Revenue generation and the Land Use Act The case of Lagos State D.P.C. Osayimw~s~ in 1978 the federal mifita~ govem- ment enacted the Land Use Act wbicb theoretically revolutionized the /and tenure system. So far, successful implementation has been limited since the Act is at such variance with reality. In spite of this, the Lagos State government, whjch has the smatlesf land resources in the nation, has been able to generate so much income from its implementation that land deal- ings are a major source of state finance. This ark/e investigates the actual generation of this income through the jmp/ementation of the Act. The author is at the Department of Geography and Regional Planning, Uni- versity of Benin, Benin City, Nigeria. ‘All population figures are estimates due to the perennial difficulties of census taking, resulting in frequent cancellation of results (the most recent being in 1973). *Laoos State of Nigeria Ministry of Econo- mic-planning and- Land Matters, Lagos State Reaional Plan ~198ct2000). Ikeia. 1981, ~~-5-6. ’ , 3The civilian government later re-enacted the decree as an Act, hence the tand Use Act (LUA). 4The Certificate of Occupancy is issued by the military governor under the LUA and grants a statutory right of occupancy (see next section). 98 Lagos State is unique in the Federal Republic of Nigeria; it has the largest population, the smallest area, the largest number of industrial establish- ments and the busiest seaport. Lt is also the only state which has suc- ceeded in capitalizing on the revenue- generating capacity of the cadastre via the implementation of the Land Use Act of 1978 (LUA) - an Act appii- cable to the whole federation. Peculiar factors have contributed to this situation. Until recently. Lagos State was the host state of the federal capital, Lagos. In spite of the creation of the new federal capita1 (Abuja), Lagos State remains effectively so. This capital status meant that the federal demand for land had to be satisfied from the land resources of the state. Naturally, internationa1 agen- cies and foreign missions clustered around the federal government, furth- er increasing the demand for land. Due to early trade contacts and subsequent government policy, indus- try is highty concentrated in Lagos - it accounts for 50% of the totai value added by manufacturing and employs about 40% of the skilled manpower in Nigeria. Lagos port is the largest Nigerian port with 70% of all foreign trade. In addition to a11 this, Lagos State has a large popuIation’ - about 5 million (1981) or 5% of Nigeria’s population - on an area of about 357 700 ha, or 0.04% of Nigeria’s total land area.’ Lagos is also the ‘Mecca’ of migrants who contribute to its high annual growth rate - about 7% for metropolitan Lagos which alone accounts for 90% of the state’s population. This combination of factors spurred a demand for land unparalleled else- where in Nigeria, resulting in land being prohibitively expensive or un- available, chaotic land dealings and fraud. Recourse was frequently taken to the courts since land titles and boundaries were seldom defined. It was into this chaos that the federal military government dropped the Land Use Decree of 19’78,” and the Lagos State government has since been able to use it not only to regulate land dealings (in spite of many of its provisions being violated), but to generate a considerable amount of desperately needed revenue. This arti- cle summarizes the broad outlines of this revenue source and goes on to examine the way it is generated via the implementation of the LUA. ~~venue~r~~ land dealings The LUA vested all land in the military governor, but the vesting is incomplete as only a small percentage of the land has been acquired by the government for building schemes and layouts throughout the state. These parcels are the source of revenue. The rest of the land is privately awned and only when a land transaction is made must a Certificate of Occupancy be sought, thus making the parcel subject to charges.” LAND USE POLICY April 1989
Transcript
Revenue generation and the Land Use Act The case of Lagos State
D.P.C. Osayimw~s~
in 1978 the federal mifita~ govem- ment enacted the Land Use Act wbicb theoretically revolutionized the /and tenure system. So far, successful implementation has been limited since the Act is at such variance with reality. In spite of this, the Lagos State government, whjch has the smatlesf land resources in the nation, has been able to generate so much income from its implementation that land deal- ings are a major source of state finance. This ark/e investigates the actual generation of this income through the jmp/ementation of the Act.
The author is at the Department of Geography and Regional Planning, Uni- versity of Benin, Benin City, Nigeria.
