Public investment, or public expenditure, is spending by governments (federal, state and local in Nigeria) on the creation of fixed, long-term assets called physical infrastructure and human capital development (soft infrastructure). Spending on physical infrastructure like buildings, roads, bridges, tunnels, dams etc, is public investment as they are necessary for the living of the people. Real estate is defined as landed property – land, buildings, air rights above the land and underground rights below the land. The term real estate means real, or physical property. Some land economists claim that ‘real’ came from the Latin word ‘res’, meaning ‘things’. Others claim it was from the Latin word ‘rex’, meaning ‘royal’ since Kings owned all land in the past.
The real estate sector is the sector of the economy that caters for the physical infrastructure development and management like buildings, bridges, dams, roads, railways, waste management, etc. These basic infrastructures, on which life depends, are inevitable for our existence. Real estate sector is important in the life of human beings because food production, shelter development and clothing production depend on it.
The means of generating income from real estate sector are:
(1) Transactional means: Governments can sell off some of their abandoned landed properties which are lying fallow to generate income since real estate is a basic need of man. These abandoned and underused properties have a total estimated value of about $900 billion, according to PriceWaterhouseCoopers (PWC). For example, the federal government can sell off the National Stadium in Surulere, Federal Ministry of Justice Complex at 6 Marina, Lagos Island, and NITEL Complex at Cappa, near Oshodi, Lagos State to generate income. There is no asset that is fixed or that cannot be turned into cash. Transactional opportunities of real estate should be considered in the debate over governments’ deficits and debts apart from taxes and spending.
Andrew S. Nevin, PriceWaterhouseCoopers’ chief economist and partner, stated that the right reforms in land and property ownership could unlock $307 billion dead capital or 81 percent of Nigeria’s gross domestic products (GDPs). Dead capital, which is the capital tied up in unused assets, remains a critical issue as the tendency to invest long term by Nigerians is low. Andrew S. Nevin further stated that since real estate buttresses the financial sector, enabling the creation of asset-backed loans and securities, it cannot work without a proper land registry as banks cannot lend against a property without evidence of ownership. Land title registration is froth with challenges and constraints as is evident in the dearth of formal, documentary and registered land titles in the country. The consequence is that people are denied access to secure land title and the economic opportunity and potential that may be realised from using and transacting titles to land.
The dismal performance of the state of land administration in Nigeria is depicted in the World Bank Report on Doing Business 2017. Therein, the country was ranked 182 among 190 economies on the ease of registering property as it takes 12.1 steps/procedures and 69.6 days in addition to about 10.5 percent of the property value to complete registration. The excessive time and cost spent on procuring land title is particularly detrimental to low-income and disadvantaged groups, especially women and peasant farmers. Specifically, it is on record that since the commencement of registration of land parcels in Nigeria in 1863 under the colonial administration, not more than ten percent (10%) of the nation’s land mass of 923,768 square kilometres has been surveyed and registered, according to the Minister for Housing and Urban Development, Arc. Ahmed Musa Dangiwa. Andrew S. Nevins stated that the current land titling system in Nigeria is onerous and excludes many people from formal ownership. Massive registration of land titles by the government will reduce poverty in Nigeria.
(2) Income generation means: Governments can generate income from the real estate sector by imposing land-based taxes, charges, levies and fees on real estate products. Land-based taxes, levies and fees are good sources of income for governments. Governments can charge road maintenance levy on all vehicles or toll its roads. Agriculture is one of the two biggest sectors in developing nations. Is it not absurd that agricultural land is not effectively taxed in a country where agriculture is the highest contributor to the gross domestic product (GDP)? Lagos State Land Use Charge administration is the largest in the country. In 2016 alone, Lagos was able to generate over N20 billion from land administration and management. This income came from less than 10 percent of the properties in Lagos State. Agriculture is the mainstay of Nigeria’s economy, and the taxation of agricultural land is a potentially important instrument in revenue generation. There are over fifteen land-based taxes that governments are empowered to charge to generate income. The ability of developing countries to maintain their stock of urban infrastructure and to expand in line with rapid urban population growth depends on administrative capabilities and financial resource management.
(3) Employment means: Government can explore the real estate sector to generate employment and create products. Construction industry of developed nations (US, UK, Germany, Australia etc) is one of the three largest employers of labour and contributes immensely to the GDP. The other two sectors are health, and banking and finance. The United Nations estimates that Nigeria’s population is set to double by 2050 to around 400 million people, which would make it the third largest nation, behind India and China. Against this background, there is a lack of adequate housing in a country where most inhabitants live on less than $2.00 a day despite the nation having one of Africa’s largest economies. Housing construction in Nigeria, with over 28 million housing deficit can be used to trigger employment and grow the economy.
(4) Other means: National real estate can be used as collateral security for loans. Securitisation is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans, or credit card debt obligations (or other non-debt assets which generate receivables) and selling their related cash flows to third party investors as securities, which may be described as bonds, pass-through securities, or collateralised debt obligations (CDOs). Securitisation is real estate potential in which the government registers its land and uses the land as collateral to sell its debts.
Property blockchain can also be created to allow for the issuing and fractionalisation of ownership in property assets. Government can create wealth by acquiring land and developing them into industrial, residential and commercial estates etc.
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