Construction Industry Challenges Await Nigeria's President-Elect
Among the key issues are lack of funding, inadequate infrastructure, corruption, and the weak enforcement of laws.
Nigeria’s President-elect, Bola Ahmed Tinubu, must hit the ground running when sworn in as the next President of the country. His election as the incoming President has been challenged by opposition candidates in court. Barring any issues or overturn of the results by the court, Tinubu will preside over a country with a myriad of problems.
The New York Times reported on March 1, 2023, that a recent Afrobarometer survey showed that nearly 90% of Nigerians believe the country is going in the wrong direction.
That is the challenge Tinubu faces. Among the key issues are lack of funding, inadequate infrastructure, corruption, and the weak enforcement of laws.
ConstructAfrica released its Nigeria Construction Market Report 2022 in December 2022. Among the points raised were infrastructure development issues being a significant constraint to Nigeria’s growth, with businesses and investors facing challenges doing business in Africa’s largest economy.
But the report also said the federal government was keen to boost infrastructure development in collaboration with the private sector through Public-Private Partnerships (PPP).
“The overall outlook for the industry is optimistic, especially considering recent reforms like the Petroleum Industry Act 2021, National Infrastructure Funds, and other initiatives to enhance infrastructure in the country,” the report said.
On January 20, 2023, The Guardian Nigeria reported Tinubu sought support from industry stakeholders for his infrastructure development plans at a meeting with the Federation of Construction Industry (FOCI) in Abuja.
High Chief Vincent Barrah, president and chairman of FOCI, said the construction industry is Nigeria's largest employer (of labour) after the government, a sentiment echoed by Olubunmi Adekoje, FOCI’s director general who was quoted on March 16, 2023, as saying, “Development of infrastructure, which is at the heart of every administration’s core objective, is being executed by the construction industry. Financing of projects is a huge challenge due to paucity of funds and the attendant high-interest rates of borrowing from commercial banks.”
The Nigerian Economic Summit Group (NESG) has predicted that the unemployment rate in the country will hit 37% in 2023. It put inflation at 20.5% for the same year. But Wale Edun, who was appointed Commissioner of Finance in 1999 after Tinubu won the governorship of Lagos State, and is tipped to be the next finance minister, told The Africa Report that the Tinubu administration will aim for double-digit economic growth, between 6% as a minimum and at least 10%. “It is what Tinubu believes will take us to a better life for all Nigerians,” he said.
Tinubu must tackle funding challenges such as limited access to credit facilities and high-interest rates to achieve infrastructure development goals. The outgoing government created the Infrastructure Corp of Nigeria (InfraCorp), a NGN15 trillion fund set up to drive Public‐Private Partnership (PPP) investments in infrastructure.
FOCI is calling on the incoming administration to set up a construction bank to fund infrastructure. Director General Adekoje spells out the federation’s concerns. “Development of infrastructure, which is at the heart of every administration’s core objective, is being executed by the construction industry. Financing of projects is a huge challenge due to paucity of funds and the attendant high-interest rates of borrowing from commercial banks.”
To ensure funding is directed to the right projects, Tinubu’s to-do list must prioritize the fight against corruption. A New York Times article on March 1, 2023, almost sums up what the incoming president is up against, “A nation bursting with entrepreneurs and creative talent, Nigeria is held back by rampant insecurity, widespread unemployment, persistent corruption, and a stagnating economy, which together mean that simply surviving can be a major struggle. Young middle-class Nigerians trying to escape this life are leaving the country in droves.”
Corruption is a significant challenge in Nigeria's construction industry. It leads to inflated costs, delays, and poor quality of work. Transparency International places Nigeria at 150 out of 180 countries on its Corruption Perception Index (CPI). The incoming president must tackle corruption in all its forms and improve the country’s ranking.
In the ConstructAfrica report, Igbuan Kaisabor, CEO/Founder of Construction Kaiser Ltd, said in an interview that his company focused on the private sector “to avoid biases and corruption in the public sector”.
To attract such companies to the public sector and win their confidence, the Tinubu government will need to strengthen existing anti-corruption agencies, such as the Economic and Financial Crimes Commission (EFCC), the Independent Corrupt Practices Commission (ICPC), and the Code of Conduct Bureau (CCB). Strengthening these anti-graft agencies means increased funding and resources and giving them investigative powers to prosecute corrupt officials.
Laws must be seen to be working. Osinachi Nwandem, Senior Associate in the Construction Law and Arbitration Practice Group of Aluko & Oyebode, and West Africa editor of the Africa Construction Law blog, told ConstructAfrica that interpreting the law is essential for dispute resolution and avoidance.
Osinachi said Construction companies willing to submit disputes for arbitration need more specialized training for practitioners and arbitrators interested in construction arbitration. Institutions such as the Institute of Construction Industry Arbitrators (ICIArb) and the African Construction Law (ACL) offer programs for interested parties to develop competencies.
Besides the knowledge gap, there are no special courts to hear construction cases, tilting the balance in bargaining power against the contractor if a project is abandoned. Developed countries have prompt payment laws, and defaulters can be blacklisted. Nigeria is still plagued by building collapses even though there are laws, for example, for sub-soil assessment. These laws must be strictly enforced to raise and maintain high standards. Such shortfalls open the door for China, with better equipment and standards, to dominate the construction industry in the public sector.
Chinese investments in Nigeria have risen exponentially over the last 20 years. According to the World Bank, Nigeria-China trade in products increased from about US$1.2 billion in 2003 to US$13.7 billion in 2019.
China is financing large projects, and its companies are contracted to deliver their construction – including railways, road projects, and the rehabilitation of Nigeria’s four main airports in Abuja, Lagos, Kano, and Port Harcourt.
This rise in China’s dominance raises concerns that Nigeria is shutting local companies out of contracts and growth opportunities.
Another concern is the heavy reliance on China for sources of funding. In 2021, Business Wire reported that “the government is grappling with funding challenges and will need to attract private investment if it hopes to bridge the country's huge infrastructure deficit. Local companies often operate at a disadvantage as foreign construction companies are generally awarded large projects.”
And in 2022, Nigerian Minister of Transportation Rotimi Amaechi, in an interview with the Guardian, said that the government had shopped for funds from Europe as China was no longer forthcoming with loans to help finance some projects, and this had caused delays.
Tinubu must consider how Nigeria can best work with China in the future. But turning things around in Africa’s most populous nation, rich in resources but plagued with perennial problems, will take forward-thinking collaborators and stakeholders with the political will to right the ship.
Addressing these challenges will improve the construction sector's growth and contribution to Nigeria's overall economic development.
In a BBC interview before the elections, Tinubu touted an excellent infrastructural renewal of Lagos State when he was governor. He said he built a model state that could be a country on its own, which he claimed proved he was the most qualified person to be president.
The proof of the pudding is in the eating.
Top Photo: Bola Ahmed Tinubu speaking at Chatham House in the U.K. (Chatham House | Wikimedia Commons)
Add a comment
ConstructAfrica welcomes lively debate, but will not publish comments that are threatening, libellous or abusive.