Nigeria is an African powerhouse of a nation, possessing enormous potential along with many investment opportunities. Due to its growing economy, rich natural resources, and burgeoning middle class, the country has been receiving great attention lately from both business and personal investors worldwide. Among the many questions which are usually thrown by foreign investors when it comes to consideration of the Nigerian market, one prominent question pertains to whether or not foreigners are allowed to buy property in Nigeria.
The Nigerian government has a legal framework for property ownership by foreigners, various regulations, and practical steps to take. We are going to address a few frequently asked questions which would make it easy for foreign investors in the Nigerian market.
Can Foreigners Buy Property in Nigeria?
The straightforward answer to this question is whether foreigners can buy property in Nigeria; yes, this they can, but with some level of compliance to set regulations and conditions that separate property ownership for non-Nigerians from that which accrues to the local citizens. In as much as the country may be open to foreign investment in its real estate, laws that regulate such transactions have been done in a way to ensure the interest of the locals in their desire to have a balancing effect in the land ownership dynamics in the country is guaranteed.
First, differentiate the various factors that play a role in this process to understand whether a foreigner can purchase property in Nigeria and the conditions attached to it:
1. Land Ownership Law in Nigeria
Land ownership in Nigeria is considered from the perspective of both customary law and statutory law. The Constitution of Nigeria and Land Use Act, 1978, are the two most important legislations defining how land can be owned, used, and transferred.
The Land Use Act
The main legislation that regulates ownership and use of land in Nigeria is the Land Use Act of 1978. All lands are hereby vested in the state, which simply means that while individuals and corporate entities can obtain land, the government still has ultimate control in the allocative ability of land. This law shall be applicable to all Nigerians and foreigners; however, it has certain restrictions within the circle of foreign ownership.
Under the Land Use Act, land is usually categorized either as urban land or rural land, and there are various provisions relating to each of these. The Act basically confers on the Governor of the state the right to grant land for use and provides Certificate of Occupancy (C of O) as the legal evidence of ownership of land.
2. Foreign Ownership of Land in Nigeria
Although foreigners can purchase property in Nigeria, there are some key restrictions and conditions. Generally speaking, under Nigerian law, a non-citizen may purchase property, but the significant limitation is with respect to land tenure: a foreigner can only purchase land in urban areas, and only on leasehold, rather than freehold.
Leasehold vs. Freehold
While Nigerian citizens can own land on a, the only land tenure system available to foreigners is on a basis. This simply means that while foreigners may be allowed to lease land, they do not own the land but can be allowed to lease it for up to, with some leases renewable. In practice, most foreign property purchase transactions in Nigeria are made through long-term lease agreements.
3. Urban Versus Rural Land
Foreigners can purchase land in an urban area. Most commercial and economic activities are concentrated in these urban areas of the country; thus, they can buy real estate properties in most urban cities like Lagos, Abuja, Port Harcourt, and others. Acquiring land in rural areas is, however, more complicated. The Land Use Act restricts the rights to buy rural land from non-Nigerians; most land in these areas is controlled under customary law.
In rural areas, lands are usually communal and owned by local tribes or communities, and the sale or transfer of land occurs upon approval from the community. Due to these provisions, there might be several legal and practical complications for foreigners who wish to buy land in the rural areas.
4. The Role of Nigerian Companies in Foreign Property Ownership
Foreign investors in Nigeria who intend to acquire an interest in a landed property do so through the vehicle of a Nigerian-registered company. Nigerian companies may hold land outright on a freehold basis, and for that reason, it is advisable that foreigners establish a business entity in the country to facilitate the purchase of property. This option is increasingly employed by foreign investors who intend to acquire commercial or industrial properties, since Nigerian companies have the right to hold title to land without the restrictions operative upon individuals.
A Nigerian company can be formed in accordance with the Corporate Affairs Commission (CAC); for its process of incorporation, it has to show or prove the activities which a company is engaged and its business plan is clear and bright. Once a company is formed, it can buy land. Through investment in such a business, foreigners who are its members may have indirect benefits of property ownership.
Frequently Asked Questions When Buying Property in Nigeria
1. Should foreigners resident status be compulsorily considered while buying a property in Nigeria?
No, a foreigner does not have to be a resident of Nigeria in order to buy house property in the country. The process for purchasing property will likely be such that the foreign buyer is required to comply with the Nigerian immigration laws so as to secure a valid visa or residency permit in that regard. Very often, the investor will also have to retain local attorney or a real estate agent conversant with the Nigerian legal and regulatory environment.
