Of the many problems which close industry watchers say are holding down the growth of the construction industry in Nigeria, funding stands out as a limiting factor, which is why institutional investors’ new interest in the industry is a welcome development and raises growth prospect.
The construction industry in Nigeria holds out much hope in terms of growth and contribution to the nation’s Gross Domestic Product (GDP). According to industry experts’ prediction, the industry anticipates over 15 percent growth by 2020 when Nigeria’s dream of joining the league of the largest economies of the world is suppose to materialise.
The latest 10-year forecast from Global Construction Perspectives and Oxford Economics says construction growth in Nigeria will be the fastest of all markets, predicting that China will overtake the US as the world’s biggest construction market by 2018.
The report sees Nigeria as the market where the fastest growth will happen, adding, “Nigeria will be the global hotspot from here to 2020 because the nation’s construction growth is even faster than India’s, which reflects increased wealth”.
Analysts, however, contend that this can only happen if there is adequate funding for the industry, stressing that funding is critical for growth. “The slow growth in the industry is not about equipment or skilled labour as is frequently cited”, says an institutional investor who wouldn’t like to be named.
“I think things have to change for the industry going forward because it provides a good opportunity for investment. The good news is that more and institutional players to whom funding is not an issue are supporting more projects. That will improve the life of construction companies. Projects that have funding would always keep going”, he added.
He disclosed that his company has looked at some companies that they are going to back, adding that one of the things that is very important is for the institutional investors to try to grow the local players that are good rather than always bringing in foreign firms.
He noted that there are quality builders in the country that have not been given the chance to prove themselves, arguing that if they don’t have the chance to get good sites or the opportunity to do something bigger, they can’t grow.
“Big institutional players should be able to take the risk of sponsoring local players to enable them to grow or to step into new shoes. There is need for them to be given the chance to acquire new equipment, technology and techniques that will enable them to flourish”, he advised.
Greg Thomopulos, president, International Federation of Consulting Engineers (FIDIC), shares this view, adding, however, that Nigerian construction firms need to be built up and developed. “They also need to get a little bit bigger; firms should grow more and consolidate to be able to handle big projects”, he said, pointing out that one of the reasons why the industry is not growing is that companies are not sustained with work. Thomopulos, who was on a weeklong visit to Nigeria, stressed that it is very important to load firms with work, “because no firm can grow without work. Loading companies with work is one of the ways governments can grow capacity”, he said.
The institutional investor noted that most of the construction industries in the country struggle by going into projects that are not fully funded, adding that most of them also go into projects that there are only deposits and midway into the project, they are demobilised.
“I hope that the more the local firms find institutional players that will provide the funding, the more they are going to find credible projects that will enable them to rise up to those projects that had been the exclusive preserve of the likes of Cappa D’Alberto, Julius Berger, Bouygues etc that go into projects that are fully funded and such that when they take up a project, they don’t stop”, he said.
Mobolaji Williams, president, Federation of Construction Industries (FOCI), however, noted that the greatest threat to the anticipated growth in the construction industry is in heavy contract debts that have led to job losses, adding that owing to the failure of government and some multi-national companies all over the country to meet their financial obligations of funding on-going capital projects, over 100,000 jobs have been threatened in the industry which will directly or indirectly affect 400,000 more Nigerians.
Williams said that the job losses which cut across all classes of workers has seen the exit of more than 60,000 workers in FOCI member-companies due to government’s failure to meet its financial obligations to contractors and subsequent closure of sites where these workers were deployed.
Reference: http://www.businessdayonline.com/NG/index.php/markets/investor/38318–growth-prospect-seen-as-investors-focus-on-construction-industry