INSURGENCY ITS IMPLICATION ON ESTATE SURVEYING AND VALUATION PRACTICE IN NIGERIA
ABSTRACT
The study examined the impact of insurgency on the practice of estate management and valuation profession in Nigeria, and haw it affect both sales and rental value of real estate , using the city of Kano as the study area. Data from the study were gathered through personal observation and assessment and from secondary sources. Data collected were analyzed using simple percentages it was found that insurgency in the study area has negatively affected the practice of the estate management and valuation ,the property market both sales and rental value as well as the socio-economic activity of the study area.
INTRODUCTION
The increasing rate of insurgency activities in the Northern Part of Nigeria has lead to the reduction in demand of properties as well as a reduced rate in property values by 30-40% resulting in a downturn in the property market in parts of the Northern States.
Most of the residents of the areas usually attacked by the insurgents have relocated to comparatively peaceful places in the region while those who are not from these states have completely relocated to workable states down south.
The former Chairman of the Nigerian Institute of Estate Surveyors and Valuers (NIESV), Kano State Chapter, Fred Akinloye, confirmed that the property market in parts of the north (especially the north-east) was passing through difficult times.
People are moving down south. The insurgency is really affecting the construction industry negatively, though there are other factors like the upcoming general elections. Property values have gone down considerably because demand is very low’ the terrorist activities have affected property market negatively such that prices of plots of lands in places like Kano State have reduced by 30-40% from N10mn per plot of land to N6mn-N7mn per plot of land.
Also another reason for the drop in the value of properties is the rate in which a lot of properties come into market from those who want to raise funds to execute political campaigns due to the upcoming general election.
‘’Many layouts are now in the market, focusing down prices. Before now, lands in those layouts were selling for N60, 000 per square meter, but now you can buy land there for between N50, 000 per square meter ’In the core north-east (Borno, Yobe and Adamawa states), building and construction is not being attempted by people as these places are where recent attacks of the insurgence occurs.
There is also a slowdown in activities in the property market in the Federal Capital Territory (FCT), Abuja, which is one of Nigeria’s most vibrant housing markets. The recent security threats that has occurred twice and caused loss of lives have resulted in loss of investment interest by able real estate investors. According to analysts, this may lead to supply glut.
The high risks associated with property investment in FCT have made both foreign and indigenous property investors to be doubtful of investing there.
Some of the property vendors are pessimistic of a recovery in property prices, explaining that the forthcoming election had also contributed its quota to the pause in the market as investors prefer to play the ‘’wait-and-see’’ game.
The immediate past president of Nigerian Institute of Architects (NIA), emphasised that all aspects of socio-political and economic activities in the northern part of the country is being affected by insurgency.
Private property developers in Borno, Yobe, Bauchi, Katsina, Kano are being frustrated due to the high vacancy rates in both the commercial and residential properties.
Meanwhile, in the mist of the challenges facing private developers in Kano due to insurgency, the state government is upbeat, developing three new housing estates at the moment.
The insecurity in the north have also delayed seven hotel projects valued at N15bn , while a few hotels already completed or near completion cannot be opened due to low patronage and anxiety resulting from insurgency.
According to a report, losses from the botched projects come to about N15bn. These include the Magwan Water Hotel in Kano, which would have cost close to N5bn; the Kaduna Plaza Hotel (about N3bn), and the Bauchi Three-star Hotel estimated at N1.5bn. The remaining four three-star hotels would have cost not less than N2bn each.
STATEMENT OF PROBLEMS
The persistent increase of insurgency activities in the northern part of Nigeria has lead to the reduction in demand and supply of properties as well as reduction rate in property value to 30-40% , resulting in downturn in the property market in the northern states
AIM AND OBJECTIVES
This paper is aimed at examine the impact of insurgency on estate management and valuation practice as well as the value of real property in Nigeria.
To achieve the aim stated above following objective shall be pursued
- To examine the effect of insurgence on real property value.
- To examine it impact on estate management and valuation practice.
- To also examine the root course of the insurgence.
- To prefer possible recommendation to the problems.
SCOPE AND LIMITATION
This paper on the effect of insurgency on the practice of estate management and valuation in Nigeria, tends to cover kano city as one of the state adversely effected by the insurgency.
LITERATURE REVIEW
Insurgency (Violence) in any way affects land and housing in a very subtle or direct manner. When there is an increase in rents on properties and in housing values in one part of a city and there is a fall in prices and land values in some parts, people will prefer to invest in properties where land values are high.
Property is known to have an edge over inflation; this prompts a lot of investors to put their income in property rather than in other forms of investment. Kano being the second largest city in Nigeria after Lagos, a lot of people opted for and migrated to Kano. With this more investors invested in property to accommodate the growing population in the metropolis. There was a high increase in property values and rental value increased almost every two years. The most valuable asset to investors (both indigene and foreign) was property. Many of the homeowners depend on property value growth to generate the funds to re- invest in other businesses.
