Tokenization of Land and Landed Properties in Nigeria

Introduction

The affairs and activities in Nigeria are governed by so many laws. These laws also apply to land and landed property. Statutory laws to regulate, guide and govern all forms of land and landed property transactions in Nigeria have been enacted by the federal and state governments.

Often, the Land Use Act, enacted in 1978, is usually the first law that comes to the mind of most people because it is the most common land law in Nigeria. Other laws exist and include the Lagos State Properties Protection Law 2016, Land Instrument Registration Act 2001, Registration Of Titles Act, Nigerian Urban And Regional Planning Act and several others.

In Nigeria, the major problems surrounding the transfer of land ownership between two individuals is the fact that the process is slow, time-consuming and stressful.

What could be the solution to this problem? Tokenization should be the solution.

What then is tokenization?

Tokenization is simply the issuance of asset-backed tokens using blockchains.

How tokenizing landed properties works

The process of tokenizing land and landed properties is quite simple and is highly applicable in the real estates. Imagine you have a landed property worth One Hundred Million Naira (N100,000,000) and you intend to sell it while avoiding the troubles that come with landed property transaction in Nigeria, then tokenization would be the best solution.

The process involves creating a digital duplicate of the asset, including vital information such as the specification of the property and property document, and storing it on a blockchain. This makes transferring the property to another person relatively easy.

Another solution is that instead of selling the entire property to a single person, the digital asset can be split into several units, called tokens, and then issued to buyers i.e primary investors. In this case, a property worth N 100,000,000 can be split into 10,000,000 tokens and each token sold at N 10 or 1,000,000 tokens to be sold at N 100 each. The issuer can list the tokens on a digital exchange and issued to primary investors under government-regulated Security Token Offering. The buyer can benefit from token price appreciation and the rights specified in the smart contract such as dividends from rent, interest payment and principal distributions.

Can lands in Nigeria be tokenized?

There is a possibility of landed properties to be tokenized in Nigeria. If it is happening in the UK, Ukraine, Singapore and some parts of Kenya, then it can happen in Nigeria.

Pros and Cons of Land and Property tokenization

Pros

The benefits of Landed property Tokenization include:

• Elimination of intermediaries like lawyers and agents;
• Elimination of fees associated with escrows by using smart contracts;
• Increased capital;
• Greater Liquidity;
• Immutable tracking; and
• Streamlined transaction.

Cons

If the blockchain private key is lost, the property cannot be recovered; and if the property (for instance a house) begins to depreciate, there might be a reduction in the value of tokens.

Conclusion

Tokenizing landed properties in Nigeria would help ease the stress associated with the normal traditional land transaction process in Nigeria, eliminate intermediaries and land grabbers and boost investments in real estates. Though we still have a long way to go in achieving this, however, it is not impossible.

Recommendation

I recommend that the Federal government of Nigeria look into this.

References

Hofer, L. (2019). Property Tokenization: The Digital Future of Real Estate Investment. Blockchain Land
https://realtynxt.com/2019/04/24/the-pros-and-cons-of-tokenization-in-real-estate
Joel, P. (2017). Nigerian Laws and Regulation on Landed Properties. www.ibejulekkilawyer.com
Lyon, N. (2017). Tokenization of Real Estate: from New Investment Options to the Futuristic Cities of Tomorrow. www.coinidol.com

Lucy Adegbe,

Guru Capital Limited.