‘All population figures are estimates due to the perennial difficulties of census taking, resulting in frequent cancellation of results (the most recent being in 1973). *Laoos State of Nigeria Ministry of Econo- mic-planning and- Land Matters, Lagos State Reaional Plan ~198ct2000). Ikeia. 1981, ~~-5-6. ’
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3The civilian government later re-enacted the decree as an Act, hence the tand Use Act (LUA). 4The Certificate of Occupancy is issued by the military governor under the LUA and grants a statutory right of occupancy (see next section).
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Lagos State is unique in the Federal Republic of Nigeria; it has the largest population, the smallest area, the largest number of industrial establish- ments and the busiest seaport. Lt is also the only state which has suc- ceeded in capitalizing on the revenue- generating capacity of the cadastre via the implementation of the Land Use Act of 1978 (LUA) - an Act appii- cable to the whole federation.
Peculiar factors have contributed to this situation. Until recently. Lagos State was the host state of the federal capital, Lagos. In spite of the creation of the new federal capita1 (Abuja), Lagos State remains effectively so. This capital status meant that the federal demand for land had to be satisfied from the land resources of the state. Naturally, internationa1 agen- cies and foreign missions clustered around the federal government, furth- er increasing the demand for land.
Due to early trade contacts and subsequent government policy, indus- try is highty concentrated in Lagos - it accounts for 50% of the totai value added by manufacturing and employs about 40% of the skilled manpower in Nigeria. Lagos port is the largest Nigerian port with 70% of all foreign trade. In addition to a11 this, Lagos State has a large popuIation’ - about 5 million (1981) or 5% of Nigeria’s population - on an area of about 357 700 ha, or 0.04% of Nigeria’s total land area.’ Lagos is also the ‘Mecca’ of migrants who contribute to its high
annual growth rate - about 7% for metropolitan Lagos which alone accounts for 90% of the state’s population.
This combination of factors spurred a demand for land unparalleled else- where in Nigeria, resulting in land being prohibitively expensive or un- available, chaotic land dealings and fraud. Recourse was frequently taken to the courts since land titles and boundaries were seldom defined. It was into this chaos that the federal military government dropped the Land Use Decree of 19’78,” and the Lagos State government has since been able to use it not only to regulate land dealings (in spite of many of its provisions being violated), but to generate a considerable amount of desperately needed revenue. This arti- cle summarizes the broad outlines of this revenue source and goes on to examine the way it is generated via the implementation of the LUA.
~~venue~r~~ land dealings The LUA vested all land in the military governor, but the vesting is incomplete as only a small percentage of the land has been acquired by the
government for building schemes and layouts throughout the state. These parcels are the source of revenue. The rest of the land is privately awned and only when a land transaction is made must a Certificate of Occupancy be sought, thus making the parcel subject to charges.”
LAND USE POLICY April 1989
Nores:aW66 million collected for the period ex- cluding building plan approvals: bJanuary to August.
Source: Derived from the Ministry of Economic Planning and Land Matters, Lagos State.
Source: Derived from data from the Ministry of Economic Planning and Land Matters, Lagos State.
5The 1986 data cover the period from January to mid-September.
Source: Derived from data from Ministry of Eco- nomic Planning and Land Matters, Lagos State.
LAND USE POLICY April 1989
Table 1. Revenue from land dealings (million W).
Yearly total January-June July-December Monthly average
Data were available only for the years 1983 to 1986.5 In spite of their aggregated nature the trend and volume of receipts are clear. The cost of a parcel of land has two main elements: infrastructural charges, ground rent and premium (for re- sidential land); and registration, sur- veying and processing fees. In addi- tion, income is generated by payment of fees for approvals (for subsequent land transactions), building plan pro- cessing and violations (penal fees).
Between 1983 and 1986 total col- lected revenue increased steadily from Ml million (1983) to over W60 million (1986). Average monthly revenue in- creased similarly from W4 million (1983) to W7 million (1986). However, the monthly (as distinct from the annual) trend was not clear, with the greatest collection being realized be- tween July and December for 1983 and 1984 and between January and June for 1985 (Table 1). The highest figures were realized in December (1983, 1984) and April (1985, 1986) while the occurrence of the lowest varied (Table 2). While the data were too limited to determine the trend, the difference between the highest and lowest months is substantial - it varies from W14.5 million (1984) to W1.4 million (1983).
Charges on state lands generated between 78% and 83% of all revenue, with percentages generated by fees for approvals (mortgage, sublease) and building plans following. Fees for approvals and building plans, plus fees for technical survey and registration, contributed less than 20% of the total revenue (Table 3).
