COMPENSATION WITHOUT LAND VALUE:
A CRITICAL REVIEW OF NIGERIA’S COMPENSATION FRAMEWORK UNDER THE LAND USE ACT
By
ESV. Isah Adalkhali, ANIVS, RSV
ABSTRACT
Compulsory acquisition remains one of the most important instruments available to governments for the provision of public infrastructure, urban renewal, environmental management, and economic development.
In Nigeria, the legal framework governing compulsory acquisition is principally derived from the Land Use Act of 1978.
While the Act recognizes compensation for unexhausted improvements, crops, buildings, and other developments on land, it provides limited recognition of land value itself. This position has generated considerable debate among valuation practitioners, policymakers, academics, and affected communities.
This paper critically examines the implications of excluding land value from compensation assessment in Nigeria. Drawing from statutory provisions, valuation theory, professional practice, judicial principles, and practical examples from infrastructure projects, the study highlights the disconnect between compensation awards and actual economic losses suffered by affected landholders. The paper argues that the current framework frequently results in undervaluation, social dissatisfaction, project delays, and increased litigation.
The study proposes a policy-driven compensation reform framework incorporating land value recognition, livelihood restoration, disturbance compensation, and market-based assessment principles. Such reforms would promote fairness, transparency, and sustainable development while strengthening public confidence in compulsory acquisition programmes.
Keywords
Compensation, Land Value, Compulsory Acquisition, Land Use Act, Resettlement, Property Valuation, Nigeria.
INTRODUCTION
Land constitutes one of the most valuable economic resources in any society. It serves as a factor of production, a source of wealth creation, a medium for social and cultural identity, and a platform for physical development. Consequently, the acquisition of land by government for public purposes often generates significant economic and social implications for affected persons.
Compulsory acquisition is universally recognized as a legitimate governmental power. However, international best practice requires that individuals deprived of property rights through compulsory acquisition should receive fair, adequate, and prompt compensation.
The fundamental principle underlying compensation is that no individual should bear a disproportionate burden for projects undertaken for public benefit.
In Nigeria, compulsory acquisition is governed primarily by the Land Use Act of 1978. The Act vests all land within each state in the Governor to hold in trust for the use and common benefit of all Nigerians. It also empowers government to revoke rights of occupancy for overriding public interest. While compensation is payable upon revocation, the scope and adequacy of such compensation remain contentious.
A major criticism of the Nigerian compensation framework is its limited recognition of land value. In many instances, compensation is restricted to buildings, crops, economic trees, and other improvements, while the underlying land itself receives little or no compensation.
This approach is increasingly problematic in urban centres such as Abuja, Lagos, Port Harcourt, Kano, and Enugu, where land appreciation constitutes a significant component of property value.
The consequences include disputes, litigation, project delays, public resistance, and widespread perceptions of injustice. As Nigeria continues to pursue ambitious infrastructure development programmes, there is a growing need to critically examine the existing compensation framework and identify pathways for reform.
METHODOLOGY
The study adopts a doctrinal and practice-based research approach through:
- Review of the Land Use Act (1978).
- Analysis of compensation principles and valuation theories.
- Examination of professional valuation standards.
- Review of selected infrastructure acquisition projects.
- Comparative analysis of international compensation frameworks.
- Evaluation of current professional practice within Nigeria.
The combination of legal analysis and valuation practice provides a comprehensive basis for assessing the strengths and weaknesses of Nigeria’s compensation framework.
COMPENSATION FRAMEWORK UNDER THE LAND USE ACT
The Land Use Act provides the principal legal basis for compensation arising from compulsory acquisition in Nigeria.
Section 28 empowers government to revoke rights of occupancy for overriding public interest. Such interests include:- Construction of roads.
- Public buildings.
- Infrastructure projects.
- Urban development schemes.
- Public utilities.
Section 29 provides for compensation payable upon revocation. Compensation generally covers: - Buildings and structures.
- Crops and economic trees.
- Unexhausted improvements.
- Certain disturbance-related losses.
However, the Act does not expressly provide comprehensive compensation for land value comparable to market-based compensation systems adopted in many jurisdictions.
This creates a significant gap between compensation assessments and actual economic losses.
According to Ogunba (2013), compensation practice should seek to restore affected persons to a position comparable to that which existed before acquisition. However, where land value is excluded, complete restoration becomes difficult to achieve.
THE CONCEPT OF LAND VALUE IN PROPERTY ECONOMICS
Land value represents the worth attributable to the location, accessibility, development potential, infrastructure availability, demand conditions, and economic utility of a parcel of land.
Unlike buildings, land does not depreciate through physical use. In many urban areas, land values appreciate significantly due to:- Population growth.
- Infrastructure development.
- Economic expansion.
- Government investment.
- Urbanization.
Property value is often composed of:
Property Value = Land Value + Improvement Value
Where compensation focuses solely on improvements, a substantial component of economic value may be ignored.
Ajayi (1998) observes that urban land frequently accounts for more than fifty percent of total property value in prime locations. Consequently, excluding land value can create substantial compensation deficits.
COMPENSATION ILLUSTRATION (TYPICAL ACQUISITION SCENARIO)
Table 1: Market-Based Compensation Assessment
Item
Value (₦)
Land Value
50,000,000
Building Value
40,000,000
Disturbance Allowance
5,000,000
Relocation Costs
3,000,000
Total Economic Value
98,000,000
Table 2: Current Compensation Assessment
Item
Value (₦)
Land Value
0
Building Value
40,000,000
Disturbance
Limited
Relocation Cost
0
Total Compensation
40,000,000
Observation
- Economic loss suffered = ₦98,000,000
- Compensation received = ₦40,000,000
- Compensation deficit = ₦58,000,000
This illustration demonstrates the extent to which affected persons may suffer financial losses despite receiving compensation under the current framework.
