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Lagos Land Use Charge

Demystifying the Lagos Land Use Charge

— 15th March 2018.

There must be a very few people in Lagos today, who have not heard the term “Land Use Charge.” In contemporary lingo, Land Use Charge can be said to be “trending.” Unfortunately, it’s been trending for the wrong reasons, many of which I will attempt to clarify and correct in this write-up. 

Land Use Charge is a tax that applies to properties in Lagos. It is an aggregated tax that has combined three erstwhile separate taxes namely tenement rate, ground rent and neighbourhood improvement levy, respectively, into one. So instead of paying three different taxes, the tax payer pays just one consolidated tax.

Land Use Charge is not new in Lagos, neither has it been arbitrarily introduced to the state. Rather, it emanated from a long process of deliberation, consultation and engagement, all of which typically precede law-making. Indeed, implementation of this particular tax was sequel to the passage of the Land Use Charge Law of 2001 as promulgated by the Lagos State House of Assembly. The law has therefore, been operational since 2001. Its stipulations are also fairly simple. It essentially applies to defined categories of properties which are in turn required to pay taxes that vary in accordance with the categories. In calculating the Land Use Charge payable on a property, a simple formula is applied: the estimated value of the property is multiplied by relief rate and further multiplied by the appropriate “charge rate.” While the estimated value of a property is self explanatory, I will explain each of the other two terms in more detail.

The “charge rate” is a relatively small percentage charge that is applied to different categories of property depending on their categorization. A property that is occupied by the owner for instance, enjoys the lowest charge rate. A property that is used for industrial or manufacturing activity is categorized as “industrial” and is charged higher than owner-occupied properties but considerably lower than “commercial” properties. Commercial properties are those properties that are deemed to be fully utilized for commercial activity – a bank branch for instance. There are a few categories in-between.  There is also the “relief rate” which refers to a discount on the calculated charge. I will address this in more detail shortly.  Whereas the Land Use Charge Law of 2001 stipulated that reviews of the charges payable be made on a five-year basis, for some reason this did not happen. So in 2017 for instance, properties were paying charges based on rates that were last determined in 2001. Clearly, after 16 years, those charges had largely become obsolete.

In addition, property valuation did not appear to always follow a uniform standard. There were often stark variations in property valuation, that were inequitable. Furthermore, property enumeration did not appear to be proceeding as fast as it ought to and a considerable chunk of properties was actually not paying this charge. These were some of the inefficiencies in the old Land Use Charge regime that prompted the Lagos State House of Assembly to repeal the old law and promulgate a new one.

In the course of today’s “trending” debate on Land Use Charge, some commentators have tried to create the impression that the Lagos State Government arbitrarily, without engaging or consulting different stakeholders, increased the Land Use Charge rates payable in Lagos. This is not true. The process of the review of the old law and promulgation of the new Land Use Charge Law by the Lagos State House of Assembly was elaborate and painstaking. We must remember that the LSHA which comprises democratically elected representatives of the people is constitutionally vested with the responsibility of making laws for the state.  As Finance Commissioner I was invited several times to make presentations and clarifications to the ad hoc committee of LSHA which oversaw the review. The draft legislation was rigorously interrogated and debated at the Assembly not only at committee level but over two separate hearings. Memoranda were invited from dozens of stakeholder groups including civil society groups, community development associations, leadership of local government councils and local council development areas, etc. A well-publicized public hearing was also held at which sundry stakeholders freely aired their views on the draft bill. I trust that the diverse views and opinions must have considerably shaped the revised bill.  The revised bill was eventually signed into law last February by Governor Ambode. The new Land Use Charge law is different from the old law in some respects which I will detail hereunder.

First, in the valuation of property, the new law prescribes that this should be done using prevailing market rates. While I admit that this has expectedly increased the charges that property owners are expected to pay, I should add that it has helped to standardize the Land Use Charge regime, eliminating the opacity that was associated with the older law wherein calculation of property value was sometimes based on the whims and disposition of the assessor.  It is important to remember too, that with the Land Use Charge regime not undergoing any review for 16 years, as at 2017 before the repeal of the old law, rates payable had become significantly obsolete. So when some people complain that their rates have gone up by 300 percent over last year’s rates, the truth is that the rates have actually gone up for the first time since 2001. In adjusting the bill of a property owner from the N1,200 which he paid annually between 2002 and 2017 to N5,000 annually for instance, the new regime has simply tried to bring the charge up-to-date and in line with present day realities, regardless of the percentage increase.   This is not to say, however, that the entire Land Use Charge administration is working perfectly. It isn’t. Like all systems which employ human intermediaries, there are occasional errors especially where “Best of Judgement” has been employed in determining the scope and size of a property and the exact use to which it is put. This typically happens where property enumerators are denied access to these properties. I would therefore like to implore Lagosians to kindly avail our enumerators of as much cooperation as possible when they visit your properties. This is to help ensure that ultimately accurate variables are used in determining the rates chargeable on each property.