Kano was experiencing a boom period up till the middle of 2011. The “bust” period (this is a period of negative growth in the cycle) started towards the end of 2011. Apart from the economic depression throughout the world, which Nigeria as a nation is still battling with, there was also a fall in house prices as a consequence of the first attack by the Boko Haram sect. Despite the effect of social unrest on property values, sales and rental values according to Anas, 2003 of landed property could be arrived at by looking at many indicators like accessibility, transportation, nearness to school, place of work, place of worship, market, hospital etc.
To others, one of the major implications of persistent conflicts is the insecurity of lives and properties which tend to hinder foreign economic relations to jumpstart the economy Adeyemi,(2006).This is also supported by Babangida, (2002) who believed that the overall consequences of social crises, especially ethnically and religiously inspired violent clashes are threat to security of life and properties, domestic and foreign investments with continuous capital flight, and loss of confidence in the economy. Eventually, this may lead to increase in the level of poverty in the country. It could also be determined by the components and elements that form part of the building like ceiling, roof, door, decoration finishes, windows, external and partition walls. In addition, the value or worth of a real estate could be arrived at by looking at the public utilities.
Facilities and services go a long way in providing a conducive environment for healthy and comfort living Aliyu, (2012). The social unrest incidence in other part of the North, for instance in Jos, took another dimension on the effect of social unrest on sales and rental value when compared to Kano State. The scenario is different in Jos because the sales and rental value of landed properties is increasing and maintaining a steady upward movement as at 2001, when the crisis in Jos took a different dimension up till now. The wide gap between the supply and demand is gradually driving the housing bubble rent into the drain. This in turn is having a negative impact on the lending capacities of people from the bank. According to Auty,(2007) high rent diverts government incentives from wealth creation into patronage distribution that causes growth to collapse and the negative effects of high rent are amplified when rent is concentrated on governments or associated with ethnic diversity. Using the rent-cycling theory, he further observed that low rent confers incentives to create wealth because governments in low-rent economies expand their revenue by taxing an increasing output.
He believed that encouraged governments to invest in public goods and maintain efficiency incentives. Although a lot of studies has been done on conflict and violence as they affect the economy and socio-political conditions, not much research has been done on the impact of violence on rental value of property, most especially with the peculiar nature of the Boko Haram threat. This study analyses the impact the threat has on property value in Kano metropolis and the trend of rental growth presently when compared to previous years
THE IMPACT OF INSURGENTS
Nigeria has experienced four major threats to her survival as a nation since gaining her political independence in 1960. These threats were the Nigerian Civil War (1967-1970), the June 12 1993 crisis following the annulment of the presidential election results by the military, the violent uprising by militant groups in the oil producing region of the Niger-Delta and the frequent and increasingly violent sectarian and ethnic conflicts, (BOKOHARAM) which have led to the deaths of several thousands of people. The Boko Haram insurgency mostly in the northern parts of the country is the latest major crisis to threaten the political stability of Nigeria. This is a kind of crisis that Nigeria has not experienced before. From study, it is difficult to totally classify it as an ethnic or a sectarian conflict; the crisis also has economic undertones. Meanwhile, escalation of crisis is blamed on government neglect of its responsibility in meeting the basic needs of the people and its slow response to the security issues involved. The crisis, as to be expected, has had negative effects on the society and the economy far beyond the areas where the insurgents have been operating. Indeed, the social, political and economic effects of the crisis are felt throughout the country.
Abuja, Lagos and Kano city region is the commercial nerve centre of the North and the second largest industrial centre after Lagos in Nigeria. Presently there are over 400 privately owned, medium and small scale industrial establishments. Likewise, there are over 40 branches of commercial banks, quite a number of branches of insurance companies and brokerage firms with impressive infrastructural facilities. As the largest commercial centre in the North, it provides a stable market for both manufactured and semi-processed goods. The volume of trading activities conducted on a daily basis in such local markets as Kwanar singer, Kantin- Kwari, Kurumi and Dawanu, is a proof of the metropolis‟ potentials as a market for various products. These have resulted in high population densities in this city; it has also helped Kano state a lot in terms of property development because land is highly sought after www.kano.gov.ng. With the booming business activities in Kano, property investors grew up every day to meet up with the demand of populace. This made property investment to be lucrative and many people acquired property in the state and property values shot up. Presently, Nassarawa GRA, Muritala Mohammed Way, Ibrahim Taiwo Road, Civic Centre, Bompai command the highest property rental and sales value either residential or commercial purposes. Likewise, Sharada, Maganda, Bompai ( Industrial area) command high property rental and sales value for industrial purposes.