2. Can a foreigner buy agricultural land in Nigeria?
A foreigner cannot directly own agricultural land in Nigeria. The Land Use Act precludes non-citizens from owning rural land, including agricultural lands, usually subject to customary law. In certain instances, foreign investors may lease land for agricultural purposes; normally, it is confined to urban or commercial properties only.
The only way a foreigner can be allowed to invest in agriculture is through registering a Nigerian company. By this, a foreign investor can lease agricultural land or acquire land for agricultural purposes, even as the ownership still remains within the confines of the leasehold system.
3. What is the process for foreigners to buy property in Nigeria?
The process for purchasing property in Nigeria is reasonably similar, whether one is a foreigner or a local, and some of the key steps in the process include the following:
1. Carry Out Due Diligence: Ascertain that the property has a proper title deed and a Certificate of Occupancy, C of O from the government of the state where it resides. It becomes important to affirm the legitimacy of the property and further that it is unencumbered or in dispute.
2. Sale Agreement Execution: After due diligence verification, the buyer and seller execute a sale agreement reflecting the terms of the transaction.
3. Governor’s Consent: The sale shall not be deemed complete until the Governor of the state where the land is situated gives consent to such a sale. This affirmations make sure the transaction is in conformity with the land laws in that state.
4. Conveyance: Once all the above clearances are obtained, the buyer will have to pay the purchase price and execute the conveyance.
5. Registration of Property: The name of the buyer will be duly registered along with the local land registry to secure legal titles over the property.
For this reason, foreign investors are advised to engage local professionals in law and real estate throughout the process to ensure that due process is followed according to Nigerian laws and to avoid potential problems.
4. Can foreigners finance property purchases in Nigeria through a mortgage?
It is comparatively not easy for foreigners to obtain mortgages in Nigeria, since most financial institutions require the parties to provide evidence of local income and employment either as Nigerian citizens or residents. Banks may, however, provide financing opportunities to foreign investors, especially in cases when property purchases are made to facilitate or further business prospects.
Most foreigners buying into the Nigerian property market prefer to pay in cash or make private financing arrangements. With the intricacies involved in financing in the Nigerian market, a foreign buyer is usually expected to be prepared for the entire cost of a property.
5. Are there taxes and fees involved in buying property in Nigeria?
Yes, there are various taxes and fees associated with purchasing property in Nigeria:
– Stamp Duty: The duty paid on the agreement of sale, usually in the range of 1-2% of the value of the property.
– Governor’s Consent Fee: This is the consent fee that you will have to pay to the Governor for approval of the transaction of the property. It is a charge on the value of the property.
– Registration Fees: Fees associated with the registration of the property at the state land registry.
– Capital Gains Tax: This is payable if, at a later date, the property is sold at a gain.
Suspending disbelief, foreign investors are advised to ensure that they understand fully the tax obligations and other fees relating to the purchase and sale of the property through local lawyers or estate agents.
6. Is the Nigerian property market a good investment for foreigners?
The Nigeria property market is a high-risk-high-reward investment destination for international investors. There is huge demand for both residential and commercial properties due to the rapidly expanding population and middle class. Fast-growing cities like Lagos, Abuja, and Port Harcourt are recording exceptional growth in their real estate industry, with foreign investors also making hay from the boom in residential, office, and retail space.
However, the market is not without risks. The Nigerian property market can be very volatile. Foreign investors must be aware of issues regarding disputes over titles and other fraudulent transactions that mar the political and economic environment of the country. That said, with proper due diligence and assistance from locals, investment in Nigerian property could prove highly rewarding in the long run.
Conclusion
While foreigners can buy property in Nigeria, it means going through a maze of complicated legislation to understand land ownership restrictions and follow numerous regulations. As non-Nigerians are generally allowed only leasehold arrangements over land in urban areas, the possibility is immense for going into the property market in Nigeria, especially through business ventures or long-term leasing.
This is quite important for foreign investors in property in Nigeria: to conduct serious due diligence and, importantly, to work with local experts while being in full understanding of the full set of regulations, taxes, and fees involved. By following proper procedure and compliance with the laws of the Federal Republic of Nigeria, foreign property buyers in Nigeria will successfully invest in one of Africa’s most dynamic real estate markets.
