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It might be interesting to trace the origins of taxation – that much hated aspect of our lives but one that we cannot do without for our continued, collective societal and economic growth and development.

No exact records exists as to when taxation was introduced but somewhere in the bible – Luke 2:1 it states that a “… decree from Caesar was sent out, that all the world should be taxed”.

Long before then men had began to impose levies on themselves to raise finances / funds to wage war or defend themselves from unfriendly rampaging tribes.  This in itself was a form of taxation.

However as man evolved and leadership and existence took a formal nature, taxation – became a means by which governments finance their expenditure by imposing charges on citizens and corporate entities.


For our purposes today, we are referring in particular to property taxation.

Property tax, as the name implies is simply a tax levied on real property and transactions on real property. Real property here refers to land or land and buildings or variants of these factors.


Property tax apart from meeting all the conditions of an acceptable tax has some major advantages.

  1. Real estate is easily identifiable and ownership is hardly ever in doubt except in few instances of litigation.
  2. Real estate is stationary and unlike human beings cannot be removed or change locations.
  3. Property tax is easy to administer and equally easy to collect.
  4. Property tax is easy to calculate and both owners and assessing authorities can easily determine the property tax liability of all properties with minimum disagreement.
  5. Property tax is levied on the value of the property.  The higher the value of your property the higher the tax.
  6. In implementing an effective property tax administration system, the government will, as a by product, have a census of the total properties and types in various localities.  This is invaluable especially for planning purposes towards provision of services and infrastructure.
  7. Following from (3.6) above, the housing census, will encourage property owners who do not have registered title (a common problem in Nigeria as 85% of properties are not titled) to approach government for same.  The long term effect of this is that capital will be freed to be invested in other productive activities.
  8. An effective property tax administration can be used to control land use patterns, urban sprawl etc.


There are various kinds of taxes on properties and transactions on property in Nigeria. They can be basically separated into Federal and State taxes. Some of these taxes are sometimes specific to one or 2 States in Nigeria especially as our democratic experience takes root and States are at liberty to chart a growth path for themselves.


    Capital Gains Tax is a tax levied on capital gains made on the sale / disposal of chargeable assets including real property.

    Covered by Cap 42 of the Laws of the Federal Republic of Nigeria. Capital Gains Tax currently stands at 10% of gains made on real estate disposal after sundry adjustments.


    Section 68 (1) of Personal Income Tax Decree No. 104 of 1993 provides that where a rent becomes due or payable to a person, the payer of the rent shall at the date when the rent is paid or credited whichever first occurs, shall deduct there-from tax and pay over to the relevant tax authority the amount so deducted.

    The definition of rent in this instance covers payment for the use or hire of any equipment, and use or hire of moveable or immoveable property under which real estate can be classified.

    The withholding tax rate is currently 10%.


    Stamp duty is a tax collected on every real estate related document agreement to authenticate them and to ensure the validity of the documents. Stamp duty is calculated at a given rate of the total amount or value of the subject property or transaction in question.

    Examples of property related documents on which stamp duties are paid include.

    • Tenancy agreements
    • Certificate of Occupancy
    • Land Agreement
    • Lease and sublease agreements
    • Deed of Gift
    • Power of Attorney
    • Mortgages
    • Deed of Assignments

    The Stamp Duties Act is know as Cap 411 of the laws of the Federal Republic of Nigeria.


    The Land Use Act of 1978 came into being with vast powers to the State Governors including the fact that authority and control over all land in the State was vested in them, and alienation of any nature was to be done only with their consent.

    Section 22 of the Act enjoins a holder of a Statutory Right of Occupancy to first obtain Governors consent before alienating his right of occupancy or part thereof.

    Alienation in this case refers to Mortgages, Sublease, Sales, Assignments.

    Consent Fees vary from State to State. Oyo, Abuja (10%), Enugu, Lagos (15%).

    In Lagos if your title – Certificate of Occupancy is less than 10 years the consent fees can rise to high as 30%


    Registration fees are usually paid on instruments presented to the Land Registry for registration. The process of registration ascertains that the property is given a title number, that makes it traceable and documented in the Register of Titles.


    The Development Charge is one that is payable on government land as allocations are made to interested individuals and organizations.

