Anchoring Nigeria’s economic growth, development on construction industry

Construction companies in Nigeria can be found engaged in the construction of roads, buildings, dams, sewers, bridges, water pipes, oil rigs, electricity grids, telecommunication masts. They are generally grouped into three by their sizes: large (major), medium and small. Most of the major players of the industry in Nigeria like A. G. Ferrero, Arab Contractors, Brunelli, Cappa and D’Alberto, Chinese Civil Engineering Construction Company (CCECC), G. Cappa, Guffanti, Julius Berger (JB), Lodigiani, Reynolds Construction Company (RCC), Sallini, Slava Borgu, Strabag, etc, are foreign. Major players like Arbico, Craneburg, Dantata and Sawoe, Dutum, Elalan, Gibraltar Construction, Hitech, Monier, Sageto, Segil Construction, Setraco and Stabilini Visioni are indigenous companies.

According to the classification of construction companies, the small companies have less than five workers and form over 90 percent of the registered construction companies with the Corporate Affairs Commission (CAC); the medium construction companies have between six to 50 workers and form about seven percent of the registered companies and the large companies have more than 50 workers and form less than three percent of the registered construction companies. In terms of turnover, the major construction companies have over N1.00 billion as turnover per annum, the medium companies have between N50 million to N1.00 billion, while the small construction companies have less than N50 million as turnover per annum, according to Bureau of Public Procurement (BPP) classification.

The major construction companies do market segmentation through cost of projects. For example, some construction companies will not handle jobs with less than N500 million as contract sum, while it is N450 million for some. The construction companies employ a great number of workers. According to S. M. Ogwu, in “Berger Resumes on Lagos – Ibadan Expressway”, published in the Daily Trust of May 21, 2018, “the 127 kilometre ongoing Lagos-Ibadan highway/dual carriageway project is said to have created 4,500 jobs.”

Construction companies develop physical infrastructure which are basic to business, commerce and security of lives and properties. Construction projects also require huge finance to execute. This necessitated the establishment of the Bank of Infrastructure by the Federal Government of Nigeria. The amount budgeted for infrastructure development in 2021 was N1.45 trillion, 8.9 percent of the total budget of N13.08 trillion.

While the medium and small construction companies have their head offices all over Nigeria, the major construction companies have their offices in Abuja, Lagos and Port Harcourt. Most construction companies are unorganised, have high mortality rate, high staff turnover, high negligence for health and safety and are highly affected by government annual budget implementation. The construction companies have an above average rate of litigation because of a high number of bad financial management of some small contractors, snags (defects), cost-overrun and time-overrun. The companies have high potential for fraud. Most of the promoters of these companies, especially the small and medium companies, have no background in engineering. Some of them are just into business to make money and have no value-addition.

The construction industry is an essential contributor to the process of national development. Buildings, telecommunication masts, warehouses, roads, dams, irrigation works, schools, hospitals, factories, and other construction works are the physical bases on which development drives and improved living standards are established. About one-half of the gross, fixed capital structure in the budget of developed nations generally takes the form of construction output. Some 44 percent of the total cost of projects approved for assistance by the World Bank and its affiliate, the International Development Association (IDA), in the three-year period fiscal 1980-82 went for construction work.

The construction industry usually accounts for between three percent and eight percent of a country’s gross domestic product (GDP); the more dynamic national economies, as well as wealthier countries, are largely bunched at the upper end of this range. Improving construction capacity and capability is important to most developing countries. Firstly, the extensive basic infrastructure built up at high cost in earlier years, and especially during the 1960s and 1970s, has decayed and needs to be maintained. It is generally expensive, if not impossible, to bring major contractors for this type of work. Secondly, most of the new capital projects are small works that are scattered, which are also usually unsuited for execution by major firms.

Thirdly, there is a need to improve the efficiency, aesthetic, and quality of construction and maintenance works in many developing countries. Fourthly, there is a growing recognition that construction can be a more important generator of jobs and create avenues for human capacity development and entrepreneurship development. The growing interest of many countries in developing their construction industry has coincided with increasing concern of the World Bank for this sector. In 1973, after various studies, the World Bank first adopted an explicit policy of assistance to promote the growth of borrowing countries’ construction industries so that these countries can retain most of the amount collected as loan. Since then, initiatives have been taken in a variety of projects in over 40 countries. And fifthly, there is a need to imbibe project management principles in construction projects.

There are too many failed and abandoned projects. Daily Trust of Sunday, 24 April, 2022, reported that multi-billion naira Abuja Rail Mass Transit, also known as Abuja Light Rail, is rotting away after being abandoned for years. The same is the fate of Lagos Light Rail, according to Oladeinde Olawoyin, in Premium Times of December 18, 2020. Efficient investment appraisal of development projects carried out by estate surveyors and valuers will curb the incessant abandonment and decay of construction projects. The development of the domestic construction industry in developing countries is prerequisite for their rapid development. Various reports have shown that developing countries which have been able to develop and rely on their local construction companies are reducing poverty in their countries.

There are greater opportunities as well as problems developing the construction industry of developing nations. The local construction companies of most developing nations need capacity development of their managers. Due to lack of international exposure, they lack the ability to use modern construction materials and methodology for construction. Some lack financial management skills and thereby go into insolvency within a short period of existence. According to Patricia M. Hillebrandt in her book titled, “Economic Theory and the Construction Industry”, published in 1985, the importance of construction in the economy stems from three of its characteristics: firstly, its size: secondly, that it provides predominantly investment goods; and thirdly, that governments are the major clients of this important sector.

The Nigeria construction industry is expected to grow by 3.2 percent between 2021 and 2025. It employs about 10 million workers annually and has a total market size of $998 million as of 2021. It has the propensity to be used for kick-starting the economic development of Nigeria as it can be used to provide employment, produce capital products and bridge the wide infrastructure gap. The total infrastructure stock in Nigeria amounts to 30 percent of gross domestic product (GDP), according to the World Economic Forum (WEF). This falls short of the 70 percent international benchmark. This presents a great opportunity and a base for the federal government to anchor the nation’s economic developmental programmes.