BusinessDay Research & Intelligence Unit (BRIU) is delighted to present the results of our Construction Survey which reects the views of 114 professionals from segments of the Construction Industry, as well as Finance and the Public Sector. Our report provides in-depth analysis of the construction industry including trends and challenges being experienced on the ground.
Sentiment for the construction industry is somewhat optimistic and the outlook for 2018 is relatively positive, with further increases in activity expected across a few strategic sectors. However, there are a number of challenges currently facing the industry, and of these, the country’s currency value and access to nance/funding for activities is causing the greatest concern.
With the exception of Real Estate Development Sector, which is shared equally between private and public sector financing, other significant aspects of the Construction Industry is still largely influenced by public sector financing (Federal and State government) for infrastructural developmental activities.
In the 2016 Federal Government Budget, a total of N422.9 billion was budgeted, comprising N260.082 billion for Works, N91.257 billion for Power and N71.559 billion for housing. According to the Federal Minister of Power, Works & Housing, during the implementation of the 2016 budget, 103 construction companies executing 192 projects were paid who employed 17,749 people directly and 52,000 people indirectly in works, adding that there was provision of funding under the 2017 budget in the sum of N90 billion out of which N47.169 billion has been paid to 62 contractors working on 149 projects to continue work on roads and bridges and keep people at work and sustain production.
But, in spite of this commitment to funding infrastructure by the governments, industry stakeholders posit that the government cannot do it alone because of the huge capital requirement, hence the need for private public partnership (PPP) initiatives. According to the Managing Director of the Infrastructure Bank, contractors working for the federal and state governments are owed about N1.7 trillion and some of these debts are as old as 5 to 10 years.
Analysis of data from the National Bureau of Statistics (NBS) for 2016 reected that Nigeria’s construction to GDP was 4 percent. The recommendation of the Asian Development Bank is that in order for a developing country to sustain growth and development, not less than 6 percent of GDP should be invested on infrastructure.
Nigeria’s Construction Industry grew by 8 percent from the previous quarter, according to the latest Q2 GDP gures released by the National Bureau of Statistics (NBS). The Sector’s GDP has been improving steadily in the last four quarters (Q3 2016 to Q2 2017). From a drop in GDP of 21 percent in Q3 2016 from the prior quarter, the sector bounced back in Q4 2016 recording growth in nominal GDP of 19 percent over the previous period and increase of 15 percent in
Subsequently, Construction GDP in Q 2 2 0 1 7 o f N 1.1 7 trillion represented nominal growth of 8 percent from Q1 2017. In real terms, growth was 5 percent (quarter on quarter). Comparative analysis of Q2 2017 to the same quarter in 2016 revealed that the Sector grew by 18 percent in nominal terms (year on year). The Industry accounted for 4 percent of Country’s total GDP of N27.22 trillion Naira in Q2 2017.
The Nigerian Construction Sector is p r i n c i p a l l y i n v o l v e d i n t h e development and maintenance of civil engineering works and infrastructural provision comprising roads, bridges, railways, etc., as well as residential and commercial real estate. Opportunities for investment and expansion abound in the Industry for infrastructural and real estate development activities if the right policy, regulations and framework are adopted and instituted. With respect to housing development, back in 2006, the United Nations agency for Human Settlement, UN-HABITAT, estimated the country’s housing decit at 17 million units. That was 11 years ago, meaning that the decit could be more. The market value of this decit has been estimated at $363 billion.
The UN report states that for the country to bridge this gap, it needs to build b e t we e n 172,000 and 200,000 housing units annually for the next 20 years. But a recent report on the real estate market reveals that despite efforts at various levels of development, not more than 50,000 units are built every year.
In the area of infrastructure development, a 30-year roadmap infrastructure development plan, known as the Integrated Infrastructure Master Plan (NIIMP) projects that
Nigeria required at least $3.05 trillion for infrastructure development over the next three decades. The NIIMP captures the Energy, Transport, Information, Communication Technology (ICT), Agriculture, Water, Mining, Housing, Social Infrastructure, Security and Vital Registration sectors in Nigeria.
Nigeria’s infrastructure stock currently accounts for about 20 to 25 percent of GDP, which is significantly lower than the global average of 70 percent. Hence, the need for accelerated and increased Private Sector involvement and investment in the Sector, as the country requires at least $100 billion annually for the next 30 years to meet our infrastructure needs, as forecasted by the NIIMP.