Rental value is the fair market value of property while rented out in a lease. More generally, it may be the consideration paid under the lease for the right to occupy. It is also the monetary return which an investment in property can be reasonably expected to command for the use of the particular property Kuye, (2003). It is also
the amount which a property will command on a weekly, monthly, quarterly or yearly basis. With the dynamic forces of the market, rental value on property can be determined easily. These forces majorly are the demand and supply forces. With the high population demanding for more properties, investors invest in properties to meet up with the demand. However, the property market is very sensitive to happenings in the social and political arena in any country. A cursory look shows that the Boko Haram crisis seems to have had significant impacts on the property market in Kano metropolis in recent times. Therefore, the aim of this study is to determine the impact the Boko Haram insurgency has had on property rental and sales value in Kano metropolis. The study also wants to find out if it is still possible under the prevailing conditions in Kano for an investor to maximise his profit on property as compared to a few years.This make most of the residents of the areas usually attacked by the insurgents have relocated to comparatively peaceful places in the region while those who are not from these states have completely relocated to workable states down south.
METHOD OF DATA COLLECTION
| The method of data collection used in paper is mainly secondary source which include information from maps, journals, articles bulletins and textbooks |
TREND OF RENTAL VALUE FOR 5 YEARS
Property values fell in the period 2011-2013 as compared with the period 2009-2010. They fell to their lowest levels in 2012 and picked up a little in 2013. The fall apparently affected both residential and commercial property. Thus, it appears that investing in property in Kano metropolis might not be viable and this affects all facets of property investment (sales, purchase and development).
CONCLUSION
It is quite clear from the findings of this study that insurgents have adversely affected the property market. Supply outstrips demand for property because of the flight of the population to safer locations. Rents and sale values are depressed and investors are wary of investing in property at such unsafe locations.
Ethno-religious crisis have over the years have stiffened the real estate market in the city Kano. Properties running into Billions of Naira have been destroyed since then. However, it has been noticed that the crisis is not amplified by religious difference but political, even though it is given a religious coloration. If real estate development must be successful, peace or absolute peace must be given a chance.
RECOMMENDATION
Urgent measures are needed to avoid a catastrophic collapse in the property market. Such measures might include the following:
- The estate surveyors and valuers in the state need to critically interview prospective tenants to establish their integrity, nature of work etc when it comes to renting out of apartments. It should strictly be based on professional grounds and not on personal interest.
- Also, there is need for government in collaboration with security agents to train more staff in this line. They can help to provide information to the government and also identify the culprits. Government should also be sensitive enough to take necessary actions on the culprits involved. These trained personnel can be placed at different strategic locations in the metropolis.
- Education and youth empowerment is also a main solution to the cause of social unrest in Kano State. The present state government is already making frantic efforts on this, but more can still be done in youth empowerment.
- Religious leaders are supposed to be closer to the people, so through their sermons, it can really influence people. Their sermons should be constructive such as to bring peace and harmony to the community.
- Effort should also be intensified by government to start off a ministry to effectively manage the demands and crises of ethnic and religious differences. This will improve the harmony and cooperation among different tribes and religions to achieve a positive human development in the country.
- People mostly politicians should change their mindset and stop considering election as a so or die but should rather accept defeat. The judicial system must be strengthened to try and fast-track all issues or offence connected with violence. Religious bodies, e.g church, mosque etc should preach peace to their subjects and the need for peaceful co-habitation among themselves.
REFERENCES
[1]. Adeyemi, L.O., (2006). Ethno-Religious Conflicts and the Travails of National Integration in Nigeria Fourth Republic.DAWODU.COM
[2]. Aliyu. A.A (2012). The Impact of Intangible Location Attributes of Residential property value in Nigeria. A ph.D Thesis submitted in fulfilment of the requirement for award of Doctor of philosophy. pp 16.
[3]. Anas. A. (2002). Residential location markets and urban transportation: Economy Theory, Econometrics and public policy Analysis: Newyork Academic Press.
[4]. Auty, R.M (2007), Rent Cycling Theory: The Resource Curse and Development Policy: Published in Developing Alternatives; 11(1)2007,7-13.
[6]. Babangida, I.B. (2002). Ethnic Nationalities and the Nigeria State: The Dynamic and Challenges of Governance in a Plural Nigeria. Distinguish Annual Lecture, National Institute for policy and Strategic Studies, Kuru, Nigeria.
[7]. Kuye.O. (2003). Principle and Practice of Property Valuation in Nigeria. 2nd edition. ISBN 978- 36149-5-9; 2003.
[9]. www.Kano.gov.ng/2012-10-29-11. Accessed on September, 2013.
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