Drive around the Osapa/Idado/Chevron axis of the Lekki-Epe expressway and you will not fail to notice one thing: Construction activities are going on full-swing, with new estate developments springing up almost as if from nowhere. You find yourself asking…what recession??
Interestingly, a good look around will also tell you that a large number of properties remain unoccupied and unsold for months, sometimes even years. We have a glut. Yet these new properties are springing up at a frenzied pace. And most confusingly, prices are not coming down as one would expect in a typical glut situation.
The most recent example of a glut is the plunge in global crude oil prices between 2014 and 2016, which caused serious macro-economic problems in commodity-based economies all over the world, including Nigeria. The root cause was simple. Crude oil production far exceeded demand, creating a massive and sustained over-supply situation and driving down prices.
It is confusing then, that these demand and supply dynamics do not currently seem to apply to the Nigerian real estate market. There have been very marginal property price reductions but nothing that is commensurate to or reflective of the current market conditions as concerns demand, supply and the general state of the economy.
A possible explanation for this paradox, for me is this: When a man constructs a property with funds which he neither borrowed and is incurring interest on, nor generated through legitimate means, that man will not be under any pressure to lower his selling or lease price for that property, regardless of how long the property remains unsold or unoccupied. And when a man has in his possession large amounts of cash and no ‘safe’ way to channel these funds, the fastest and most viable way to hide these funds would be to embark on a real estate construction spree. This would appear to explain the stories we hear of entire estates in Abuja that are unoccupied and luxury flats in Ikoyi remaining vacant for years. Suffice is to say, it looks like the root cause of this anomaly is that old familiar scourge of the Nigerian narrative: corruption.
Quite simply, I believe that a possible solution to this problem is to by law, mandate every property owner to validate their identity and property documents against an already existing database. The database I have in mind in this case is the Bankers Verification Number (BVN) database.
The BVN initiative has greatly enhanced the ability of the relevant government institutions to track financial activity of virtually every single banked Nigeria. To the extent that every registered person has one and one unique BVN, the Nigerian government has a full picture of the cash assets of the whole population. Interestingly and not surprisingly, we now hear of billions of naira locked up in unclaimed accounts, as the true owners of these accounts, for their own reasons do not want to be associated with those monies. We can safely conclude, for all intents and purposes that the government has the banking system in full view as far as identity management is concerned.
To prevent legal bottlenecks in the implementation of the proposed solution, enabling legislation would be required both at the federal and state levels. Any property that is not validated against a unique BVN identity within a stipulated period would be sealed until such a time as ‘owner’ register the property against his identity in the BVN database. A massive enlightenment campaign will be launched to educate the public well ahead of time, explaining the validation procedure and highlighting the overall and long term benefits of the exercise to the entire populace. In cases of corporate ownership, the properties will be associated with the identities of the company directors, as is currently being done with BVN and corporate bank accounts. In the many situations where a property which remains unvalidated beyond the stipulated period is being occupied by a tenant on lease, provisions would be made to ensure that the tenant is allowed to enjoy the full duration of the lease period before the property is sealed.
As funds with doubtful sources have been abandoned in unclaimed bank accounts, the expectation is that properties that were constructed with stolen funds will also either be abandoned, or hurriedly disposed of at ‘distressed’ prices. This, at a large enough scale will immediately bring down property prices. Abandoned properties would be absorbed by the government and auctioned in an open, transparent manner. The overall objective would be to create an environment where real estate prices are more reflective of prevailing market conditions.
By Bolarinwa Durojaiye