INTEGRATION OF ESCROW SMART CONTRACT PAYMENT SYSTEM IN REAL ESTATE IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF STUDY

The real estate sector in Nigeria is a critical part of the economy, contributing significantly to the country's Gross Domestic Product (GDP) and serving as a major investment avenue for individuals and institutions (International Energy Agency, United Nations Environment Programme, 2018). However, this industry is plagued by challenges such as fraud, lack of transparency, delays in transaction processing, and inefficiencies in property ownership transfers. These issues have eroded trust between buyers, sellers, and intermediaries, making it difficult to ensure secure and transparent real estate transactions by Business Day (2022).

In recent years, advancements in blockchain technology have presented an opportunity to address some of these persistent problems. Blockchain technology and smart contracts have shown promise in improving transparency and reducing transaction costs in various industries by PwC (2019). One of the most promising applications of blockchain in real estate is the use of Escrow smart contracts. The Nigerian government has been actively promoting the adoption of digital technologies, including blockchain, to enhance economic growth and reduce corruption by Federal Ministry of Communications and Digital Economy (2020). A smart contract is a self-executing contract with the terms of the agreement directly written into code, which runs on a blockchain network. An escrow system, on the other hand, involves a third party holding and regulating the payment of funds required for two parties involved in a transaction.

The integration of escrow smart contract payment systems in real estate promises to streamline transactions by eliminating the need for intermediaries, reducing fraud, and ensuring that funds are released only when certain conditions are met. This technology can enhance transparency, as the terms of the contract are visible and immutable on the blockchain. Additionally, it can reduce delays caused by manual processing and lower transaction costs by removing the need for traditional escrow services or legal intermediaries by PwC (2019).

Given the potential of blockchain and smart contract technology, it is essential to explore how the integration of an escrow smart contract payment system could transform real estate transactions in Nigeria, focusing on its feasibility, benefits, and challenges (Manyika et al.,Calvino et al.,) This study aims to investigate the effectiveness of this technological solution in addressing the specific issues faced by Nigeria's real estate market and propose a model for its implementation.

1.2 STATEMENT OF PROBLEM

The real estate sector in Nigeria faces significant challenges related to transaction security, payment processes, and trust between buyers, sellers, and intermediaries. One of the most pressing issues is the lack of transparency and reliability in property transactions, often leading to fraud, disputes, and delayed payments by Business Day (2022). Traditional payment methods in real estate are often manual, inefficient, and prone to manipulation, creating risks for all parties involved (Ferreira, 2021) Real estate transactions in Nigeria, like many developing countries, face numerous challenges. These challenges include:

High transaction costs due to intermediaries by PwC (2020).
Lack of transparency in payment processing by World Bank (2020).
Frequent disputes over property ownership by KPMG (2021)
Slow transfer of funds between parties.
Limited access to credit facilities for potential homebuyers.
Delays in property transfers.
Increased risk of fraud and disputes.
Higher costs for buyers and sellers.
Limited access to real estate services for low-income individuals

1.3 AIMS AND OBJECTIVES

1.3.1 AIMS:

The primary aim of this study is to explore the integration of an escrow smart contract payment system into the Nigerian real estate sector. This study seeks to assess how the implementation of blockchain-based escrow services can improve transaction security, transparency, and efficiency in real estate dealings.

1.3.1 OBJECTIVES

Specifically, the objectives are:

To analyse the current payment methods used in Nigerian real estate transactions and identify the associated challenges, particularly in terms of security, trust, and efficiency.
To develop a smart contract that automates the escrow process for real estate transactions.
To integrate the smart contract with existing real estate platforms in Nigeria.
To conduct a pilot test of the system with actual real estate transactions.
To evaluate the effectiveness and efficiency of the implemented system compared to traditional methods.
To identify potential challenges and limitations in implementing the system in the Nigerian real estate market.

These objectives guide the exploration of how an escrow smart contract payment system can transform the real estate landscape in Nigeria, addressing key problems and paving the way for more secure and efficient transactions.

1.4 SCOPE OF STUDY

The scope of the topic "Integration of Escrow Smart Contract Payment System in Real Estate in Nigeria" will focus on exploring the feasibility, impact, and practical applications of implementing blockchain-based escrow smart contracts in Nigeria's real estate industry. This study focuses specifically on:

Developing and testing an escrow smart contract payment system for real estate transactions in Nigeria.
Exploring the integration of the system with existing real estate platforms in Nigeria.
Conducting a pilot test of the system using actual real estate transactions.
Analysing the performance and impact of the system on transaction efficiency and security.

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