Investment interest now favours informal land market, here’s why
Informal land market has become the toast of investors who buy land for economic activities, especially real estate where it is a major factor for consideration.
In most Nigerian societies, there are formal and informal land markets. Whereas the formal land markets are those governed by state law, informal land markets are those that are neither governed by state law nor registered in the government system.
In recent times, some investors are attracted to informal land delivery networks due largely to expediency benefits. But these benefits are often short-term. Still, this is particularly attractive in regions where conventional land procedures appear detached from the reality of the operating environment.
“In contrast to the formal land system, which is typically slow and complex, the informal system provides greater flexibility, more affordable land, and a broader selection of locations. It also benefits where government-backed regularisation programmes assist individuals in legalizing their land upon acquisition,” according to a new report on the real estate market.
The report compiled by Northcourt Real Estate, notes that other investors concentrate on the historical and structural factors underlying the preference for informal systems, pointing out that antiquated regulations, rigid planning controls, and the centralized management of land render the official system unattractive.
Land in most cities of Nigeria commands high value and therefore attracts premium price. This is because it is in high demand for virtually all economic activities. Though it is a passive factor and does not possess any ability to produce on its own, it is an important agent of production.
Modern economists consider land as a specific factor of production, which can be put, not only to a specific purpose, but also to several other uses.
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Some investors hinge their reason for favouring informal market on the inadequate performance of the formal system, which compels them to opt for the alternatives.
“When the formal system fails to allocate land efficiently, individuals seek alternatives. This dynamic supports rising land demand- particularly in regions where customary actors actively shape spatial development patterns,” the report explains further.
The report notes that farmlands which largely belong to the informal land market have suffered significant space loss to urban expansion and infrastructure development.
It cited Lagos, where a recent study by the Federal University Ekiti, Federal University of Technology Akure and Obafemi Awolowo University found out that farmland decreased from 1984 to 2024, while developed regions increased by 22,538.34 hectares.
“The annual rate of farmland reduction has intensified over time. Recent studies suggest that from 1984 to 2013, the average annual reduction in agriculture was -0.45 percent, while light forest, open spaces and waterbodies (through landfilling) experienced declines of -2.38 percent, -0.61 percent, and -0.57 percent, respectively.
“During the same timeframe, developed regions and wetlands expanded at rates of 4.94 percent and 2.06 percent per annum. From 2013 to 2024, the annual rate of farmland loss increased to -2.42 percent, with more pronounced decreases in light forest (-6.78 percent), open space (-3.45 percent) shrub (-6.36 percent), and waterbodies (-1.56 percent),” it said.
Accelerated loss of agriculture and natural landscapes exerting upward pressure on land prices. The decrease in farmland and open spaces since 2013, largely attributed to urban expansion. Urban farming in Lagos is seeing a consistent decline due to the escalating conversion of land for residential and infrastructural development.
Despite indications that urban farming is gradually acknowledged as a viable means of
livelihood, agricultural land is still being developed into residential and commercial use. This is especially the case for the marginalized.
