By Zhihwi Dauda Esq And Abodunrin Ibukunoluwa Hannah Esq
1.0 ABSTRACT
This article examines the legal and institutional framework for the administration of property taxation across Nigeria’s three tiers of government. It traces the historical evolution of property taxation from its origins in medieval England to its adaptation within Nigeria’s colonial and postindependence legal order, and considers the constitutional distribution of taxing powers among the Federal, State and Local Governments. The article analyses property-related taxation at the Federal level (Stamp Duties and Capital Gains Tax), the State level (Ground Rent, Land Use Charge, Governor’s Consent Fee, Stamp Duties and Land Registration Fee), and the Local Government level (Tenement Rate). It then undertakes a comparative analysis of the three tiers, identifies recurring administrative challenges including overlapping taxing powers, poor property enumeration, low voluntary compliance, political interference, and outdated valuation methods and proposes recommendations for reform. The article argues that, while each tier occupies a distinct constitutional space, closer harmonization and modernization of administration are needed to realize property taxation’s full revenue potential in Nigeria.
2.0INTRODUCTION AND EVOLUTION OF PROPERTY TAXATION
Taxation is a fundamental source of government revenue and an essential tool for economic development. Black’s Law Dictionary1 defines taxation as the imposition or assessment of a tax, and the means through which government obtains the revenue required for the performance of its functions. It is a compulsory financial charge imposed by government on individuals, businesses and properties within its jurisdiction.
Property taxation is a specific form of taxation imposed on immovable property such as land and buildings. The Food and Agriculture Organization2 defines property tax as an annual tax levied on real property, usually based on the market value of the property, whether imposed on land alone, buildings alone, or both together. Property taxation is widely recognized as one of the most reliable sources of internally generated revenue, particularly for sub-national governments.
The origin of property taxation can be traced to medieval England, where obligations to the king or local lords were initially based on social status and land ownership, and were often discharged in agricultural produce, livestock or military service. As society evolved, these obligations became fixed monetary payments, and in urban community taxes were assessed according to an individual’s ability to pay. Early examples include the Danegeld3, a tax imposed on landholdings, and the Church tithe, which required individuals to contribute a portion of their produce. By 1194, England had introduced the ‘Aid on Moveables’4, a tax assessed on the value of personal property and goods a development that laid the foundation for modern systems of direct taxation.
In Nigeria, property taxation has its roots in the colonial era. The country inherited the British system of property rating at independence in 1960, but the system was largely outdated and failed to reflect Nigeria’s changing economic and social realities, so its administration became increasingly ineffective. To address this, the Federal Government introduced reforms in the 1970s, the most significant being the Land Use Act 19785, which vested land ownership in State Governors to hold in trust for the people and established a new framework for land administration. The Act has since shaped the development of property-related taxes such as tenement rates, land use charges, capital gains tax on property transactions, and stamp duties.
3.0 THE ROLE OF PROPERTY TAX REVENUE IN NIGERIA’S ECONOMIC DEVELOPMENT
Property tax revenue plays a significant role in Nigeria’s economic development. It is an important source of internally generated revenue for the Federal, State and Local Governments, reducing dependence on oil revenue and federal allocations. Revenue from property taxes finances public infrastructure such as roads, schools, hospitals and drainage systems, while at the State and Local Government levels it supports urban development, environmental sanitation, waste management and community development. Property taxation also promotes fiscal autonomy and, through proper assessment and collection, encourages the productive use of land and property, thereby enhancing government revenue and the delivery of public services. The Federal Government of Nigeria recorded property tax (Capital gain tax) revenue generated in the sum of 522 Billion for 2025 only6
3. THE CONSTITUTIONAL FRAMEWORK FOR TAXING POWERS IN NIGERIA
Nigeria operates a three-tiered Federal system in which the power to tax is distributed among the Federal, State and Local Governments under the 1999 Constitution of the Federal Republic of
Nigeria (as amended)7, which delineates the legislative and consequently the fiscal responsibilities
of each tier. The Federal Government, acting through the National Assembly, holds the most extensive taxing powers, derived principally from the Exclusive Legislative List however some of the property tax impose by Federal Government has by same legislation vested in state government the power to only collect same as regard to individual. State Governments exercise taxing powers under the Concurrent Legislative List and their residual powers, while Local Governments derive their taxing powers mainly through delegation from State laws.
Property taxation at the Federal level is, however, largely indirect and transaction-based. Rather than taxing the mere ownership or occupation of land and buildings which falls chiefly within the province of the States, the Federal Government captures value from property through taxes such as Capital Gains Tax, Stamp Duties and Education Tax. Paragraph 4 to 6 below examine, how each tier of government administers property taxation within this constitutional design.
4.0 ADMINISTRATION OF PROPERTY TAX AT THE FEDERAL LEVEL The Federal
Government administers three principal instruments through which it derives revenue connected to property: ax, Stamp Duties, and Capital Gains Tax. Each is examined below.
