By Pat Onukwuli
Nigeria’s real estate sector holds vast potential to boost economic growth through job creation, infrastructure development, and stimulating sectors such as construction and finance. Yet, the sector remains underutilised due to macroeconomic instability, high inflation, fragmented taxation, and limited access to finance. Real estate can become a critical driver of Nigeria’s fiscal recovery with the right reforms.
Nigeria’s economic outlook in 2025 is worrying. Inflation has soared to 34.9%, and the Naira hovers around ₦1,550 to $1. Removing fuel subsidies has increased fuel prices, raised transport and energy costs, and weakened household purchasing power. The private sector struggles to finance housing development with limited fiscal space and high borrowing costs. These constraints continue to fuel Nigeria’s 22-million-unit housing deficit. Sadly, the government is not on sound fiscal footing, as over 90% of its revenue goes to debt servicing.
The Federal Government’s new Tax Reform Bill 2024 aims to address revenue shortfalls by widening the tax net, and real estate is a prime target. The Bill proposes stricter enforcement of capital gains tax, broader application of stamp duties, and an eventual increase in VAT. While these measures could boost public finances, they risk overburdening developers and property owners without proper safeguards.
A first step toward reform is ensuring accurate, regular property valuations. The Nigerian Institution of Estate Surveyors and Valuers (NIESV) is crucial in standardising valuations. Without them, fair property taxation and effective real estate governance are impossible. Leveraging their expertise is essential.
Beyond valuation, Nigeria must overhaul its property tax system. Developers currently face an array of overlapping taxes, such as capital gains tax, land use charges, and development levies. These inconsistencies increase costs, discourage investment, and drive activity into the informal sector. Simplifying the tax framework and creating a unified property tax code, supported by digital land records and valuation systems like GIS and AVMS, can improve transparency and compliance.
Historically, property taxation has long been recognised in Nigeria’s governance framework. The 1976 Local Government Reform provided tenement rates, an annual tax on properties, collectable by local governments. However, most local councils lack the institutional capacity or political will to implement this effectively. This has led to under-collection and inefficiencies, leaving a significant gap in revenue potential. A pressing need exists to harmonise and weave Nigeria’s fragmented property tax regimes across federal, state, and local levels into a more coherent and enforceable system.
If well implemented, gains from real estate taxes can support Nigeria’s fiscal stability. Revenue from property-related taxes could diversify income sources, reduce dependence on oil, and finance critical infrastructure. Transparent systems can ensure equitable taxation while rebuilding trust with taxpayers. Formalising property transactions and enforcing fair, well-communicated tax obligations can generate predictable income without disproportionately burdening citizens.
Yet taxation, in any civilised society, is not merely a fiscal tool; it is a treaty between the government and the governed. Political philosophers from Rousseau to Rawls have argued that taxation is part of the social contract. Citizens contribute to the everyday purse not out of coercion, but with the expectation that their contributions will return to them through public goods, justice, and welfare. If taxes are paid but roads remain impassable, hospitals ill-equipped, and housing unaffordable, then the contract is broken, and with it, public trust.
Philosopher John Locke, whose ideas underpin many democratic constitutions, once noted that a government’s legitimacy rests on its ability to protect life, liberty, and property. Under Locke’s lens, taxation is justifiable only when it promotes the public good and protects private rights. In a country like Nigeria, where mistrust in governance runs deep, taxation must be visibly linked to delivering tangible benefits. Otherwise, it risks becoming a tool of extraction rather than empowerment.
Nigeria must adopt cautionary safety nets to avoid deterring investment or worsening housing affordability. These include exemptions for low-income homeowners and first-time buyers, progressive tax rates, and fair valuation and appeal mechanisms. A portion of revenue should be visibly reinvested into local infrastructure to foster public trust. The government must communicate clearly how taxes are being used, demonstrating that the benefits of taxation are tangible, inclusive, and sustained.
Nigeria also needs to revitalise its real estate financing environment. Real Estate Investment Trusts (REITS), if better regulated and promoted, can provide liquidity and attract broader investment. Blended finance, which combines public and private capital to reduce risk, offers another route to delivering affordable housing at scale.
The diaspora is another potential source of funding. With over $20 billion in annual remittances, structured diaspora bonds focused on housing and infrastructure could mobilise significant capital. Lagos HOMS has shown how public-private partnerships (PPPS) can deliver results, though sustainability and stronger financial structures are still needed.
Nigeria can also learn from its African neighbours. Rwanda’s digital land registry has enhanced efficiency and boosted tax collection. South Africa’s well-regulated REIT sector has encouraged both local and foreign investment. Kenya’s Affordable Housing Programme, supported by levies and PPPS, has delivered thousands of homes. Nigeria can learn from these experiences while tailoring them to its local context.
In addition, aligning Nigeria’s real estate sector with sustainability goals opens new funding opportunities. Green financing can attract ESG-conscious investors through tools like green bonds and sustainability-linked incentives. Building on its 2017 green bond debut, Nigeria should develop enforceable green building codes and monitoring systems.
Nigeria can unlock the true potential of its real estate market and strengthen its fiscal foundations as a key lever for economic recovery. However, this must be accompanied by fair valuations, a simplified tax structure, inclusive financing models, and protection for vulnerable citizens. Most importantly, it must be underpinned by a renewed social contract, ensuring taxes lead to visible, meaningful improvements in Nigerians’ lives.