Experts see construction industry driving economic growth in 2021
Despite the heavy impact of Covid-19 pandemic that saw activities in the construction industry drop by over 60 percent in 2020, the industry will be a significant growth driver for the Nigerian economy in 2021, experts have said.
Medium to long term outlook for the industry, according to the experts, is positive given that its contribution to the GDP, based on figures released by the National Bureau of Statistics (NBS), increased to N572.9billion in Q3 2020, up from N513.6billion in Q2 of the same year.
“Nigeria’s economy is forecast to expand by 1.9 percent to 3 percent. The construction industry is expected to be one of the drivers of growth in 2021; it is expected that a lot of construction projects will resume this year as many projects were halted due to the global pandemic,” Temitope Runsewe, CEO, Dutum Construction Company, confirmed.
Out of Nigeria’s total budget of N13.5 trillion for 2021, capital expenditure corners N3.85 trillion, meaning that, where budget discipline is allowed, the country will witness an avalanche of construction activities, creating jobs and leading to the provision of critical infrastructure such as roads, rails and bridges.
Runsewe, who spoke at a Real Estate Market Outlook 2021 presentation jointly organized by his compny and Northcourt Real Estate in Lagos, noted that the 2021 budget christened ‘Budget of Economic Recovery and Resilience’, was designed to deliver on government’s Economic Sustainability Plan goals meant to accelerate the pace of economic recovery in the country.
“With over N3.85 trillion budget for capital expenditure, investment in the construction industry will be driven by government spending on infrastructure in a bid to drive economic growth,” he said, adding, “over the next 8 quarters, we expect growth across residential, commercial, industrial, and institutional sectors in Nigeria.”
The NBS has projected that the construction industry will record a Compound Annual Growth Rate (CAGR) of 16.6 percent to reach an all-time high of N13.2trillion by 2024 and this, Runsewe reasoned, makes it imperative for players in the real estate and construction industry to exploit the attendant opportunities for growth that will be presented.
“With the positive outlook for the construction industry for 2021 and the projected growth in the industry, Dutum intends to participate and contribute towards the development of various industry segments,” he assured.
Besides the budgetary allocation, the construction industry will also benefit from the N2.3 trillion Economic Sustainability Plan which was approved in June 2020 by President Muhammadu Buhari . Expectation is that the plan, which will deliver 30,000 social housing units alongside rural roads, will also create jobs, employing the services of both established developers and young small-medium scale professional contractors such as architects, engineers, quantity surveyors, accountants, etc.
Recently, the Central Bank of Nigeria (CBN) approved NGN 200 billion in mortgage finance to fast track construction of the 300,000 social housing units aimed to serve low-income households, and to create new jobs for the unemployed.
“Federal government’s decision to build 300,000 houses around the country and also to spend N2 trillion on rural roads construction is a welcome development that will positively impact the economy in various ways,” Femi Akintunde, GMD, Alpha Mead Group, noted.
“First, it is a form of reflationary measure that will stimulate economic output through increased spending in housing and infrastructure development. Such investment will create large scale employment, increase the stock of housing and the provision of additional road infrastructure that will help to improve connectivity and further ease our logistics challenges,” he added.
The development of the housing project which cuts across the six geopolitical zones of the country, comprising one, two and three bedroom units, is going to serve as a launch pad for increased construction activities in the new year.