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Nigeria's Fast Growing Construction market: Local construction companies facing stunted growth

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Notwithstanding Nigeria’s 7 percent annual GDP growth, which makes it the fastest growing economy in sub-Saharan Africa with high volume of building and infrastructure provision, most of its local construction industry players have continued to suffer stunted growth.

The construction industry in Nigeria, analysts say, is a multi-billion dollar enterprise in which hardly any year falls short of expected windfalls coming the way of successful contractors who bid for construction projects, noting that the industry is a major component of any developing economy because it is a significant part of the GDP.

According to a 10-year forecast from Global Construction Perspectives and Oxford Economics, “Construction industry growth in Nigeria will be the fastest of all markets; China will overtake the US as the world’s biggest construction market by 2018, but the fastest growth will happen in Nigeria.” The report, which named Nigeria ‘global hotspot from here to 2020’, says the nation’s construction growth is even faster than India’s, which reflects increased wealth.

An investor, who did not want to be named, agrees, pointing out, however, that this growth would happen without most of Nigeria’s local industry players, explaining that construction itself is big and only the big players are profitable.

“Looking at the construction industry, therefore, it is not impressive to me that it is going to grow by 110 percent by the next 10 years. What will impress me is the role of the local players. The question is: how are the local Nigerian industries evolving to take advantage of the expected boom in the industry so as to participate and grow? To me, growth means you are getting more sophisticated, buying better equipment to actually become a bigger player; it also involves hiring the right people with the right skills which our local players lack,” he says.

Continuing, he advises on the need for a lot of construction to be done in Nigeria. “One of the things that I think would help construction is standards across board. In any developing country, there should be standard that people have. This is not so among local players in Nigeria; the industry players should be able to get themselves together and say they have to create standard,” he adds.

Igbuan Okaisabor, executive vice chairman/CEO, Construction Kaiser Limited, says that as a high asset business, industry players need to invest in construction, lamenting that a lot of Nigerian entrepreneurs don’t do this. He explains that the stunted growth of some of the local players was because, in the past, these players lacked financial discipline, adding that scarcity of well-trained people also contributes to the industry’s slow growth.

“The multi-national companies come in from Europe and America. They can borrow money from their home countries at single-digit interest rate. If Julius Berger, for instance, wants to buy equipment, they simply go to their country to buy. Sometimes they are even begged to buy the equipment. For us, if we want to buy equipment, we go to local banks and borrow money at 21 percent for two years while we are competing with companies that get money for 10 years at 3-4 percent interest rate,” he notes.

Kadri Adebayo Adeola, managing director, CPMS Limited, heaps the blame for the local players’ stunted growth on the dominance of foreign firms and their preference for award of contract by both public and private sector operators. He laments that after over 50 years of independence, the local players are still struggling to find a place in their own country.

Adeola adds that contract debt is another factor that contributes to the stunted growth of the local players, explaining that even when they get patronage from government, the contract fees are hardly paid, leading to job loss due to their inability to pay workers in the affected companies.

“Our engineers don’t have opportunity of a place to work; the best of them work in places other than their area of competence, mostly in banks; some even travel abroad while those who dare to remain in the industry end up working for individuals and earning miserable pay,” he says.

Article Credit: Business Day Newspaper

Updated 5 Years ago

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