. This provision and its operation across the country tend to hinder the use of properties as collateral for loans (due to the difficulties in registering mortgages) and thereby make the environment less business friendly. It also does not encourage the development of a fluid and formal land market as it has forced most land transactions to be done outside government regulation and control as a lot of people do not bother seeking for consent because of the costs and time involved. Beyond our very poor land title registration profile, this consent provision is a key contributor to our poor ranking in the global index on the ease of doing business.
While a few states have made remarkable progress in speeding up the process of obtaining consent, it remains a major problem in most states and at the federal level. Interestingly, no consent has been signed or granted by the Federal Ministry of Power, Works and Housing since this administration came into office. The import of that is that no mortgages or land transactions have been registered at the federal level in the past two years. This scenario wherever it exists whether at the state or federal level portends immense negative multiplier effects on the whole economy as mortgages cannot be registered, new investments in the sector are discouraged and development of new projects cannot commence.
Another fundamental issue with the Act is the rather tedious process of obtaining a Certificate of Occupancy. Regrettably, despite the fact that land title registration started in Nigeria as far back as 1863, available data indicate that only about three per cent of the land in Nigeria is registered. This means that most of our land area (97 per cent) are still not easily convertible to capital and constitute what land economists regard as dead capital. It is sad that under our present land policy, an individual or family with a plot or an acre of land cannot use the land as security for a loan to invest in a business. Our vast land resources remain dormant or dead capital due to lack of title, while the land owners remain in poverty due to lack of ability to create wealth with what they already have.
The various reasons adduced above bring to the fore the need for a holistic reform of our land tenure system. The simplistic result of this process will be to ensure that all land within the country is appropriately delineated and titled or registered in much the same way that every vehicle on our roads has a distinct registration number registered at the state vehicle registry. This process, when completed along with the simplification of our land transaction process, will go a long way not only in resolving the impediments created by the operation of the Land Use Act but will also foster economic development and wealth creation. Remarkably, Rwanda that just recently came out of a civil war has made a remarkable progress in its land titling effort.
Eleh is a past president of the Nigerian Institution of Estate Surveyors and Valuers and a Senior Partner of Ubosieleh + Co.
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