NIGERIA: LAND USE ACT TO BE AMENDED

UNCLAS ABUJA 000917

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E.O. 12958: N/A
TAGS: ECON EINV ETRD PGOV NI
SUBJECT: NIGERIA: LAND USE ACT TO BE AMENDED

REF: A. 07 ABUJA 1344

B. 06 ABUJA 3172


1. Summary. The Land Use Act (LUA) vests all land rights with the
36 state governors requiring that all transfers or land sales be
approved by the governors. The LUA makes it difficult for potential
investors, homeowners, etc to secure title, which impedes the use of
property as effective collateral for commercial transactions. In
late February, President Yar'Adua sent to the National Assembly (NA)
a bill seeking an amendment to the LUA to limit the requirement for
the Governor's consent to assignments only. The proposed amendment
sets the foundation for the land reforms proposed in his Seven-Point
Agenda. The proposed amendment can only be passed through a
constitutional amendment because the land use act is embedded in the
1999 Constitution, thus requiring concurrence by two-thirds of the
36 state legislatures in addition to the federal legislature. This
will pose a major challenge to passing the amendment, but mortgage
industry operators are optimistic the amendment will be passed.
They also contend that if foreclosure and securitization
legislations are also passed, Nigeria's mortgage sector will
experience a boom. End Summary.


2. In February 2009, President Yar'adua sent a proposed amendment
to the NA regarding the LUA. The proposed amendment will restrict
the requirement for the Governor's consent to assignments only.
Thus Governor's consent won't be required for creating mortgages and
foreclosing on mortgaged property.
.
LUA Primer
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.

3. The Land Use Act was enacted in 1978 and vests ownership of all
land within the territory of a state in the federation on the
governor of the state. Under the Act all forms of ownership or
title to land both under common law and customary law were
abolished, and the LUA confers a possessor occupier status to a
holder of right of occupancy on either land in rural or urban areas.
Thus the holder of a right of occupancy cannot pass a legal title
to any other person because title to all lands vests with each state
governor.


4. The LUA also requires that a governor's consent is mandatory
while entering into a mortgage agreement by a holder of a right of
occupancy. Also an individual or institution, such as a bank, that
is holding a mortgage through a certificate of occupancy cannot
foreclose on the mortgaged property or sell it without the consent
and approval of the State Governor. The stringent requirements of
the act obstruct the development of a virile mortgage sector in
Nigeria.
.
Operators Express Hope
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5. Hassan Usman, President of the Mortgage Banking Association of
Nigeria (MBAN) and Chief Executive of Aso Savings and Loans,
expressed optimism to Econ Specialists on May 5 that the proposed
law will be enacted despite the cumbersome process required to amend
the constitution. He stated that though the amendment might not be
passed in 2009, it could be passed next year. The proposed
amendment was a welcome development and MBAN is hopeful that it
could lead to phenomenal growth in the mortgage sector. In
addition, securitization and foreclosure laws should also be passed
to encourage the mortgage sector.
.
Comment
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6. This law could restrict the requirement for the Governor's
consent to assignments only and will greatly encourage housing
production and provision of mortgages, thereby increasing home
ownership for the middle class. That said, no/no economic reform
legislation of national scope has been enacted during the first two
years of the Yar'adua administration and the current NA -- much less
reforms requiring amendment of the constitution. End comment.


7. This cable was coordinated with Consulate Lagos.

SANDERS