Nigeria: Land of Promise for the construction sector?

Being the largest and most populous country on the African continent it is expected that the construction sector in Nigeria, would be at the core of economic activities given the economies of scale opportunities for companies operating in the Construction sector.
Lets first get a sense of the country itself before we considering the construction sector that is so aptly described in the latest WoW report (The Construction Sector in Nigeria) and look at some nuances to the arguments put forward in the report.
The country’s vast population which is made up of the “GDP” generated by each person multiplied by the number of people which pushes Nigeria to the top. A large number of people who really don’t make that much money.
The question for individual people then would be: Would you choose to live in a country where individual income is very low and yet, the economy is considered the biggest or would you rather choose one with high individual incomes yet has a lot less people? In every country some people make it rich; however the chances of any person to be amongst that elite gets smaller to very small, the more people live at or below the breadline.
From the very general to something a bit more concrete about Nigeria as compared to South Africa and Egypt, the contenders for the crown of the biggest economy, we will add Rwanda and China to sharpen the perspective as we look at the impact of economic policies and governance over a period of time, long enough to see the significant impact of good strategic policies.
The table below provides a comparison of GDPs of some countries of interest as further context on the subject:
The first comment is the fact that in 2000, South Africa’s economy was twice the size of Nigeria’s.
The second comment is that the slow or lack of economic growth in South Africa during these 20 years caused the individual income (GDP/Cap) to lag behind many other nations including the ones in the table above.
For example, China’s individual wealth was 1/3rd of South Africa’s in 2000 and now in 2020, China’s individual wealth is twice that of South Africa. That is the power of growth strategies in the long run. Nigeria did better than South Africa in terms of individual wealth. They saw a larger improvement than South Africa’s from $US568 to $US2097, a multiple of 3.7 whilst SA increased by only 1.7.
According to WoW, Nigeria’s construction industry is doing well in the circumstances, the latter meaning that as everything else in Nigeria, the sector is also plagued by corruption and nepotism. People always say corruption is everywhere; of course but it is the extent of it that makes all the difference! Why have China, where corruption is dealt with swiftly and severely, and Rwanda, being landlocked with no natural resources but having a “benevolent” dictator, done so much better?
Because of its size, Nigeria’s construction contribution to its GDP of 4.12% is not exceptional in its share but relevant in monetary terms. The list of current projects and values stated in the Wow report are impressive and do attract foreign investment, currently dominated by Chinese entities. The question is how much more investment and infrastructure development could happen if the regulatory environment and stricter governance would be in place? The backlog of housing development and road infrastructure offer big opportunities for industry players.
The various estimates of what is required to take advantage of the opportunities available is the for the government and public sector to create an enabling environment by addressing the political instability, fast track mega projects in transport infrastructure, utilities and unlock affordable housing programmes that are in big shortage.
Having visited the governor of one of the States and listened to what he perceive to be the biggest challenge; he singled out the lack of skills and expertise and not lack of funds. Whilst those are key, one cannot underestimate the importance of attracting Foreign Direct Investment (FDI). Without, the housing and the associated infrastructure will lag behind and the economic growth opportunities that could be brought about by the Construction sector will not materialise. Weak governance that leads to corruption and nepotism will continue to discourage FDI.
With the large population and increased oil prices, one would expect that Nigeria’s construction industry would be on a good footing to make a positive contribution to the economy – but alas – the jury is still out on how much progress the Presidential team tasked with the responsibility of improving the ease of doing business, is making. Hopefully, the small gains made during HE President Buhari’s term will not be undone and bear fruit.