Weak construction sector growth contradicts Buhari’s Independence Day speech

The weak growth of Nigeria’s construction sector as well as the broader economy since 2016 contradicts President Muhammadu Buhari’s claim that infrastructure spending has been impactful, according to analysts polled by BusinessDay.

In his nationwide broadcast to Nigerians to mark the nation’s 61st Independence, President Buhari declared, “No government since 1999 has done what we have done in six years to put Nigeria back on track in terms of infrastructure.”

Seven years into President Buhari’s presidency, Nigeria’s construction industry is yet to attain 2015 levels or feel the current impact of the Federal Government’s acclaimed commitment to address decrepit infrastructure that continues to hurt business growth and deter investment.

The economy has also failed to grow in per capita terms since 2015, with poverty and unemployment deepening.

Analysts say if the government was indeed splurging on infrastructure, it would be evident in the construction sector and more broadly, economic growth.

But that is not happening as data from National Bureau of Statistics (NBS) show the sector is still unable to contribute significantly to Nigeria’s economic growth despite huge potential.

The data from NBS show the construction sector grew by 3.7 percent in Q2’ 2021 from 1.42 percent in Q1’ 2021. The sector recorded a -7.68 percent in full-year 2020 compared with a growth of 1.81 percent in 2019.

In full-year 2018, the construction sector grew by 2.33 percent from 1.0 percent in 2017 and -5.95 percent in 2016 compared with growth of 4.4 percent recorded in 2015.

“Lack of will and misappropriation of few available funds are the bigger issues facing the industry,” notes Olumide Akinyemi, project manager at Lagos-based Global Building Limited.

Nigeria has penned record amounts for capital expenditure in successive budgets under Buhari’s watch but implementation has often suffered on the back of lower than expected revenues.

“Contractors don’t get paid on time, so how do you expect them to fund projects?” Akinyemi asks?

The data show that the Buhari government has been big on talk about infrastructure spending but small on actual expenditure.

For instance, Buhari’s government budgeted N1.58 trillion and N2.17 trillion for capital expenditure in 2016 and 2017, but actual money released was N173 billion and N1.43 trillion.

Read Also: Economic impact of Nigeria’s construction industry veiled with untapped opportunities

In 2018, the government budgeted N2.8 trillion but actual money released was N1.6 trillion, while in 2019 the government budgeted N2 trillion for capital expenditure but actual money released was N372 million as of Q3’ 2019.

In 2020, the government budgeted N2.4 trillion but there are still no official figures of how much was eventually released.

In 2021, the government’s capital expenditure, including that of 10 Government-Owned Enterprises (GOEs) and projects tied to loans, is put at N3.85 trillion.

The distribution of capital expenditure follows the typical pattern of the current government with massive appropriation for Works and Housing (N404.64bn), Transportation (N255.88bn), Health including GAVI (N211bn), Power (N198.27bn) and Education (N127.36bn).

Actual spend on infrastructure was even lower going by data from third party sources, industry players say.

“The cost of construction in Nigeria is one of the highest in Africa. This is even as over 65 percent of materials are sourced abroad. Foreign exchange is not smiling as well,” Akinyemi states.

Other stakeholders also complained that most of this government’s infrastructure projects favoured one part of the country and questioned a lack of transparency as well as the involvement of Chinese backers.

“Nigeria’s construction industry requires a form of transformation in order for players to fully exploit the abundant opportunities in the sector,” Olusegun Ladega, managing director, Interstate Architect Limited, says in a webinar themed “Opportunities in construction and engineering industry: a private sector perspective” hosted by the Lagos Chamber of Commerce and Industry (LCCI).

“Most industries have undergone tremendous changes over the last few decades and have reaped the benefits of processes and product innovations. However, the engineering and construction sector has been hesitant about fully embracing the latest technological opportunities and its labour productivity has stagnated,” Ladega says.

The government this year broke ground on a $2 billion internationally-funded rail line connecting the country’s north to neighbouring Niger Republic, and announced it was forming Infraco, a public-private infrastructure fund with N1 trillion ($2.6bn) in seed capital from the Central Bank of Nigeria, Nigeria Sovereign Investment Authority and the Africa Finance Corporation, a mostly privately owned pan-African project finance firm.

Some critics argue that a rail connection to Niger, one of the world’s poorest countries with a gross domestic product about one-fortieth the size of Nigeria’s, is a poor use of scarce government resources.

In February, the government also commenced a $3 billion railway line that would link the country’s east side, from oil-rich Port Harcourt in the south to Maiduguri in the north.

“The president is trying to grow all the sectors of the economy that would improve and increase production — he’s focusing on power, on roads, on transportation, and rail networks and maritime,” said minister of transport, Rotimi Amaechi.

Africa’s largest crude producer has generated billions of dollars in oil revenues each year for decades, but has little to show for it developmentally — its ports are congested, its road network decrepit, its rail system almost non-existent and its power grid too weak to carry even a fraction of the meagre amount of electricity it generates.

The Buhari administration’s latest moves will barely make a dent in the $3 trillion that is estimated by Moody’s that Africa’s largest economy will need to spend over the next 30 years to close its infrastructure gap.

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