From Global Data

Nigeria’s construction industry, having contracted by around 6% in 2016 in the wake of the collapse in oil prices, continued on a steady recovery path in 2018, expanding by 2.4%, following on from 1% growth in 2017, and is expected to grow by 6.1% in the medium term, says GlobalData, a leading data and analytics company.

Nigeria’s construction industry’s performance has been bolstered by the government’s focus on developing the country’s infrastructure, energy and residential sectors, as well as a general recovery in the economy.

In a bid to improve the infrastructural needs of Nigeria and maximise resources, the Federal Government signed the Executive Order 007 on Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme. Private companies are able to fund the construction and refurbishment of eligible roads in Nigeria and to recover the project funds by way of tax credits, claimable against Companies Income Tax (CIT) payable. Dangote is set to construct 19 federal roads across the country, in accordance with the Executive Order (007).

Yasmine Ghozzi, Economist at GlobalData, comments: “This will have a huge impact on Nigeria’s construction industry since under federal laws public roads are constructed and maintained by the government but due to minimal funding, key roads were left in poor conditions. The road project will total to 794.4km and spread across the six geo-political zones and will help reduce the cost of doing business in the country.”

The continued expansion in the economy as well as the construction industry will be dependent on the pace of implementing the Economic Recovery and Growth Plan, which anchors Nigeria’s industrialization by establishing industrial clusters and staple crop processing zones to give firms a competitive edge through access to raw materials, skilled labor, technology, and materials.

Ghozzi continues: “The Power Sector Reform Program, if effectively implemented, could attract private investment. It targets 10 gigawatts of operational capacity by 2020. But Nigeria needs to adjust its federal budget, currently dominated by persistent spending, toward more capital expenditure and accumulating savings to sustain social spending.”

The government is targeting 3% economic growth in 2019, while the World Bank says real GDP is projected to grow by 2.2% in 2019 and 2.4% in 2020 as implementation of the Economic Recovery and Growth Plan gains pace. However, the slide in oil prices from late 2018, coupled with an output cut imposed on Nigeria by OPEC to 1.685 mbpd, poses a downside risk to the economic outlook.

Ghozzi concludes: “Parliament’s approval of the NGN8.83 trillion (US$24.4 billion) 2019 ‘budget of continuity’ is still delayed due to presidential elections. This cut, coupled with fluctuations in oil price and potential supply disruptions, could potentially impact the 2019 budget implementation.”

Note:

• Comments provided by Yasmine Ghozzi, Economist at GlobalData
• Information based on GlobalData’s report: ‘Global Construction Mega Cities’

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