    The development charge was introduced in the 1980’s in Lagos by the government of Raji Rasaki as regards the Lekki land allocations. The issue was that government could not fund the provision of infrastructure alone in the Scheme, so the allotees were made to contribute to this by paying the levy.

    Over the years this has mutated into all manner of levies and charges and is now a common feature of most State Governments regarding transactions on real estate.

    In Lagos State for example there is even now an Infrastructural Development Levy (IDL) paid before certain categories of planning approvals are given for projects.


    The Land Use Charge Law No. 11 of 2001 of Lagos State was signed into being during the tenure of Asiwaju Bola Tinubu.The law sought to and does consolidate ground rents, tenement rates, and neighbourhood improvement rates into one single tax known as the Land Use Tax.

    The modus operadi, is that the State will collect all these taxes including those that are constitutionally the domain of the local governments and then a pre-agreed formula is used to share the proceeds amongst all the tiers of government.

    Once the value of the property is arrived at, rates are applied to determine tax payable. The rates are as follows; commercial properties – .375% per annum, industrial properties 0.125% per annum, residential 0.125% per annum, residential owner occupied 0.0375% per annum.

    Public, religions and owner occupied – pensioner houses are exempted.

    Initially much uproar greeted the introduction of the law and its implementation but with time, its operators have tweaked with the rates payable bringing them down to more acceptable figures.


    Under the tenure of President Olusegun Obasanjo the Federal Government decided to monetize a lot of the allowances and benefits of public servants. Part of this monetization included the letting go of government houses by selling the same properties to their occupants who were public servants.

    This issue was not a problem with any of the State Governments with the exception of Lagos State who insisted that the Federal Government had no right to sell the properties and should ordinarily return them back to the State if they had no further use for them.

    An impasse developed.

    The Federal Government went ahead and sold its properties in Lagos.

    Lagos State imposed a Regularization of Title Charge upon purchasers which translated primarily to a re-allocation of the property that had been bought from the Federal Government.

    The rates payable for this regularization vary with neighbourhood – N20,000.00 per square metre in Old Ikoyi to N15,000.00 in Apapa and G.R.A. Ikeja to N5,000.00 in some other areas.


    The Estate Surveyor and Value provides services to clients and these services includes amongst others, valuations, estate agency, project management etc. The fees charged for these services according to the Value Added Tax Decree 102 of 1993 are taxable.

    The Value Added Tax rate is currently 5%.



    One of the major issues with property taxation and its development as a major revenue base is that most of the States in Nigeria are still very comfortable with receiving monthly revenue allocations from the Federal Government. As this is an easy and trouble free source of money, and in most cases, it covers recurrent expenditure few of the governors have become creative as to how to increase internally generated revenue to finance capital projects in their States.

    Tax on property and property related transactions is one of those sources of revenue.


    Another challenge with property tax collection and administration is that of inadequate data of properties and their owners.

    In Nigeria very few records exist as to the exact number of our housing stock and even fewer records exist of titled property – Less than 15% of properties nationwide are titled.

    These lack of data has made property taxation very difficult and only in the last decade has the Geographical Information System (GIS) and property enumeration began to gain ground in many States of the Federation.

    Hopefully as these data are gathered it will create a base for efficient property tax administration.


    Another major challenge with property tax is that of wrong assessment / valuations. This is not unique to Nigeria alone. It is a worldwide phenomenon, particularly where the number of properties being dealt with are in the thousands or hundreds of thousands.

    However one of the causes of this problem is the use of the wrong personnel or staff who are not professionals and have little or no experience in property valuation.

    There are also cases of under assessment.

    The Estate Surveyor and Valuer who should be involved in these valuation are excluded, and wrong professionals as well as wrong methods of valuation are adopted.

    The various heads of departments or units that should be occupied by qualified Estate Surveyors and Valuers are taken up by lawyers, accountants and other non related people.


    Nigerians, and people generally, have never been glad to pay tax of any form or sum. In Nigeria this is borne mostly out of decades of failure by the government to seriously collect same. Few understand it is a civic duty, fewer pay any tax at all.