This is one of the reasons why Governor Ambode stated clearly at his engagement with the organized private sector recently, that the government is open to dialogue. The Land Use Charge bills are on paper demand notices, not etched in stone. Property owners who find their bills contestable are encouraged to contact the Land Use Charge Office Help Desk at Alausa or indeed any of our offices spread across Lagos. There are also provisions for mediation. If after all of this, a citizen remains unsatisfied, he may proceed to the Appeal Tribunal.

In addition even though the law clearly stipulates that upon receiving a demand notice, payment must be made within 14 days, failure of which different penalties of up to 200 percent of the original bill begin to apply, the reality is that the state government is making key concessions in this area. We appreciate that the economic situation has impacted everyone significantly and that the increases are steeper for some property owners than others. Property owners who are unable to pay the full charge up front can engage the Land Use Charge officials and jointly agree on a staggered payment plan. So the argument that government expects everyone to pay this charge in full upfront, regardless of your economic circumstances, is not correct.  The new Land Use Charge regime also has several “reliefs” or discounts that are designed to cushion the impact of the charge on property owners.

Ashade is the Lagos State Commissioner of Finance

Pensioners who are aged 70 years and above and who live in their own houses, for instance, are not expected to pay Land Use Charge.  Every property enjoys a general 40 percent discount on the calculated market value. Where a property owner goes ahead to pay his bill promptly upon receiving the demand notice, he enjoys an additional discount of 15 percent. A person living with disability and occupying his own property enjoys a further discount of 5 percent.

So I can confidently say that property owners need not be alarmed at what they may have heard or read regarding this new Land Use Charge regime. Land Use Charge does not seek to punish anyone. Where the charge is considered outrageous for instance, we have provided ample room for engagement with the Land Use Charge officials for possible review. And of course, we recognize that the law has been made for us and not vice versa. In for instance providing an option for property owners to stagger their payments, you will find that we are very disposed to implementing this law intelligently and in such a manner that it does not portend an inordinate economic burden on our people. Currently, the state government is working on a proposal to be submitted to the LSHA for additional reliefs for widows and other vulnerable groups in the state.

Very importantly, Land Use Charge is being implemented in an asymmetric manner. What this means is that it impacts considerably less on the less-wealthy or poor than the wealthy. In our ongoing enumeration of properties in Lagos for instance, we realize that the vast majority of properties across the state – close to 75 percent, are valued below 10 million. A building that is valued at under N10 million is required to pay annual land use charge of N5,000 (up from N1,200 which they were expected to pay in the old regime). Simply put therefore, majority of properties in Lagos will be required to pay N5,000 annual Land Use Charge which translates to N417 every month.

A building that is valued at N20 million for instance, only pays N9,120 annually where it is occupied by its owner. If that building is being used commercially, it pays N91,200 annually. If on the other hand it is partly occupied by the owner and partly used for commercial activities, then the annual charge is N30,720.

It is a relatively small fraction of properties that are valued between N10 million and N100 million and even much smaller fractions for higher valuations. What this means, therefore, is that the poorer segments of our population will be considerably less impacted than the relatively wealthier segments, by this reviewed Land Use Charge law.

I should also remind Lagosians of the horrifying conditions of physical and social infrastructure across the state. From roads to drainages, from power to bridges, from education to healthcare, the story is the same. Many of us are products of the public school system, but today on account of severe under-funding there is such a lack of confidence in the public school system that everyone who can afford it, takes his child to a private school. This need not be so. Is it decent to have Lagosians spend 7 to 8 hours in traffic everyday? But this is what we have been condemned to in the absence of a functional mass transit system and the inadequacies of our road and transportation infrastructure. Should we be relying on rickety “danfo” buses to convey human beings in the 21st century?

It is against the backdrop of decades of under-investment in infrastructure in the face of our rapidly exploding population, that we came to the realization that we must embark on aggressive infrastructure renewal across Lagos or brace up for total infrastructure collapse. Internally generated revenue is our best hope for redressing this humongous infrastructure deficit. Thankfully, the evidence of effort in this regard, stares us in the face everyday. From completed and ongoing construction works at Badagry, Epe, Ikorodu, Ajah, Abule-Egba, Ojodu, Pen Cinema in Agege, Airport Road, Oshodi, Oworoshonki and others, to the sundry road infrastructure projects planned in this year’s budget including the BRT lane from Oshodi to Abule Egba and the 8 Kilometer alternative road to be constructed to link VGC with Freedom Road in Lekki Phase One; from the enhanced security across the state and the major streets which are all lit up at night to the planned investments in education, healthcare and others, clearly the Ambode administration is putting your taxes to good use.

Our pledge is that even in the midst of our anxiety to work as frenetically as possible to deliver the infrastructure that Lagos requires, we will continue to engage Lagosians to ensure that the there is understanding, appreciation and buy-in by our people and that implementation of our IGR regime remains as humane as possible.

•    Ashade is the Lagos State Commissioner of Finance

•    Author, Uche Atuma (15th March 2018). The Sun Newspaper




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Lekki Penninsula II, Lagos