Report: $900bn ‘Dead Capital’ Abound in Nigeria

A report has estimated that Nigeria holds at least $300 billion or as much as $900 billion worth of dead capital in residential real estate and agricultural land.

It estimated that the high value real estate market segment holds between $230 billion and $750 billion of value, while the middle market carries between $60 billion and $170 billion in value.

PwC, one of the leading global professional services firms stated this in a report titled, “Bringing Dead Capital to life: What Nigeria should be doing,” obtained at the weekend.

In 2001, Hernando de Soto coined the term ‘dead capital’ to describe assets that cannot be converted to economic capital. Capital is any resource that can be used to increase productivity and generate wealth in the economy.

De Soto posited that the differentiating factor between developed and developing countries was the ability of convert physical assets to capital that creates value. According to De Soto, capital is the most essential component of societal advancement and deserves the utmost priority when developing solutions for developing countries.

On its part, PwC in the report, pointed out that there many forms of dead capital, but stated that its report was focusdd on real estate.

“At least $300 billion or as much as $800 billion worth of dead capital in residential real estate and agricultural land alone across Nigeria,” it stated.

“Lack of access to finance is a major contributor to persistent poverty. Research has long shown a positive relationship between financial development and poverty reduction. Individuals and businesses benefit from a range of financial services such as saving, loans and insurance products that allow them to mitigate financial risks and access capital for value-creating endeavors.

“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. For many, the cost accrued in the formal sector outweigh the benefits. However, this creates a large stock of dormant assets. Capital is scarce in societies with large stock of dormant assets.

“Ideally, a standard description of assets lowers the costs of economic transactions, as it provides security for parties involved by making transactions legitimate and legally binding. However, a lack of description makes transaction costs too high to be economically beneficial for both parties. The poor are therefore unable to leverage their assets and possessions