    Publicity about payment of taxes is very limited. Nigerians need to be educated on a continuous basis on the necessity to pay taxes.


    The tax rates demanded by the Governments are often in the very high percentages, and can almost be regarded as punitive.

    Examples in Lagos include the Regularization of Title charge for Federal Government property purchasers.

    Consent fees of 15% of assessed property values are high and a major disincentive to real estate transactions.

    Many of these high rates are borne out of a desire to meet set departmental targets etc.


    It is said that in a lot of cases, despite the provisions of the laws, liability for these taxes are passed directly and indirectly to the end user i.e tenants or purchasers. This is moreso in a situation like ours where demand especially for rental property outstrips supply by a wide margin.


    High property taxes have been known to be a major disincentive to development and even transfer.

    This is obvious from our experiences with property development particularly in Lagos State with reference to most of the Federal Government properties sold. Most of the purchasers have been unable to proceed with redevelopment for the simple reason of some of the high taxes being demanded of them before construction can commence.

    The same thing applies to transfer and title perfection. As practitioners we are aware that less than 20% of properties that change hands are progressed to the stage of obtaining Governors Consent to the transaction, unless absolutely necessary and this is primarily due to cost of such perfections.

    This state of affairs is despite the fact that Lagos State has simplified the process to a large extent compared to other States.

    Again where these property taxes are paid it only adds up to the final cost of development and in the final analysis is transferred to the end user especially for rental properties.


    One of the biggest challenges of property tax collection in Nigeria, is that of non-chalance and poor work ethics of the tax office staff.

    Apart from the use of inexperienced and wrong personnel to assess property taxation, the quality of staff collecting these taxes leaves a lot be desired.

    They are readily willing to compromise the tax demanded for personal pecuniary benefits, and it is difficult to sense any commitment on their part to ensure compliance with the tax payment.


    (Rabiu) “The generation of additional revenue from property tax requires the political will and reciprocal response by government to the basic needs of the ordinary man – viz provision of good roads, supply of electricity and water and good health services to mention a few”.

    Put in very simply terms the citizenry want to feel the impact of the taxes they pay. That way, they are encouraged to pay more.


    One of the key principals of property taxation is that once there is beneficial value, the subject property becomes rateable.

    This does not however take into consideration owners of properties who have come into ownership of property by inheritance or gift and are simply unable to keep up with the rates demanded of them by reason of economic standing age or others.

    This can sometimes be a challenge to successful administration of property taxation in Nigeria.


    Following from the wrong use of wrong or inappropriate personnel is that a lot of the processes for the successful implementation of property taxation are hardly followed.

    There is no display of a valuation list. More often than not the first time individuals realize that their properties have been valued is when they receive a copy of the demand notice. By this time they are given only a few weeks to pay. The stage is therefore set for conflict with the rating / tax office and refusal to pay the taxes.



    Lagos State remains the only State in the nation that has put together an albeit efficient tax administrative and collection system. Today, the State collects an internally generated revenue of between N12 billion to N14 billion monthly. In 2008, the State made a total of N139.2 billion from internally generated revenue.

    Of this figure, tax from property accounts for between 1% – 2% annually. In 2010, Lagos State generated a total of N3.00bn from Land Use Tax alone. This is a marked improvement from figures collected in 1981 – N24.80m, 1982 – N17.70m and 1983 – N18.50m respectively, from property and property related taxes.

    Under the Land Use Charge Law of 2001, the State has collapsed all property related taxes and rates i.e. ground rent and tenement rates into one single tax known as the Land Use Charge Tax. Originally the tenement rate was collected by the Local Government and the ground rent by the State Government.

    Currently, the Land Use Charge Tax is collected and, shared amongst all the tiers of Governments – State and Local on a pre-agreed basis.

    The success of this tax has been primarily because of an efficient administration system peopled by professionals.

    Virtually every property in the State has been enumerated, valued, and is now identifiable with computer generated codes. The tax bills are sent annually with time lines for payments failing which appropriate penalties would apply.

    Different rates apply, depending on the status of the property – .0375% for owner occupied properties, .375% for commercial properties and .125% for industrial properties. These rates are applied on the value of the property.


    Anambra State recently also passed its own equivalent law of the Lagos State Land Use Law.

