According to a report by PwC, Nigeria is sitting on a huge amount of untapped wealth in its residential and agricultural sectors. The report estimates that the value of dead capital in these sectors ranges from $300 billion to $900 billion, meaning that these assets are not legally registered or cannot be used as collateral for loans. This is a major challenge for the Nigerian economy, as it limits the access to finance and investment opportunities for millions of people.
Dead capital refers to assets that are not recognized by the formal legal system or that cannot be easily converted into cash. In other words, these are assets that have economic value but are not productive or liquid. For example, a house that is not registered with the government or a land that has no clear title cannot be used as collateral for a loan, sold to another party, or inherited by heirs. These assets are essentially “dead” in the sense that they do not generate income or wealth for their owners or the society.
Why is dead capital a problem for Nigeria?
Nigeria has one of the largest stocks of dead capital in the world, especially in its residential real estate and agricultural land sectors. According to PwC, about 97% of land in Nigeria is held under customary tenure, which means that it is governed by local rules and traditions rather than by formal laws.
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This makes it difficult to prove ownership, transfer rights, or access credit using land as security. Similarly, many residential properties in Nigeria are not properly registered or documented, making them vulnerable to disputes, fraud, or expropriation.
The problem of dead capital in Nigeria has serious implications for the economic development and social welfare of the country. First, it reduces the availability of credit and capital for individuals and businesses, as they cannot use their assets as collateral for loans or as equity for investments.
This limits their ability to start or expand their enterprises, create jobs, or improve their living standards. Second, it reduces the efficiency and transparency of the property market, as it creates information asymmetries, transaction costs, and risks for buyers and sellers. This discourages investment and innovation in the real estate and agricultural sectors, which are vital for economic growth and diversification.
Third, it reduces the tax revenue and public services for the government, as it makes it harder to identify and collect taxes from property owners or users. This affects the quality and quantity of public goods and infrastructure that the government can provide to its citizens.
What can be done to unlock the potential of dead capital in Nigeria?
The solution to the problem of dead capital in Nigeria lies in improving the legal and institutional framework for property rights and registration in the country. This involves several steps, such as:
Simplifying and harmonizing the laws and regulations governing land and property ownership and transactions in Nigeria, to make them more consistent, clear, and accessible.
Strengthening and modernizing the land administration system in Nigeria, to make it more efficient, reliable, and digitalized.
Increasing the awareness and education of property owners and users on the benefits and procedures of formalizing their property rights and registering their assets.
Providing incentives and support for property owners and users to formalize their property rights and register their assets, such as reducing fees, streamlining processes, offering subsidies, or granting amnesty.
Enhancing the enforcement and protection of property rights in Nigeria, to ensure that property owners and users can enjoy their rights without fear of losing them.
These reforms would not only increase the economic value of the assets, but also create more opportunities for income generation, job creation, infrastructure development, poverty reduction, and social stability. PwC also cites some examples of countries that have successfully implemented similar reforms, such as Rwanda, India, and Peru.
These countries have shown that with political will, institutional reforms, and technological innovation, it is possible to unlock the wealth hidden in dead capital and create more prosperity and well-being for the people.
At PwC, we have extensive experience and expertise in helping clients to address the challenges of dead capital in Nigeria. We have worked with various stakeholders, such as governments, private sector actors, civil society organizations, and international donors, to design and implement solutions that improve the legal and institutional framework for property rights and registration in Nigeria.
We have also helped clients to leverage their assets for economic growth by providing services such as valuation, due diligence, advisory, financing, taxation, audit, assurance, and more.