VZCZCXRO3299
RR RUEHPA
DE RUEHOS #0257/01 0520921
ZNR UUUUU ZZH
R 210921Z FEB 06
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC 6620
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 6927
RUEHLO/AMEMBASSY LONDON 0536
RUEHFR/AMEMBASSY PARIS 0386
RUEHRO/AMEMBASSY ROME 0995
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 LAGOS 000257 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT PASS TO EX-IM KENNETH VRANICH AND BERT C. UBAMADU 
DEPT OF TREASURY PASS TO LKOHLER 
USDOC FOR 3317/ITA/OA/KBURRESS 
STATE PASS OPIC FOR ZHAN AND MSTUCKART 
STATE PASS TDA FOR NCABOT 
STATE PASS USTR FOR ASST USTR SLISER 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EAID PGOV NI
SUBJECT: LAGOS LAND TITLING REFORM MISSES MARK 
 
REF: LAGOS 09 
 
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Summary 
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¶1. (SBU) A cumbersome legal superstructure continues to 
hamper the real estate and mortgage market in Lagos.  Lagos 
State Governor Bola Tinubu's recent attempts at land reform 
are cosmetic in nature and do not alleviate the fundamental 
problems associated with land titling and conveyance in 
Lagos.  His reforms may make procedures for legally 
transferring titles somewhat less arbitrary.  These new 
procedures, while offering some incentives, are still too 
cumbersome, costly, and inefficient.  They continue to invite 
too much state government interference in what essentially 
should be private transactions.  End summary. 
 
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Background 
---------- 
 
¶2. (U) The Lagos State Government Lands Bureau held a 
stakeholders' forum January 26, 2006 to explain procedures 
implemented last August for obtaining a Governor's Consent. 
To legally transfer title to real estate, a person must 
obtain a "Governor's Consent."  This procedure requires 
numerous transaction fees including: a consent fee, capital 
gains tax, a documentary stamp tax, and registration fees 
which, when combined, amount to 30% of the capital value of 
property (reftel).  Obtaining a Governor's Consent takes 
several months.  The time and costs associated with the 
procedure discourage most people from applying. 
Consequently, most landholders do not have perfected titles 
to the land they own, and recording of de jure ownership is 
in substantial variance with actual de facto ownership.  Main 
changes discussed at the January 26 forum included: 1) 
reducing processing time to within 30 days and 2) reduce cost 
of obtaining Governor's Consent from 30% to 15% of the 
property value.  (Note: Lagos inaugurated the 30-day 
Governor's Consent on August 1, 2005 in hopes it would 
increase the number of people applying for a Governor's 
Consent.  It has not had that salutary effect thus far.  End 
Note.) 
 
------------------------- 
Survey Results Misleading 
------------------------- 
 
¶3. (U) From August to December 2005, the Lands Bureau 
conducted a random customer satisfaction survey on the new 
procedures for the Governor's Consent.  According to the 
survey, over 70% of applicants obtained a Governor's Consent 
in 60 days or less and 90% of applicants were pleased with 
the reduction in fees.  Survey results, however, are 
misleading, industry experts posited.  Legal Secretary A.A. 
Daniel of Union Homes, the largest primary mortgagor in 
Nigeria, said the survey was limited to twenty case files, 
which is much too small a sampling from which to base 
conclusions.  Moreover, the reduction of fees was 
insufficient to enable most Nigerians to afford the costs of 
this procedure. 
 
-------------------------------- 
Title Transfer Fees Too High; 
Too Much Government Interference 
-------------------------------- 
 
¶4. (SBU) Lagos State Lands Bureau Director Onikepo Animashuan 
said of 2,726 applications for Governor's Consent in 2005, 
only 505 were registered mortgages.  Animashuan estimated 
that over 80% of land titles are either not documented or 
registered.  Some industry experts claim that figure to be 
closer to 90%.  They argue that Consent fees are too costly, 
especially for transactions involving the passing of titles 
from several previous owners.  If a title has never been 
perfected, the current owner would have to pay all the fees 
for the previous title owners who never obtained Governor's 
 
LAGOS 00000257  002 OF 002 
 
 
Consent.  In such a case, title transfer fees could soon 
match or exceed the value of the property.  To reduce 
cumulative Consent fees, Animashaun said the Governor could 
give concessions on a case-by-case basis. (Comment: 
Individual intervention by the Governor makes the title 
transfer process highly inefficient, and continues to make 
the process susceptible to political considerations.  End 
Comment.) 
 
¶5. (SBU) Critics point to the 1978 Land Use Act as the root 
of the problem because it vests too much control in the state 
governments over private property.  CEO Babalakin and 
Company, B.O. Babalakin, said the new procedures were 
insufficient to spur real estate development.  He sent 
Governor Tinubu a confidential memo in 2001 stating the need 
to address land tenure problems, but said his suggestions 
have not been implemented.  Banks have lost confidence in the 
Governor's Consent document, and it is difficult to convince 
people to perfect titles, Babalakin argued.  He said if 
Consent fees, bureaucratic hassles, and waiting times for 
obtaining Governor's Consent could be reduced, more people 
would apply. 
 
-------------------------------------------- 
Titling Issues Drain Economic Growth; 
Governor's Consent A Major Concern for Banks 
-------------------------------------------- 
 
¶6. (U) United Bank of Africa (UBA) Global Markets CEO Sonnie 
Ayere said the bureaucratic hassles and high transaction 
costs associated with obtaining a Governor's Consent impeded 
economic growth.  He claimed the transaction costs associated 
with collateral processing, foreclosure, and resale cost the 
economy billions of naira per year.  While banks prefer real 
estate as collateral for secured loans, many loans cannot be 
concluded because individuals or companies do not have 
perfected titles.  Ayere said a lack of formal ownership is a 
critical barrier to secured credit access for borrowers. 
 
¶7. (SBU) Lagos Land Bureau Director Animashaun said many 
banks resort to "equitable" loans in place of mortgages 
because most people do not have perfected titles.  A person 
would submit his title deed to the bank for a loan, even 
though the title has not been perfected, and the bank runs 
the risk that the facility might go bad.  Union Homes Lekki 
Branch Manager, Ifeanyi Ozoh, said before bank consolidation, 
70-80% of applicants applied for an equitable loan in place 
of a mortgage loan to avoid costs associated with registering 
and perfecting titles, but that post-consolidation, less 
banks would be willing to do so.  However, industry experts 
are unconvinced that the new 30-day procedures will 
significantly compel more people to switch from obtaining 
"equitable" loans to obtaining mortgage loans through banks. 
The long delays and high costs associated with perfecting 
titles and transfering titles discourage even well-to-do 
individuals from applying, they said. 
 
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Comment 
------- 
 
¶8. (SBU) The media and Lagos State government tout this new 
procedure as a "landmark" event in land reform.  Their claims 
are overstated.  The measure represents progress, but not a 
breakthrough.  Fundamental legal restrictions continue to 
prevent the growth of the real estate market.  These 
restrictions have led to artificial scarcity, escalated land 
prices, and have stifled economic activity over the years. 
Ultimately, genuine reform is dependent on amendment of the 
1978 Land Use Act.  Until then, changes like those introduced 
by Lagos State will basically be superficial.  End Comment. 
BROWNE