    It is called the Anambra State Property and Land Use Charge Law – August 2010.

    Implementation is at its preliminary stages but it is projected that the State could raise as much as N1.50 billion annually from collection of collection of Land Use Charge taxes.

    The administration and collection of this tax has been outsourced to a private firm which is currently in the process of public enlightenment, before actual enumeration / valuation of properties commences.


With the collapse of oil prices from $140 a barrel to $40 a barrel late 2008, as well as the increased militant activities in the Niger – Delta, which reduced oil production to less than 1,000,000 (one million) barrels per day the revenue accruable to the Federal Government of Nigeria became very reduced.

This in effect also meant that the allocation of revenue to the various State governments from the Federal purse was also negatively affected. The import of this was that States were getting in some cases less than 40% of their regular allocation in 2009, compared to 2008 and 2007.

The Central Bank of Nigeria statistics indicate that as at December 2008, N435.40 billion was shared amongst the three tiers of government. This figure dropped drastically to N285.58 billion in January 2009.

The significance of this reduction in revenue, was that many State governments were unable to meet up with their obligations in terms of recurrent and capital expenditure and this of course put achievement of targets and objectives in their respective budgets askew.

Gradually it dawned on many State Governments particularly the ones wholly dependent on Federal allocations that steps must be taken to shore up their income, and this would only be through increased focus on internally generated revenue within their States.

This was once again highlighted at one of the Governors Forum held in 2009 and specifically targeted on Internally Generated Revenue in the states.

One of the areas generally agreed upon for further action was the area of taxation on property.
Many States till date have failed to appreciate the gold mine that property taxation will yield them.
Statistics below from various cities around the world indicate that a fair proportion of their revenue is made from property taxes.

Source: Various sources.

The success of implementation and administration of these taxes depends very much on the administrative structure and more particularly the use of professionals and experts in the various aspects of the administration.

As much as possible aspects of the administration that cannot be efficiently handled by the public structure should be outsourced. This includes for example, the statewide enumeration and valuation of properties.

Aggressive public awareness campaigns must be undertaken and continued almost ad-infinitum to sensitize the general public on the exercise and the benefits of paying property tax and other taxes for that matter.

The Government at all levels must on their own part show transparency and accountability in the use of the taxes collected so that the paying public cannot only see and feel the impact of the taxes paid, but are also as a result encouraged to pay more. This is the only way to build up trust.

There should be penalties for non-payment of tax or evasion and these penalties must be enforced and offenders and their punishment made public and widely publicized to serve as a deterrent to others.

As I close, it is pertinent to point out in terms of property taxation the Governments at various levels have not taken it as seriously as they should. The table above showing the percentage of property tax to the overall revenue base of these states compared to States in Nigeria speaks volumes.

A lot of work still needs to be done in this regard. It remains a revenue head that is solely undertapped.

It is hoped that as the communiqué from this seminar is States will begin to give this all important revenue based a second and serious look.

  1. Fundamentals of Real Estate Taxation – Kuye Olusegun.
  2. Business Dictionary.
  3. Holy Bible.
  4. Personal Income Tax Decree 104 of 1993.
  5. Rabiu S.A. – The Current property based taxes in Nigeria Administrative, Logistics and Procedural problems in implementation – paper presented at a seminar on Property based Taxation organized by the Nigerian Institution of Estate Surveyors and Valuers – 2nd – 3rd December 1998 at the International Conference Centre, Abuja.
  6. Kola Akomolede – Surveyors warns against over – taxing in Lagos being article published in The Punch Newspaper – June 21, 2004.
  7. Ade Ipaye – Property Taxation in Lagos State, History Philosophy and Law of the Land Use Charge being a paper presented at the inaugural workshop of the Land Use Charge Assessment Appeal Tribunal held on December 2009 at De Renaissance Hotel, Alausa, Ikeja.
  8. Central Bank of Nigeria reports.
  9. Land Use Charge Law No. 11 of Lagos State 2001.
  10. Regularization of title to Land in Lagos State being document of the Directorate of Land Regularization Lagos State Ministry of Lands.
  11. Anambra State of Nigeria Property and Land Use Charge Law 2010.

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