Institutional Economics of Agricultural Land Markets in Nigeria: A New Institutional Analysis

This study applies new institutional economics frameworks to analyse the functioning of agricultural land markets in Nigeria, examining how formal and informal institutions shape land access, use rights, and transaction costs. The Land Use Act of 1978, which vests all land in state governors, has created a distinctive institutional environment for land markets that combines statutory and customary tenure systems with complex transaction cost implications for agricultural investment and land market efficiency. Drawing on Ostrom's institutional analysis and development framework, North's institutional change theory, and transaction cost economics, this study develops an original analytical framework for understanding Nigerian agricultural land market institutions. Empirical data are generated through a multi-level mixed-method study combining national policy document analysis, institutional mapping in six states representing diverse tenure contexts, and in-depth qualitative fieldwork in 18 communities across Ogun, Kano, Rivers, Benue, Kaduna, and Enugu States. Institutional configurations, transaction costs, and investment outcomes are assessed and compared. Findings establish that informal customary institutions largely govern smallholder land transactions in all study states despite the formal dominance of the Land Use Act. Transaction costs under customary systems are lower for within-community transfers but extremely high for cross-community and investor land acquisition. The study contributes an original institutional analysis framework for Nigerian land markets and recommends Land Use Act reform to enable community-based tenure registration as a transaction cost-reducing institutional innovation.

Keywords: institutional economics, land markets, Nigeria, Land Use Act, transaction costs.