Powerful Insights: How the Land Use Act Shapes Investment Across Sectors in Nigeria
Introduction
Nigeria remains one of the most dynamic economies in sub-Saharan Africa, with vast land resources crucial for stimulating economic growth across sectors such as agriculture, real estate, oil and gas, infrastructure, tourism, and more. However, the regulation and management of land in Nigeria are largely governed by the Land Use Act, enacted in 1978.
The Land Use Act was intended to unify land administration and ensure equitable access. But decades later, stakeholders across various sectors are grappling with both its advantages and limitations. This article delves into how the Land Use Act influences investment in different sectors, with legal interpretations, case law insights, and a practical view tailored for investors, lawyers, and regulators.
1. The Framework of the Land Use Act
To understand its impact, one must first grasp the legal foundation of the Land Use Act. The Act vests all land in every state (except land vested in the Federal Government or its agencies) in the Governor of the State, who holds it in trust for the people.
Key Provisions:
Section 1: Land ownership vested in the Governor.
Section 5: Powers of the Governor to grant statutory rights of occupancy.
Section 6: Local Government authority over rural land.
Section 22: Consent of the Governor required for alienation.
Section 28: Revocation for overriding public interest.
This centralized control is a double-edged sword. While it simplifies access to land on paper, in practice, it presents bureaucratic hurdles that affect various investment areas.
2. Influence on Real Estate Investment
The Land Use Act plays a pivotal role in shaping Nigeria’s real estate sector.
Positive Impact:
Legal Uniformity: Investors have a clear legal framework guiding land transactions.
Certainty of Title: Once a Certificate of Occupancy (C of O) is issued, investors can confidently develop property.
Reduction in Land Speculation: The Governor’s control discourages arbitrary land sales.
Negative Impact:
Governor’s Consent Bottleneck: Every land transfer or mortgage requires Governor’s consent under Section 22, causing delays.
Title Perfection Costs: Expensive and time-consuming processes discourage foreign investment.
Revocability: The Governor can revoke rights for “overriding public interest,” creating uncertainty.
Case Law Example:
In Savannah Bank Ltd v. Ajilo (1989), the Supreme Court emphasized that failure to obtain Governor’s consent rendered a mortgage transaction void. This underscores how stringent compliance with the Land Use Act is, impacting real estate transactions.
3. Agricultural Sector: Restrained Expansion
Agriculture accounts for a significant portion of Nigeria’s GDP, yet land acquisition remains a core issue for commercial agriculture investors.
Positive Influence:
Customary Rights Protection: The Act allows local governments to grant customary rights of occupancy, empowering rural dwellers.
Prevention of Land Grabbing: The law protects indigenous communities from being forcefully displaced by large investors.
Negative Influence:
Fragmented Land Tenure: Much of Nigeria’s farmland lacks formal documentation.
Limited Access to Finance: Banks require formal land titles, which most farmers lack due to the bottlenecks in the formalization process.
Political Interference: Local elites often hijack land allocation in the name of development.
Legal Insight:
The 2009 case of Adole v. Gwar highlights the risks involved in relying solely on customary grants without formalizing them through the Governor’s consent under the Act.
4. Oil and Gas: A Tug-of-War Between Federal and State Powers
The oil and gas sector is the backbone of Nigeria’s economy. However, investments in upstream and downstream operations are influenced by both the Land Use Act and petroleum laws.
Influence of the Act:
Land Acquisition for Pipelines and Refineries: The Act requires state-level approvals for land needed in exploration and infrastructure.
Conflict with Federal Laws: The Petroleum Act vests oil in the federal government, but surface rights (land) are subject to state authority under the Land Use Act.
Investment Implications:
Delays in Land Acquisition: Multiple layers of approvals often delay projects.
Community Unrest: Disputes over land compensation fuel conflict in the Niger Delta.
Case Example:
In SPDC v. Farah (1995), the Court ruled that even oil companies must comply with the Land Use Act when acquiring land, despite holding oil licenses under federal law.
5. Infrastructure and Urban Development
With Nigeria’s rapid urbanization, the government and private developers seek to build roads, bridges, housing estates, and public utilities. The Land Use Act is central to this expansion.
Positive Impact:
Public Purpose Acquisition: The Act allows government to acquire land for roads, rail, schools, and hospitals.
Unified Allocation: It simplifies large-scale land acquisition for masterplans.
Challenges:
Forceful Evictions: Citing “public interest,” authorities sometimes revoke land rights without fair compensation.
Lack of Resettlement Policies: Investors often face backlash when communities are displaced.
Illustrative Case:
In Nigerian Engineering Works Ltd v. Denap Ltd (2001), the revocation of land for industrial use was deemed unlawful due to lack of adequate notice and compensation, highlighting due process failures.
6. Tourism and Hospitality Investment
Tourism thrives on access to beachfronts, cultural sites, and scenic locations—usually under state control.
Barriers under the Land Use Act:
Unclear Ownership: Many tourist sites sit on customary lands with no formal titles.
Inconsistent Allocation: States sometimes allocate the same land to different investors.
Consent Delays: Prolonged processing times for building and occupancy rights slow development.
Yet, areas like Lagos and Cross River are attempting reforms to ease land access for tourism through digital land registries and public-private partnerships.
7. Manufacturing and Industrial Hubs
Establishing industrial parks requires large tracts of land—an area heavily influenced by the Land Use Act.
Incentives:
Government-Owned Estates: Industrial zones often enjoy easier access to land as the state already owns it.
Land Bank Projects: Some states are curating land banks to make allocation seamless.
Challenges:
Overlapping Claims: Historical ownership disputes complicate allocation.
Lengthy Approval Process: Acquiring C of O and development permits is a bureaucratic maze.
8. Financial Sector and Land-Based Collateral
Banks, mortgage institutions, and insurance firms rely on land documents for credit risk management.
Influence of the Act:
Governor’s Consent Requirement: Any mortgage without consent is void, as seen in Union Bank v. Ayodare & Sons (2007).
Cost of Perfection: High processing fees increase loan origination costs, discouraging SMEs.
Reform Opportunity:
Digitizing land records and decentralizing consent could boost credit access using land as collateral.
9. Recommendations for Reforms
Despite its original intentions, the Land Use Act is overdue for reforms. Here are key recommendations:
Amend Section 22 to reduce bottlenecks in obtaining Governor’s consent.
Encourage Land Title Regularization at community levels.
Create a Unified Digital Land Registry accessible nationwide.
Streamline Dispute Resolution Mechanisms through specialized land courts or tribunals.
Promote Public Awareness on land rights, especially for rural dwellers and investors.
Conclusion
The Land Use Act remains a foundational but controversial piece of legislation in Nigeria’s land administration system. Its impact is felt across every major investment sector—from agriculture and oil to real estate and tourism. While it provides a unified structure for land governance, the excessive concentration of power, procedural delays, and bureaucratic inefficiencies often deter investors.
As Nigeria continues to position itself as an investment hub, the Land Use Act must evolve. Legal reform, digitization, and transparency in land transactions will be vital in unlocking the full economic potential across sectors.
Need Expert Legal Help?
CHAMAN Law Firm has extensive experience in navigating land-related legal matters across Nigeria. Whether you’re looking to invest in real estate, agriculture, or infrastructure, we offer tailored legal solutions that ensure compliance with the Land Use Act and other relevant laws.
📞 Visit us at CHAMAN Law Firm to speak with our experienced property and investment lawyers today.
WRITTEN BY CHAMAN LAW FIRM TEAM
Email: chamanlawfirm@gmail.com, info@chamanlawfirm.com
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