Experts have raised concerns that the proposed use of escrow accounts to manage deposits for off-plan property purchases in Nigeria may not offer the intended protection to buyers. While escrow accounts are designed to hold funds until contractual conditions are met, analysts argue that structural weaknesses in the regulatory framework and lack of strict enforcement could render the safeguard ineffective.
Loopholes in the Escrow System
According to a report by the Nigerian Institution of Estate Surveyors and Valuers (NIESV), many developers still retain significant control over escrow accounts. Dr. Adebayo Ogunleye, a real estate expert, stated: "The current escrow proposal allows developers to appoint the escrow agent and dictate terms, which defeats the purpose of independent oversight." This arrangement creates a conflict of interest, potentially enabling developers to access funds before project milestones are completed.
Weak Regulatory Oversight
The Federal Ministry of Housing and Urban Development has advocated for mandatory escrow accounts, but compliance remains voluntary. A 2025 survey by the Real Estate Developers Association of Nigeria (REDAN) found that only 35% of developers have adopted escrow accounts voluntarily. Furthermore, the Central Bank of Nigeria has not issued specific guidelines for escrow operations in real estate, leaving the system vulnerable to abuse.
Enforcement Challenges
Legal experts point out that even when escrow agreements are signed, enforcement is difficult. Barrister Funmi Adewale noted: "Buyers often lack the resources to pursue legal action when developers breach escrow terms. The court system is slow, and many disputes remain unresolved for years." This lack of effective recourse means that buyers may still lose their deposits despite the escrow arrangement.
Alternative Safeguards
Some analysts advocate for a more robust approach, including mandatory registration of off-plan projects, regular audits, and a compensation fund. The Lagos State Government has experimented with a project registration scheme, but it covers only a fraction of developments. Without comprehensive reform, escrow accounts alone are unlikely to restore buyer confidence in the off-plan market.
Impact on Homebuyers
For many Nigerians, off-plan purchases represent a significant investment. A 2023 survey by the Housing Development Advocacy Network showed that 42% of off-plan buyers had experienced delays or complete project abandonment. The proposed escrow system was intended to address these risks, but experts warn that without addressing underlying issues, it may become another layer of bureaucracy rather than a genuine protection mechanism.
