Abuja · Federal Capital Territory · Nigeria
Real estate joint ventures in Nigeria operate within a legal framework that is fundamentally different from the framework governing real estate JVs in mature markets. The Land Use Act of 1978 vests land ownership in state governors as trustees for the people of each state, with the practical consequence that what is bought and sold in Nigerian real estate transactions is not land itself but the right to use land — a Certificate of Occupancy and the underlying allocation it represents.
This shapes the architecture of every meaningful Nigerian real estate JV in three concrete ways. First, the asset contribution by the landowning party is not a transfer of freehold title but a contribution of leasehold rights, often subject to development conditions in the original allocation. Second, governor's consent — required for most transactions involving the assignment, sub-lease, or mortgage of state-allocated land — becomes a structuring consideration rather than a closing formality. Third, the exit options available to the financial partner are constrained by the same Land Use Act framework that constrained the entry.
Sophisticated JV structures address these constraints rather than ignore them. The most common approach is to establish a special purpose vehicle that holds the relevant occupancy rights, with the JV partners holding shares in the SPV rather than direct interests in the land. This creates a simpler governance and exit framework, since transfers of shares in the SPV do not implicate the Land Use Act in the same way as direct land transfers.
The contribution mechanics deserve particular attention. Landowning partners typically value their contribution at a multiple of book value reflecting both the market value of the land and the development potential being unlocked by the JV. Financial partners typically resist these valuations and prefer to structure their contribution as a combination of equity and shareholder loans, with the loans senior to equity in the waterfall. Negotiation of these mechanics is where the real economic substance of the JV is determined.
Development conditions also matter. State allocations of land typically come with conditions — minimum development requirements, timeline obligations, and use restrictions. JV structures must allocate responsibility for compliance with these conditions and define the consequences of failure. The most defensible structures address these matters explicitly in the JV agreement rather than leaving them to the general law of agency.
Exit planning is often underdeveloped at the formation stage but proves to be the most important architectural choice. The JV agreement should anticipate the realistic exit scenarios — sale of the developed asset, sale of the SPV, refinancing, or buyout by one of the JV partners — and provide concrete mechanisms for each. JVs that do not address exit until exit becomes necessary tend to produce disputes rather than transactions.
