1. Improving Nigeria’s Land Markets: Recommendations From the FIAS Assessment
Stephen B. Butler
NORC at the University of Chicago
FIAS/IFC Land Policy Advisor
World Bank Conference on Land Management for the Millennium Development Goals
Washington, DC
March 9-10, 2009

2. Land and the MDGs? = = Business Access Start Up to Employment and Land
Investment
Employment = =

3. Current Policies Unfocused land grants and land subsidies
Non-transparent budgetary expenditures for state land programs
Very high taxes/fees on land transactions
Complex, time consuming and burdensome land transaction procedures
Complex procedures and high thresholds for creating legal titles

4. Current Outcomes
A room at the Airport Sheraton in Lagos costs over $600 per night! That’s right … the Sheraton!
Scarcity
Rapidly Increasing Prices
Speculation (mostly by elites)
Underutilization
Inefficient Market Mechanisms
Non-transparent (political) allocation of state lands
Informality

5. The dilemma of underutilized land grants
Land Allocation
Incorrect pricing and subsidies can lead to wasteful land use and speculation – including government speculation
The dilemma of underutilized land grants
Need to increase the costs of acquiring and holding vacant or underutilized land

6. Land Allocation cont’d
Market pricing and cost recovery – target land subsidies to specific groups and needs
Budget transparency for land programs – how much do they cost and who benefits?
Increase use of auctions
Eliminate “retail” land allocation programs – rely on concessions and public private partnerships that place more burden on the private sector to serve the poor
Enforce development covenants - prevent flipping or establish ridiculously high “flip” taxes

7. Simplifying Transactions
Governor’s approvals – an extreme result of nationalization
Widespread agreement that they have outlived their purpose – e.g. see Central Bank action plan
Best solution – eliminate; Second best - phase out over time
Problem: Widespread corruption and fraudulent land transactions – is state supervision of all land transactions the best approach to this problem?
Place more reliance on private sector professions

8. Simplifying Transactions cont’d
Eliminate mortgage approvals – banks have incentive to assure compliance - President recently called for abolition for mortgages and subleases
Free up state resources for other tasks
Reduce transaction costs and accelerate loan disbursements

9. Simplifying Transactions cont’d.
Eliminate or accelerate approvals of solicitor assisted purchase/sale transactions
Rely on self-regulating incentives for professionals
Establish appropriate sanctions for violations

10. Reducing Transaction Costs
High transaction costs encourage informality in a system in which there are no consequences for informality
Informality may (or may not) result in keeping land out of the market for business use
Charges imposed on transactions are easily avoided and avoidance is widespread today
Land transfer charges make up a surprisingly small portion of local budgets (mostly because of avoidance) – why not just lower them?
Long term: greater reliance on recurring land and real property taxes – supports formality and hard to avoid

11. Reducing Transaction Costs cont’d.
Reduce land transfer fee – at 8% to 30% on average (depending on state) too high by international comparisons
Alternative: Impose transfer fees on progressive scale, relieving burden on lower end of the market
Reduce registration fees (2 to 3% of transaction value) – registration fees should be based on sustainability, not profit, and registration fees should not be a hidden tax
Reduction of fees and taxes can result in capture of more transactions and higher revenues – See, e.g., Egypt