PricewaterhouseCoopers says Nigeria is sitting on $900bn worth of dead capital that needs to be invested

NIGERIA needs to unlock as much as $900bn worth of dead capital to increase economic activities and stimulate growth according to a recent report by international accountancy form PricewaterhouseCoopers (PwC).

Currently the country with the highest number of people in the world living in abject poverty, Nigeria has a gross domestic product (GDP) of under $400bn, which is wholly inadequate for its population of 200m people. According to the African Development Bank, Nigeria has an annual infrastructural spending deficit of $100bn a year but bridging this gap is difficult because the 2019 budget is a mere $24bn.

Confirming that Nigeria's biggest problem is that she needs to find capital to invest in infrastructural development to create jobs and stimulate economic activity, PWC said the country's economy is under-performing. In a new report titled Bringing Dead Capital to Life – What Nigeria Should Do, PwC said there is a lot of dead capital in residential and agricultural real estate across Nigeria.

It estimated that Nigeria holds at least $300bn or as much as $900bn worth of dead capital in residential real estate and agricultural land alone. According to PwC, the high-value real estate market segment held between $230bn and $750bn of value, while the middle market carried between $60bn and $170bn in value.

Dead capital was coined by a Peruvian economist, Hernando de Soto, to describe assets that cannot be converted to economic capital. With 40m households having five members each, the report added that approximately 95% of household dwellings in Nigeria have no title or a contestable title.

According to the PwC report, a lack of access to finance is a major contributor to persistent poverty. PwC noted that the International Monetary Fund’s most recent report on Nigeria concluded that the country was set to experience an incremental decline in income per capital over the next eight years, through 2022.

It said:  “This decline is a result of slow GDP growth exceeded by a population growth rate that is not expected to slow down in the near future. The population is expected to reach 263m by 2030 but in contrast, GDP is growing at a slower and less consistent rate, averaging 1.4% since 2016.

“In order to circumvent this projected crisis, Nigeria requires more investment in critical areas that directly impact economic growth. Heavy investment in infrastructure, coupled with structural reforms, will loosen domestic and foreign capital, allowing more businesses to thrive.

"In the long run, investing in human capital will yield economic prosperity by overriding high unemployment in a large population. Presently, a large proportion of Nigeria’s population operate in the informal sector by living in informal dwellings and/or working in the informal sector as for many, the costs accrued in the formal sector outweigh the benefits, however, this creates a large stock of dormant assets and capital is scarce in societies with a large stock of dormant assets."

Also, PwC said land ownership has been quite a stressful process as a result of the complex land tenure system, adding that the Land Use Act had failed to establish a uniform land tenure system that would govern ownership in the country. According to the report, about 97% of land in Lagos is unregistered and this makes it difficult for banks to validate claims for  occupants to use their land to create wealth.