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Despite huge prospects in job creation and value addition, the construction industry in Africa’s biggest economy during President Muhammadu Buhari’s first tenure underperformed and failed to meet the expectations of industry players.
The construction industry ought to be a major contributor to gross domestic product (GDP); however, that is not the case in Nigeria. Growth in the sector was weak between 2015 and first quarter of 2019, with negligible impact on the broader economy.
According to data from the National Bureau of Statistics (NBS), the construction industry grew less than 5 percent during Buhari’s first term and accounted for 4 percent share in total output.
Comparing these figures to the country’s peers in Africa is disappointing. Construction activities in South Africa accounted for about 15 percent of GDP; Kenya, 10.5 percent and Ghana, 7.6 percent, according to World Bank data.
Players in the industry blame the poor performance on government’s preference for foreign contractors over indigenous ones, saying it does little for the economy.
“Local contractors are not happy seeing a lot of contracts, which is about 95 percent, going to foreign firms. This portrays low confidence in us. Though local ones have their limitations, we should not be sidelined from the real business” said Olumide Akinyemi, Project Manager at Josh Global Limited.
“Buhari should give this a thought in the next term. We hope to see better participation of local firms in the industry,” he said, appealing to the Federal Government to invoke the Local Content Act in the industry to elevate the activity of local players.
This then begs the question why foreign firms are favorites of government and large corporate. BusinessDay gathered that dearth of competent and reliable local personnel to handle complex projects triggers the search for expatriates.
Najeeb Adeyemi, Head of Valuation at Mustapha & Ewenla Partners, cited an example from East Africa where, he said, “contractors were once time forced to import over 10, 000 workers from China to assist the locals to build a standard railway gauge, which they couldn’t construct.
“This beckons on professional bodies and regulatory agencies to train and retrain their workforce to save the industry from foreign control,” he advised.
Players also decried the prevalence of corrupt practices in the sector, saying development projects of various kinds and sizes have suffered a lot of setbacks in the hands of corrupt officials.
“It has become a norm that funds allocated to major projects are embezzled for personal use by the contractor or shared among the parties involved, which is one of the reasons for abandoned projects,” said Adeniyi Adewale, Project Engineer at Pivot GIS.
“This has thrown the industry into disrepute. Buhari as an anti-corruption crusader should set up a regulatory committee to monitor how funds are disbursed and expended. EFCC has a role to play here too,” he noted.
Inadequate funding is another worry for contractors, particularly indigenous ones. Construction is largely capital intensive. Equipment alone cost millions of naira, and this creates pressure to raise funds to execute projects.
According to NBS, credit to the construction sector averaged 4.5 percent between 2015 and 2018, showing banks’ unwillingness to support the sector with funds. “Banks are not helping in terms of funding, especially if the contractor is not yet a big player in the industry,” noted Adewale.
“Funding projects should be a priority to the government. They can explore Private-Public Partnership (PPP) which has helped Asian countries to effectively develop their infrastructure,” Adeyemi said.
Industry players are, however, optimistic that the sector will perform better if the concerns raised are attended to. “With these in place, I’m quite sure of the sector making strides in the medium term” Akinyemi stated.