State lands are of overwhelming importance. The term refers to plots allocated by government from its ac- quisitions. They occur throughout the state under different names - such as ‘estates’, ‘schemes’ and Government Reservation Areas (GRAS) - and are allocated for a variety of purposes - industrial, commercial, residential, service and institutional. In spite of the fact that they cover less than one-quarter of the state’s domain, they generate most of the revenue as premium, development charges and rent which vary with location and use. Thus, residential charges vary from W3.460 to NO.494 (development charges), N2.743 to NO.741 (pre- mium) and W1.236 to NO.247 (rent). Commercial/industrial rates are con- siderably higher.
The number of Certificates of Occu- pancy issued annually also reflects this importance. Although recent figures are unavailable, experience and
‘A considerable amount of revenue is generated by land dealings in Lagos State’
6T.0. Folami, implementation of the Land Use Acf: Report of the National Workshop, held at University of Lasos, Mav 25-28. 1987, Lagos University Press; Lagos, 1982, p 137. 7There were 3775 allocations made from 18 different government holdings as early as 1980, while in 1987 an additional 20 layouts were in the pipeline.
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observation suggest that certificates issued so far are predominantly for state lands - they accounted for 300 of the 333 issued between 1979 and 1981.’ In addition, 3775 plots were allocated by government in 1980 with a planned allocation of 13 960 in 1981, all of which increased the potential for generating revenue.
Non-state (privately owned) land generates income on two accounts - the Certificate of Occupancy itself and approvals. If the Certificate of Occu- pancy is granted, then registration, conveyancing and processing fees, plus a year’s rent, must be paid. In addition, for any land transaction, approval must be sought and paid for.
A considerable amount of revenue is thus generated by land dealings in Lagos State, mostly from state lands which constitute only a small percen- tage of the domain. A fuller imple- mentation of the LUA and better land management would increase revenue _ official opinion suggests W2 million weekly if all land were under the LUA. The real issue is how to bring privately owned land into the hands of government.
Operation of the L UA
The LUA enunciated a revolutionary land use system by vesting all land in the state governor who would hence- forth control all land transactions. The following are among its provisions:
All urban land is controlled by the governor, with advice from a committee, while other land is under control of the local govern- ment authority and a second com- mittee. The governor can: grant a statu- tory right of occupancy by issuing a Certificate of Occupancy for a specific time period which over- rides previous rights; revoke the certificate, impose fees, fines and rent; and grant consent for land transactions. Owners of land developed before the Act was passed can apply for a statutory right of occupancy, while undeveloped land exceed- ing 0.5 ha reverts to the governor. Agricultural and residential non-
urban land can be held under customary rights of occupancy granted by the local government.
There are two main aspects to the implementation of these provisions: the vesting in the governor and the granting of the Certificate of Occu- pancy. The vesting is such a revolu- tionary provision that so far no state has been able to effect it. Instead they continue to develop estates, but Lagos is unique in this respect as it has a large number of such holdings relative to other states.’ However, since the LUA, compensation which the gov- ernment must pay for its acquisitions has been reduced drastically, as only unexhausted improvements rather than improvements and land are sub- ject to compensation. Obviously, an increase in these holdings represents a proportional increase in revenue, but the role of land in the society is such that it would need a sustained revolu- tion to complete this vesting.
The granting of the Certificate of Occupancy is responsible for most of the income generated, for in the pro- cess the grantee must pay fees, pre- mium and ground rent. The procedure is as follows. (1) The applicant buys an apphcatlon form (MO.00 for residen- tial, W250.00 for commercial/ industrial) and submits it along with passport photographs and a tax clear- ance certificate. (2) The Land Use and Allocation Committee considers the application and, if approved, the par- cel is assessed for rent, development charges, premium and fees for stamp- ing and conveyancing. (3) On pay- ment, the certificate is signed by the governor, stamped and registered and the original given to the owner. Copies are filed.
The Certificate of Occupancy is essentially a 50 year lease granted by the governor who can revoke it in the case of ‘overriding public interest’ or violations. Before the grantee obtains the certificate, one year’s ground rent and one-third of the development charges must be paid, while the re- maining charges are due with the next two annual rent instalments. Collec- tion of rent has not been systematized, so grantees pay at their convenience -
*G. Obenson, Land Registration in Nigeria (privately printed), 1977, p 104. 7. Blachut, A. Chrzanowski and J. Saas- tamoinen, Urban Surveying and Mapping, Springer-Verlag, New York, NY, USA, 1979, pp 236-237.
