Let’s start with definitional and conceptual issues. So, what are contract and property rights, and why are they important? Well, contract rights are those rights that arise from an agreement freely and voluntarily entered into by two or more parties, and property rights, which derive from contracts, are the legal and proprietary rights that a person has over a property, in this context, a physical property. Those property rights confer on a person real ownership, which, as a distinguished legal academic puts it, entails at least six conditions: “not only must the owner be free to use an object at will, they should also be able to sell it, rent it, give it away, throw it away and appeal to the police if it is lost, stolen or illegally encroached upon”. No wonder the famous economist Friedrich Hayek said that “… law, liberty and property are an inseparable Trinity”, and John Locke based his concept of the social contract on the protection of property rights.
The existence of enforceable contract and property rights is an irreducible core of a true market economy, the key driver of the wealth and prosperity of nations and people. In any society where valid contracts are not strictly adhered to or enforced or where property rights are not defended and enforced, people will lack the incentive to produce and exchange goods and services, and investors will lack the encouragement to invest their money; after all, money goes where it is most safe and will yield the highest possible returns. Thus, it goes without saying that a country that doesn’t protect contract and property rights cannot attract quality investments or engender the production and exchange of goods and services that drive economic growth and prosperity.
But the key to contract and property protection is not just to have contract and property laws on the books – many countries do – but, equally important,to have the supporting legal institutions that ensure the effective implementation of the laws. Here, we are talking about the need for government officials and agency that operate within the rule of law, an independent and competent judiciary that ensure equality of treatment between actors, and professional and effective enforcement services that operate without fear or favour. A society that has these elements, the right contract and property laws and strong supporting legal institutions, is bound to be a successful market economy. The evidence, indeed, shows that countries that have high scores in the contract enforcement category of the World Bank’s Ease of Doing Business rankings are also successful economies. The same is true of countries with high scores on the International Property Rights Index (IPRI).
But Nigeria languishes at the bottom of the World Bank and IPRI indexes. For instance, in the 2018 Ease of Doing Business index, Nigeria ranked very low on the speed and efficiency of enforcing contract, scoring 8 out of 18 on the quality of judicial process. I mean, this is a country where, as a Nigerian legal practitioner recently wrote, in relation to commercial litigation, “Final decisions from courts of first instance up to the appeal court can last for a span of ten years in Nigeria”! In terms of property protection, Nigeria was ranked 116th out of 125 in the 2018 International Property Rights Index.
Of course, the problem with contract and property rights in Nigeria is not just about the quality of their protection, but also of the laws themselves. Much of Nigeria’s business and investment laws are outdated, some predating the country’s independence. In 2016, a study sponsored by the UK Department of International Development (DfID) stated that “54 Nigerian laws are obsolete”. Nigeria’s contract law system falls short of international standards. For instance, Nigeria is not a signatory to any international treaty for the recognition and enforcement of foreign judgements, such as the Hague Convention on the Recognition and Enforcement of Foreign Judgements in Civil and Commercial Matters. Such a county can hardly be taken seriously by foreign investors on contract rights protection!
What about property rights? Well, Nigerians do not ab initio have private property rights, given tha tthe Land Use Act vests ownership of all urban land within state in the state governor, and that of all non-urban or rural land in local governments. The governor or local government chairman then has the power to grant a time-limited “statutory rights of occupancy” in a piece of land to an individual, who can then transfer it to another person through “deeds of assignment”. Of course, a situation in which citizens can only secure original ownership in land at the behest of the state and only for a defined period of time (usually 99 years) lacks the indicia of the classical conception of property as a right. It’s not surprising that most people have called for the reform the Land Use Act.They are right!
But even more problematic are the legal institutions designed to protect the limited rights that exist. According to the National Content Standards in Civics and Government, property rights can be established and secured in three ways. The first is the rule of physical force, basically, a state in which brute force reigns. The second is the rule of men, which includes “the ability of government officials and others to govern by their personal whim or desire”. And the third is the rule of law, where no one is above the law, not even the state. It is universally recognised that the rule of law is the acceptable basis for organising and managing economic activities and interactions, including the creation and protection of contract and property rights, in any society. Sadly, however, both the rule of force and the rule of men compete with, and sometime override, the rule of law in Nigeria. And this is often the case in contracts between individuals and government.
Take the story of a respected and decent Nigerian and (at the time) head of one this country’s pillars of corporate integrity, who was arraigned by the EFCC before a Federal High Court for allegedly improperly acquiring a federal government’s land. The problem was not the legal action itself; after all, that’s part of the rule of law. Rather, it was that both the rule of force and the rule of men were also in display, as powerful individuals, with strong political influence, put enormous pressure, including using the EFCC and financial inducement, to force this person to give up the land. But why? Well, because it was sold to the “wrong” person! But, recently, the rule of law prevailed, as the court held that the person’s company properly acquired the land, following due process! But here is the point: how many ordinary Nigerians are victims of the rule of force and rule of men when it comes to land ownership in this country, with no money to secure legal defence? Yet property rights offer the poor the most powerful opportunity to ascend the economic ladder!
Sadly, Nigeria has a global reputation for weak contract and property rights protection. In a damning article in a London financial paper, City A.M, last year, the former UK International Development Secretary, Shriti Patel, warned foreign investors to be wary of investing in Nigeria, citing the case of an Irish against which Nigeria reneged on a contractual commitment and has refused to pay damages awarded by a London tribunal. Similar cases abound!
Truth is, Nigeria is not doing enough to protect contract and property rights. The rule of men often supersedes the rule of law. But the country can’t develop that way.
Olu Fasan
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