4.1 Stamp Duties: Stamp duties are taxes imposed on certain legal and financial instruments agreements, contracts, receipts, conveyances, leases and mortgages and play a significant role in validating documents relating to property transactions. Where a transaction is between a company and an individual, the duty is administered by the NRS on behalf of the Federal Government.
The governing framework is found in Chapter Five of the Nigeria Tax Act 20258. Section 125 NTA Act9 requires every chargeable instrument executed in Nigeria to be stamped within thirty days of execution, failing which it cannot be relied upon as evidence in court. Section 127 NTA Act 10 defines chargeable instruments to include bills of exchange, drafts, cheques and letters of credit, while sections 128, 129, 130, 131 and 134 of the NTA Act11 extend the scope to sale or purchase options, conveyances on sale, conveyances made in consideration of a debt, and leases many of which arise in property transactions.
Stamp duties are assessed either as fixed duties (a prescribed amount irrespective of transaction value, e.g. receipts, guarantor forms and proxy forms) or as ad valorem duties, calculated as a percentage of the value stated in the instrument. Most property transactions fall into the latter category.
Duty on a Deed of Assignment or Deed of Conveyance is assessed on an ad valorem basis, 1.5%12 of the property’s purchase price or market value. The Liability ordinarily falls on the purchaser, or transferee to pay for the stamp duty fees. Another property tax that follows is the payment of fees which is a prerequisite for registration at the Land Registry and for obtaining the Governor’s Consent; but in FCT consent of the Minister of the FCT. It worthy to note that under Section 126(1) of NTA 202513 Any unstamped dutiable instrument is not be admissible in evidence in any court, judicial or arbitration proceedings, and in satisfying any evidentiary requirements unless otherwise stated by the same Act. Though it has an exception under sub paragraph (2) of same section which provides: “Notwithstanding the provisions of subsection (1) of this section, an unstamped instrument may be given in evidence in a criminal proceeding”14
4.2CAPITAL GAINS TAX
Capital Gains Tax (CGT) on disposal of assert by company is administered by the NRS. It is levied on the profit or gain realized from the disposal of chargeable assets. The governing framework is contained in Part VIII (sections 33 to 55) of the Nigeria Tax Act 202515. Section 33 NTA16 provide to the extent that gains accruing to any person from the disposal of chargeable assets in a year of assessment are chargeable to tax17. Section 34 NTA 18 provides that, subject to statutory exemptions, all forms of property including land, buildings, shares, securities, debts, digital or virtual assets, foreign currencies and intellectual property rights constitute chargeable assets, reflecting the legislature’s intent to modernize the regime for emerging commercial realities.
The law is clear as when a disposal is said to have occurred. Section 35 NTA 19 provides that a disposal occurs whenever a capital sum is derived from the sale, transfer, assignment, lease, compulsory acquisition or other disposition of an asset, and extends to compensation, insurance proceeds, consideration for the surrender of rights, and sums received for the use or exploitation of an asset. CGT therefore reaches a wide range of transactions beyond outright sales.
As to how Capital tax is computed, Section 39 NTA20 provides that the chargeable gain is computed by deducting the acquisition cost and other allowable expenses wholly, exclusively and necessarily incurred in acquiring and disposing of the asset from the consideration received, ensuring that only the actual economic gain is taxed.
Worthy of noting is that the constitutional competence for capital gain tax lies in item 59, Part I of the Second Schedule to the 1999 Constitution21, which vests the National Assembly with legislative competence over the taxation of incomes, profits and capital gains. The Nigeria Tax Act exempts certain bodies public charitable, educational and ecclesiastical institutions, registered cooperative societies and trade unions, local government councils, and bodies established for economic development provided the gains are not derived from any trade or business they carry on. Although CGT is not a tax on the ownership of property, it is a tax on the gain realized from its disposal, and it reinforces the Federal Government’s constitutional responsibility for the taxation of capital gains arising from property transactions.
As the saying goes: there is no general rules without and exception so also is in the application of capital gain tax Under the Nigeria Tax Act 2025, certain exemption is provided as follows: Chargeable assets subject to exemptions22 Principal private residence is exempted once in life time23, Personal chattels exempted with a threshold24. Motor vehicles for private use are exempted however only maximum of 2 per year25, Gifts of property are exempted26, Assets held in trust for charities, religious, co-ops, trade unions are exempted27. Etc note also that there is General exemption for government/statutory bodies under Chapter Eight of the NTA 2025.
5.0ADMINISTRATION OF PROPERTY TAX AT THE STATE LEVEL
State Governments play a significant role in the administration of property-related taxes and charges within their constitutional and statutory powers. These taxes constitute an important source of internally generated revenue (IGR) and enable State Governments to finance infrastructure, public services and other developmental projects. Through state laws and applicable federal legislation, States are empowered to administer property taxes and charges relating to land ownership, occupation and property transactions. The major property-related taxes and charges administered at the state level include the Land Use Charge (in states where it has been enacted), Ground Rent, Governor’s Consent Fee, Stamp Duties, Land Registration Fee, and, in respect of individuals, Capital Gains Tax and Withholding Tax.
5.1Ground Rent
