Nigeria’s construction industry saw growth slow the most in the past three quarters despite government’s acclaimed commitment to address decrepit infrastructure which continues to hurt business growth and deter investment.
Data released by the country’s statistics office showed that the sector expanded a marginal 0.67 percent in the second quarter of the year compared to 3.18 percent in the preceding quarter.
This implies that the construction sector grew 1.92 percent mid-year 2019, lower than 3.06 percent expansion registered in similar period last year.
Nigeria’s construction sector, one of the most vibrant in Africa, suffer setbacks from ‘corrupt’ government officials, which has stalled many developmental projects, industry players say.
“Lack of will and misappropriation of few available funds are the bigger issues facing the industry,” said Olumide Akinyemi, project manager at Lagos-based Global Building Limited.
“Contractors don’t get paid on time, so how do you expect them to fund projects?” Akinyemi queried.
The sector contributed 4.4 percent to Nigeria’s economic output in second quarter, up 4.1 percent three months earlier, but below African peers such as South Africa (15%) and Kenya (11%).
Babatunde Fashola, at his ministerial screening at the senate chamber last month, tied the woes of the industry to cash shortage and called for the introduction of N10 trillion infrastructure bond to finance projects.
Worrisome is the fact that government’s rising capital spending has no corresponding impact on economic growth.
To put in context, public capital spending has surged 157 percent to N1.7 trillion in the three years through 2018, while the broader economy managed to grow by an average one percent in that period.
Government has been relying on the domestic capital market and international investors for cash to finance budget by raising debt securities through the Debt Management Office (DMO). But analysts have raised eyebrows on Nigeria’s rising debt profile, even as debt servicing is expected to gulp 82 percent of Nigeria’s revenue by 2022.
Last year, the state debt agency raised an N100 billion sovereign Sukuk bond to finance 28 projects across the country including the LagosIbadan Expressway and Second Niger Bridge. This followed after raising its debut N100 billion bond in 2017 which was over-subscribed by 6 percent.
Nigeria’s construction unimpressive performance took a toll on companies’ evidenced by theirhalf-yearearningsscorecard which showed players struggled to improve profitability amid a significant jump in cost.
While Julius Berger, the biggest listed player in the industry saw profit rise 9 percent mid-year 2019, Arbico incurred loss worth N38 million, after posting N71 million profits last year.
“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 stated.
