Buying property in Nigeria
Agent, lawyer and purchase fees in Nigeria:
Transaction costs can be broken down into four major cost areas:
|Brokerage Commission||1%-2.75% (+5% VAT)
1%-2.75% (+5% VAT)
|Costs paid by buyer||16.125% – 29.96%|
|Costs paid by seller||1.625% – 3.46%|
|ROUNDTRIP TRANSACTION COSTS||17.75% – 33.42%|
Investing in the Nigerian property market
Foreigners can obtain leases from the State for a maximum of 99 years for the use of land.
The Land Use Act of 1978 converted all land to State Land. The Governor of the State is responsible for the management of this land on behalf of the people. Therefore, land cannot be owned privately. The Governor’s consent is needed for the assignment of title to use, occupy, and improve property with a statutory certificate. This certificate does not include rights to sell, give, or sub-let, which requires further consent from the State Governor.
Consent Fee: the state government is the owner of land and therefore any change in ownership or assignment, in case of a lease, should have the consent of the Governor.
There is also a Capital Gains Tax levied at 10% of the difference between the sale price and the original acquisition tax. This is assessed by the Ministry of Finance.
The real estate broker’s commission can be calculated according to the following scale, as regulated by the Securities and Exchange Commission (SEC):
REAL ESTATE AGENT’S COMMISSION
|Up to 500,000||2.75%|
|500,001 – 1,000,000||2.25%|
|1,000,001 – 3,000,000||2%|
|3,000,001 – 5,000,000||1.5%|
Before purchasing, it is important to make sure that consent from the Governor is obtained for the sale. No land can be “sold” without this consent.
Sale of real estate, however, does not involve actual selling and purchasing. There is only the transfer of rights from one person to another. This transaction is usually called an ‘assignment’. The seller assigns the rights to use and occupy the land to the buyer. After the transaction, the buyer applies for a new (statutory) certificate under his name. In this case, the seller acts as the assigner, and the buyer is the assignee.
The buyer/assignee’s lawyer checks the title and oher documents presented by the seller/assigner before continuing with the transaction. It is better to be safe, since there are several restrictions and conditions that come with a title, and the buyer has to make sure of what s/he is getting.