Land is an important form of capital. As with other factors of production, an efficient economy requires the full utilisation of the resources in the country, effective mechanisms for discovering its price, and frictionless transactions. Duly protected property rights are the vital source of the developed world’s prosperity, and the lack thereof is the reason why many countries remain mired in poverty.
Professionals have found out a direct correlation between a nation’s wealth and having a suitable property rights system. This is because real estate is a form of capital and capital raises economic productivity and thus creates wealth. The quest for increasing human welfare through expanding opportunity for self-actualization through innovation, entrepreneurship and risk taking. As more of the world’s poor congregate in cities, they ought to benefit from the specialized division of labor that has fueled growth in industrialized nations. But in many instances poverty just seems to get worse.
In a number of countries too many citizens cannot access land because their ownership rights are not adequately recorded. This makes it a “dead capital” that cannot be used as collateral for a loan which might be used to start a business.
The term dead capital was coined by Hernando de Soto Polar, the famous Peruvian economist and author of the book The Mystery of Capital. De Soto estimated in 2015 that 5.3 billion of 7.3 billion people globally over seventy percent of the world’s population hold dead capital that is worth US$ 9.3 trillion in assets. This dead capital owned by poor or middle-class people in emerging economies cannot be realized due to poor policies, procedures or bureaucracy. If these assets in the informal sector were recognized and brought into the mainstream, market economy, they could possibly become the key to fostering development.
Individual behavior consumption, savings and investment decisions are studied to understand how they can be tweaked for increased welfare. Hernando de Soto, asserts that no nation can have a strong market economy without adequate participation in an information framework that records ownership of property and other economic information.
De Soto noted that, the real problem is within the flawed legal systems of developing nations that make it virtually impossible for the majority of their people and their assets to gain a stake in the market. The people of these countries have talent, enthusiasm and an astonishing ability to wring a profit out of practically nothing.
Here are the property effects that allow democratic market economies to succeed and are lacking in many developing countries:
- Fixing the Economic Potential of Assets
- Integrating Dispersed Information into One System
- Making People Accountable
- Making Assets Fungible
- Networking People
- Protecting Transactions
Nigerian Land Use Act was enacted in 1978 with the aim of energizing economic development by ensuring effective and equitable utilization of land and land resources in the country. However, after more than three decades of the operation of the law, it is apparent that most of the problems it sought to cure have resurfaced and certain provisions of the law have themselves worked hardship on the citizens and tended to impede economic development, which the Act initially sought to stimulate.
Moreover, the country’s constitution demands the consent of State governors before a land with a customary or statutory right of occupancy can be mortgaged, subleased or transferred. This, amongst other bottlenecks, gives the locals a mountain to climb, making it rather difficult to effectively transform dormant assets to tangible wealth. And to think of all the good that can come through if we could find a way to get out of this straitjacket.
Inadequate housing policies and the failure of the land market to offer sufficient, worthy and accessible housing options, millions of urban poor have to create their own shelter, either by invading private or public land or by buying land illegally and constructing their own housing.
Today, many Nigerians and families have a large expanse of land that are deemed almost worthless because there are no legal papers backing them up. PWC estimates that the country holds as much as $900 billion worth of dead capital locked up in residential real estate and agricultural land, including federal government’s abandoned properties estimated at N230 billion.
The Nigerian Government has planned a stimulus package of N2.3 trillion 2 percent of GDP to revivify the economy damaged by the virus. There is need to adopt a broad and a many-sided approach to development. However, PWC highlights ten priority areas policy makers and businesses in Nigeria need to consider in 2021 which include:
- Unlocking Nigeria’s vast dead assets to stimulate growth; harnessing the power of the diaspora;
- Driving export growth through services;
- The need for growth to be spread across the country, and not just in a few urban centres;
- Improving on the country’s low investment and gross capital formation;
- Moving its thriving informal sector to the formal sector;
- Improving on the business environment, and ease of doing business;
- Addressing Nigeria’s big three distortions (exchange rate, power, and subsidies);
- Shifting focus from the Gross Domestic Product (GDP) lens to sustainable development goals and finally, prioritising climate change.
Therefore, it is important to build upon this successful project with interventions dealing with access to land, the use of property by public bodies, planning and construction permitting. The information about the land can also be used to implement a better and more equitable property tax system and better use of public assets for local government financing. E-government procedures can be used to improve the transparency and efficiency of providing access to land, building permitting and better government.