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6.1 Fair Tax Regime
6.2 Professional Services
6.3 Capital Markets
In-Country Assessment Information

6. Appropriate Regulation – Weak

Goal – A comprehensive regulatory regime that is transparent, efficient, simple in its implementation and that leads to accurate reporting of property values and prudent protection from market risks

 

6.1 Fair Tax Regime

Core Question: Do market participants feel the overall tax rate is fair and participate in formal transactions? Weak – while tax rates are moderate, the arbitrary application of regulations and corruption still plague the public sector.

 

Transfer Tax

6.1.1   What is the total property transfer tax including all duties and payments? Very Weak – 20.8%

 

Overall Tax

6.1.2   What is the overall tax rate on entrepreneurs? 33.8% – Ranking – 155th out of 185, process is time consuming, Very Weak – Trend 

Source: Doing Business 2013 – Paying Taxes & Registering Property, World Bank
http://www.doingbusiness.org/data/exploreeconomies/nigeria

 

6.1.3 Divestment

Survey Question

SQ 26  What is the tax on profits for foreign investors when divesting property? 30% corporate income tax; 10% capital gains – Strong, although acquiring and maintaining property rights can be difficult.

Source: Chartered Institute of Taxation of Nigeria http://www.citn.org/cur_tax_rates

 

 

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6.2 Professional Services

Core Question: Are the professional services necessary for efficient and transparent property markets available and appropriately regulated and supervised? Yes – Strong, the professional services have improved to a large extent in recent years.

 

6.2.1 Asset Valuers

Survey Questions

SQ 27  Are property valuers licensed and/or certified by the government?  Yes – Very Strong – a valuer must be certified by the government, and Nigerian Institution of Estate Surveyors and Valuers. There are four categories of membership: Professional, Non-professional, Corporate and Honorary Membership. Different membership requires different tests and training.

Source: Nigerian Institution of Estate Surveyors and Valuers http://niesv.org.ng/membership  

 

Q 28   How effective are mechanisms in place to discipline valuers who engage in misconduct? Weak – the multi-discipline nature of the firms and the highly competitive nature of the industry suggest non-compliance with the code of conduct.

See pages 30-31 for in-country assessment information regarding valuers.

 

6.2.2 Brokers & Agents

Survey Questions

SQ 29  Are real estate brokers and agents licensed and/or certified by the government? Yes –Stong–most of brokers and agents are licensed by the government.

SQ 30  How effective are mechanisms in place to discipline brokers or agents who engage in misconduct?  Very Weak – no Code of Conduct currently exists outside the registration of estate surveyors.

 


6.2.3 Mortgage Professionals

Survey Questions

SQ 31  Are mortgage professionals licensed and/or certified by the government? Yes –Strong – Primary Mortgage Institutions (PMIs) are regulated by the Central Bank

 

SQ 32  How effective are mechanisms in place to discipline mortgage professionals who engage in misconduct? Strong – although no licensing is in place for individuals and the market is constrained by land documentation restraints, National Housing Fund policy and the high cost of building materials.

Source: www.cenbank.org/Supervision/Inst-PMI.asp

 
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6.3 Capital Markets

Core Question:         Are capital markets well-regulated and diversified enough to provide financial resources to private-sector entrepreneurs and innovators? No – Weak , Capital Markets are not fully developed but the Stock Market is increasingly active.

 

Capital Flows

6.3.1   What are the business impacts of rules on Foreign Direct Investment? Weak – Ranking 86th out of 144; Score 4.45 out of 7

 

Security Exchanges

6.3.2   Is the regulation of securities exchanges transparent, effective and free of influence from government and industry? Yes – Strong, Ranking 59th out of 144; Score 4.25 out of 7

Source: The Global Competitiveness Index 2012-2013 data platform, World Economic Forum
http://www.weforum.org/issues/competitiveness-0/gci2012-data-platform/

 

Securitization

6.3.3   What is the depth of asset-backed securities, mortgage-backed securities, high-yield bonds and highly leveraged loans? Very Weak – 49th out of 62, Score 1.2 out of 7, capital markets are very small with low turnover.

Source: The Financial Development Report 2012, World Economic Forum http://www.weforum.org/reports/financial-development-report- 2012

 

 

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In-Country Assessment


Taxation

FQ 21.         What is the overall taxation system in regards to property?
The total roundtrip transaction cost is around 26.60% to 31.275%. This includes several permits, fees and charges. The biggest cost is the 8%consent fee paid to the state government. This seems to be a screening mechanism for collecting bribes. There is also a registration fee of 3%, paid by the buyer.

Nonresidents are taxed only on income earned in Nigeria. Married couples are taxed separately, joint filing and taxation is not allowed. Non-resident individuals are generally subject to withholding taxes.

Nonresidents can only claim the personal allowance of NGN5,000 (US$31) plus 20% of earned income deduction. No other deductions are available to nonresident individuals. Gross rental income earned from leasing out real property is taxed at a final withholding rate of 10%.

The tax rate may be reduced to 7.5% for countries where Nigeria has concluded a double taxation treaty.

Capital gains tax is levied at a rate of 10% on the gains realized from the disposal of real property. Property acquisition costs and incidental costs in transferring property ownership

There are no real estate taxes in Nigeria.

Source: Global Property Guide www.globalpropertyguide.com/Africa/Nigeria


Brokerage

FQ 22.            What is the number of practitioners in the country including full-time brokers/agents with formal training and part-time, informal brokers?

The number of real estate transactions is high. Castles Weekly Magazine, a clear leader in the real estate print media business, says advertisers have increased from 200 agents to 500, and each previous advertiser increased the number of properties listed from an average of five to eight. The prices of these properties have followed the same trend as property prices went up 150 percent.

 

FQ 23.              What is the number and average size of brokerage companies?

There are several large nationwide estate agents (Jide Taiwo and Co., Diya Fatimilehin, Dipo Fakorede, Ubosi Eleh and Co., Paul Osaji and Co., ARM Properties, to name a few), but overall the market is fragmented. Small and very local estate agents are very important in the industry. These players form the vast majority, with the big names recognized nationwide. The exceptions to this rule are banks and mortgage institutions/building societies, many of whom also operate as estate agents.

Source: www1.propertyportalwatch.com/2009/10/nigerian-online-real-estate-market/

 

FQ 24.               Are there brokers associations active in the market? What number and what percentage of practitioners belong?

There does not appear to be a brokers association separate from NIESV.

 

FQ 25.               What training programs are available to enhance productivity?

None apart from NIESV and in-house training programs at the large firms.

 

FQ 26.                Is there a Code of Ethics or standards that practitioners follow? Is the Code enforced?

None apart from NIESV.

 

FQ 27.                Do civil society organizations exist to support the development of mortgage professionals?

No separate association exists, but there are Building Societies, Housing Associations and Credit Unions.

Source: Challenges of Housing Finance by Primary Mortgage Institutions in Lagos Nigeria, University of Lagos, 2008, www.gla.ac.uk/media/media_129719_en.pdf