Compensation for land and building compulsorily acquired in Nigeria

Abstract

Purpose Valuation for compensation on land and buildings compulsorily acquired for public purposes is statutory. The Land Use Act (LUA) of 1978 now cited as Laws of the Federation of Nigeria, CAP l5 LFN 2007, stipulates the use of Depreciated Replacement Cost (DRC) Method in the valuation for compensation purposes for building and installation. The purpose of this paper is to criticize the application of the DRC technique in the valuation by acquiring authority as it does not arrive at fair market value and adequate compensation in Nigeria. Design/methodology/approach The method adopted for the study was a case study of real world valuation for compensation. Data used in the study were gathered mainly from government ministries and agencies responsible for land acquisition and compensation purposes. They included the Ministry of Lands and Housing, Land Use and Allocation Committee, and Ministry of Works and Transport. Market data on rental value, sales prices and other relevant data were collected from firms of professional that deal in real property. Findings The result of the study reveals that valuation by acquiring authority using DRC methods as prescribed by the LUA does not reflect market value and it is inadequate to put the claimants in the position they were before the acquisition. As such, most victims expressed dissatisfaction with the amount paid to them, which sometimes result to crisis, conflict and prolonged litigation, resulting in delay in executing or abandonment of the intended project. Research limitations/implications The study is limited to only one case study on acquisition and compensation for land and buildings with particular reference to Akwa Ibom State. This limitation does not invalidate the result as the law is applicable to the whole country. Practical implications The implication is that the LUA needs to be review to fair market value as basis of valuation and payment for site value as well as the constitution to add “adequate” to Section 44 (1a). This will reduce the incidence of many communities and land owners protest against the decision of government or its agents to acquire their land for public purposes. Originality/value The methodology meets the requirement of the law regarding compulsory land acquisition and compensation in Nigeria: The LUA of 1978. Using three scenarios: the valuation by acquiring authority, claimant’s valuers and independent valuers to illustrate the critique of the methodology, the result shows the inadequacy of compensation.

Valuation for compensation practices in Kenya: an evaluation

“…Professional valuers should develop a unit cost manual through sample appraisals or comparable basis, to determine unit cost per built up area such as rate of construction per square metre (Asian Development Bank, 2007;European Bank for Reconstruction and Development, 2017;International Finance Corporation, 2002;World Bank, 2004). The method has however been criticized for not helping valuers arrive at fair market value and adequate compensation in land acquisition projects in Nigeria (Egbenta and Udoudoh, 2018).…”

“…Keith et al (2008) have also advocated for responsive legislations for compensation processes for determining valuations and compensations. Elsewhere, it has been noted that adopting statutory rather than market basis in valuation for compensation purposes results to unfair compensation amounts (Akujuru and Ruddock, 2015;Egbenta and Udoudoh, 2018). Different interpretations of the law have also been noted to contribute to this problem (Holtslag-Broekhof et al, 2018;Lekgori et al, 2020).…”

“…Some losses have been ignored, particularly the intangible ones, and the valuation methodology has been questioned (African Development Bank, 2003;Asian Development Bank, 2007, 2014Holtslag-Broekhof et al, 2018;Munubi, 2016;Omar and Ismail, 2009;Rao et al, 2017;World Bank, 2016). Similarly, Egbenta and Udoudoh (2018), Bello and Olanrele (2016) and Ige and Oladapo (2018) noted that most project affected persons were dissatisfied with the compensation amounts in Nigeria while lack of standardized valuation methods and procedures in Ethiopia have been found to contribute to unfair valuations and compensations (Alemu, 2013). Other existing studies have also shown that adopting statutory rather than market basis of valuation in land acquisition projects results to unfair compensations (Akujuru and Ruddock, 2015;Omar and Ismail, 2009).…”

“…The implications of the flawed valuation for compensation purposes have been noted to contribute to inadequate, unfair and unjust compensations thus promoting impoverishment of the project affected persons (World Bank, 2016). This outcome may consequently fuel bad blood between the locals or the project affected persons and the project implementers, costly litigations, project delays, among others (Alemu, 2013;Bugri and Kumi, 2018;Egbenta and Udoudoh, 2018;European Bank for Reconstruction and Development, 2017;Larbi, 2008;Larbi et al, 2004;Lekgori et al, 2020). In Kenya, for instance, the bone of contention has been on inadequate compensation amount, which have led to innumerable litigations (K'Akumu and Olima, 2018).…”

Forestalling Conflict in Compensation of Compulsorily Acquired Customary Land: The Intergenerational Payment Option

“…For example, in Tanzania, compensation disputes in land acquisition account for about 19% of land-related disputes (Komu, 2016). The compensation issue is also a significant source of land-related conflicts in Ghana (Anim-Odame, 2011), Ethiopia (Alemu, 2013) and many other countries (FAO, 2008;Alemu, 2013;Ghatak & Mookherjee, 2013;Egbenta & Udoudoh, 2018). In Nigeria, Lagos State, a land dispute resulting from inadequate or non-payment of compensation is typical.…”