LAND USE POLICY April 1989
usuahy in order to carry out a land transaction. But by insisting on this initial payment potential revenue is actually made real.
The procedure differs for private land. Applicants submit a survey plan and title documents along with their application. Payment is made for vet- ting the documents, charting the plan and the newspaper publication of the application. To discourage frivolous objections, post-publication objectors must buy an objection form together with the relevant documents. The matter is settled by mutual agreement (occasionally) or in the courts (most times). After approval the grantee pays the usual fees, and the grant is subject to rent - even though the grantee owned the land to begin with. However, few such applications have resulted in Certificates of Occupancy, as buying a parcel of land in Lagos has often meant buying a lawsuit.”
A more efficient cadastre would
facilitate implementation of the LUA, especially with regard to private land. The operational and quality require- ments of an efficient urban cadastre have been identified as:
(1)
(2)
(3)
BY
a technically correct survey based on a permanently recorded, refer- enced control network; maps showing property bound- aries, buildings, structures and terrain along with descriptive re- cords of all properties - registers of owners and parcels; complete, up-to-date and there- fore ‘final’ cadastral records.
these standards, the Lagos State
cadastre is woefully inadequate, parti- cularly in terms of maps and descrip- tive records. For government acquisi- tions there is no problem, since sites are surveyed and laid out on acquisi- tion. For the majority of land, how- ever, maps do not exist at the correct scale, coverage or date. Certainly, properties are not shown. Records are few as registration was never compul- sory and both title and deed registra- tion were allowed. Registration did not presuppose adjudication or the definition of title, so all deeds and titles were registered with impunity, facilitating fraud. Thus, most existing
records are only indicators of the true position except where the land is the subject of a Certificate of Occupancy and most of such grants are from government holdings. It is therefore expected that as the number of certifi- cates increases, and with the current procedure of registration, conveyanc- ing and charting, the records will be less chaotic.
The government is attempting to solve the problem of map coverage by the provision of maps and mosaics at scales varying from 1: 1000 to 1: 10 000. Beacons are being replaced and the number of controls increased, with the hope that within the next 20 years the whole state will be mapped at a scale of 15000 or less. Meanwhile, Lagos State remains the best-mapped area in the nation with controls dating back from Colony Province times, even though the history of control provision is characterized by disturbance of beacons.
Maps being provided now are used for charting parcels. Even where maps show all structures, the boundaries still need to be adjudicated as the cases of overlaps and gaps are many as seen from the old map sheets used for registration and from the numerous lawsuits. So, in addition to the provi- sion of controls and maps, systematic adjudication of boundaries of private- ly held parcels is necessary for com- plete implementation of the LUA. Such a decision could only emanate from government as the Certificate of Occupancy is not compulsory, and it is only with its granting that adjudication usually takes place.
Conclusion
Lagos State has been able to generate considerable revenue by limited im- plementation of the LUA - limited as most of the revenue comes from lay- outs owned by government. Most land still remains in the hands of indi- viduals and families, so the challenge is for government to be able to imple- ment the ‘vesting’ provision of the LUA. It may be that the law has to be modified to take account of family land in this vesting process so that such land would be an additional
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source of revenue - as rent or tax. The
issue of the individual’s right to the land would have to be re-articulated. It must also be remembered that Lagos State is in a peculiar position to take advantage of the LUA.
Lagos State has introduced an addi-
tionaf charge - the development
charge - not specified in the LUA but which as a practical device brings considerable revenue. it is usually almost as high as premium, although unlike premium which is paid in one instaiment it is paid in three instat- ments. Like rent, the onus of payment
of the other instalments is on the grantee who pays at his convenience rather than when due. The govern- ment is yet to find a means of forcing these payments on time so that ex- pected revenue can he reasonably estimated. At the moment it is a matter of sending demand notices - about 500 a month - ahhough there are provisions for penal fees. Atten- tion must be paid to rent as it is the
only payment which runs the length of the Certificate of Occupancy; all others, excluding development charges, are payable only once.