CASE STUDIES
6.1 Abuja Infrastructure Development Projects
Over the past two decades, Abuja has witnessed significant infrastructure expansion including highways, rail corridors, urban renewal projects, and district development programmes.
In several acquisition exercises, compensation assessments focused primarily on structures and improvements. Many affected persons argued that compensation failed to reflect prevailing land values within rapidly developing districts.
This resulted in:- Objections to compensation assessments.
- Delayed possession.
- Increased litigation.
- Project implementation challenges.
6.2 Lagos Urban Expansion Projects
Infrastructure projects within Lagos have similarly highlighted tensions between compensation assessments and market realities.
Properties located in high-demand areas often derive substantial value from location rather than structures alone. Where compensation ignores location value, affected owners may find themselves unable to acquire equivalent replacement properties.
6.3 International Perspective
Countries such as the United Kingdom, Australia, South Africa, and Canada adopt broader compensation frameworks that typically recognize:- Land value.
- Disturbance losses.
- Professional fees.
- Relocation expenses.
- Business losses.
- Livelihood impacts.
These approaches seek to achieve the principle of equivalence by ensuring that affected persons do not suffer disproportionate losses.
CRITICAL ANALYSIS OF EXISTING PRACTICE
7.1 Exclusion of Land Value
The most significant limitation of the current framework is the exclusion or inadequate recognition of land value.
This undermines compensation adequacy and creates disparities between market value and compensation value.
7.2 Departure from Market Reality
The market value of property reflects actual economic conditions.
Baum and Crosby (2008) argue that market evidence remains one of the most reliable indicators of value. Compensation systems that ignore market realities risk producing inequitable outcomes.
7.3 Social Consequences
Inadequate compensation can result in:- Economic hardship.
- Social displacement.
- Increased poverty.
- Reduced public confidence in government programmes.
7.4 Livelihood Impacts
Land serves as: - A source of income.
- A productive asset.
- Security for future generations.
Failure to recognize these functions may compromise long-term livelihood sustainability.
7.5 Increase in Litigation
Compensation disputes frequently result in: - Court actions.
- Delayed project delivery.
- Increased administrative costs.
- Reduced investor confidence.
POLICY RECOMMENDATION FRAMEWORK
8.1 Legislative Reform
Policy Area
Recommendation
Responsible Body
Land Use Act
Review compensation provisions
National Assembly
Compensation Law
Recognize land value
Federal Government
Regulations
Standardize compensation practice
Ministry of Justice
8.2 Professional Practice Reform
Issue
Proposed Solution
Inconsistent assessments
National Compensation Standards
Valuation disparities
Peer review system
Data limitations
National Valuation Database
8.3 Institutional Reform
- Strengthen compensation administration agencies.
- Improve transparency in acquisition processes.
- Enhance stakeholder engagement.
- Establish independent review mechanisms.
8.4 Adoption of Hybrid Compensation Model
The following model is proposed:
Compensation Value =
Land Value + Improvement Value + Disturbance Allowance + Relocation Cost + Livelihood Restoration Value
Such an approach reflects modern international practice and promotes fairness.
DISCUSSION
The evidence presented demonstrates that Nigeria’s compensation framework requires significant reform. While the Land Use Act has provided a workable legal framework for decades, changing economic realities necessitate a more comprehensive approach.
Urban land has become an increasingly valuable economic asset. Infrastructure development often contributes directly to land appreciation. Ironically, those whose properties are acquired to facilitate development frequently receive compensation that does not reflect this value.
The principle of social justice requires that affected persons should not become worse off as a result of projects undertaken for public benefit. Compensation frameworks should therefore balance public interest with private rights.
Professional Estate Surveyors and Valuers have an important role to play in advocating evidence-based reforms capable of improving compensation practice and reducing disputes.
CONCLUSION
Compulsory acquisition remains essential for national development. However, the effectiveness and legitimacy of acquisition programmes depend significantly on the adequacy of compensation provided to affected persons.
The current compensation framework under the Land Use Act places considerable emphasis on improvements while providing limited recognition of land value. This approach increasingly conflicts with market realities, particularly in rapidly urbanizing environments where land appreciation represents a substantial component of property value.
The study has demonstrated that exclusion of land value contributes to compensation deficits, social dissatisfaction, project delays, and increased litigation. To address these challenges, reforms should incorporate land value recognition, livelihood restoration measures, disturbance allowances, and market-based assessment principles.
A modernized compensation framework would enhance fairness, strengthen public confidence, support sustainable development, and align Nigeria with international best practices.
REFERENCES - Ajayi, C.A. (1998). Property Valuation and Analysis. Ibadan.
- Baum, A. & Crosby, N. (2008). Property Investment Appraisal. Blackwell Publishing.
- International Valuation Standards Council (2022). International Valuation Standards (IVS).
- NIESV (2021). Guidance Notes on Valuation Practice.
- Ogunba, O.A. (2013). Principles of Property Valuation in Nigeria.
- RICS (2021). RICS Valuation – Global Standards (Red Book).
- Land Use Act (1978), Laws of the Federation of Nigeria.
- ESVARBON Act, Cap E13, Laws of the Federation of Nigeria 2007.
- World Bank (2024). Environmental and Social Framework: ESS5 – Land Acquisition, Restrictions on Land Use and Involuntary Resettlement.
- United Nations Human Settlements Programme (UN-Habitat) (2022). Land Administration and Urban Development Guidelines.
This version is structured as a complete conference/seminar paper in the same professional format as the uploaded publication, while remaining original and academically supportable.
