Nigeria’s Construction sector, which employs millions of people and contributes 3-4% of GDP, is crucial to the country’s urbanisation and infrastructural development. Yet the industry has been badly hit by economic instability, which is typified by unemployment, budget deficits, inflation, and exchange rate volatility. Increased prices for imported building supplies like Steel and cement due to high Inflation cause project delays, lower profitability, and financial losses for businesses. Foreign Investment is discouraged, Finance arrangements for construction projects become more complicated, and import costs rise due to the depreciation of the Naira.
These problems are made worse by bureaucratic inefficiencies and public financing delays. Workers’ employment Insecurity and businesses’ difficulties retaining talent are the results of labour market volatility. There are government programs like the National Infrastructure Master Plan, but their efficacy is hampered by budgetary limitations and erratic regulations. To increase efficiency and resilience, the industry needs new technology, improved project management, and cooperation between public and private organisations. Important building projects in Nigeria, like the Lagos-Kano Standard Gauge Railway (SGR) and the Ajaokuta Steel Complex, have had major delays.
Financial limitations have caused problems for the AKK gas pipeline project.
Funding shortages and policy obstacles have caused the SGR, which aims to improve connection nationwide, to move slowly. Financial limitations have also caused problems for the Ajaokuta-Kaduna-Kano (AKK) gas Pipeline project, which aims to increase domestic gas utilisation. Economic gains like job development and infrastructure improvements are hampered by these delays, which have an impact on areas like Lagos, Kano, and beyond. Project management in Nigeria is changing as a result of the implementation of Modern Engineering Practices (MEP) and Building Information Modelling (BIM).
Through improved stakeholder communication and a decrease in errors and project timeframes, these technologies increase efficiency. 3D modelling and advanced data analytics are being utilised more to manage expenses, optimise designs, and forecast dangers. In Nigerian building projects, promoting their broad implementation might greatly reduce delays and cost overruns. Nigeria’s infrastructure deficit is intended to be addressed via the National Integrated Infrastructure Master Plan (NIIMP), which makes significant investments in housing, electricity, and transportation. It is a sign of progress that infrastructure projects have received the largest capital vote in recent budgets.
Manufacturing is directly impacted by the construction sector.
Abidjan-Lagos Corridor and other projects are still in the planning stages, but execution has been sluggish. Nevertheless, Nigeria’s building sector has unrealised potential. Public Private Partnerships (PPP) have the potential to make large-scale project financing possible. Incorporating Renewable Energy sources and green building practices into urban projects offers a chance to follow worldwide Sustainability trends. Manufacturing is directly impacted by the construction sector, which generates demand for steel and cement. Also closely related is Real Estate development, as housing shortages are frequently caused by stalled developments.
Furthermore, the sector’s critical role in maintaining Economic Stability is highlighted by the impact that delayed transport infrastructure which was caused by building setbacks that created issues with International Trade and logistics. Nigeria’s Construction Sector is now recovering from contractions brought on by the COVID-19 pandemic and economic difficulties. Due to inflation, currency rate instability, and other economic pressures, its percentage of the GDP dropped to 3.2% by mid-2023, despite its substantial contribution of ₦18.7 trillion in 2022 (9.4% of the economy). From 21.9% in early 2023 to 25.8% in August, inflation skyrocketed, driving up the price of building supplies and affecting the feasibility of projects.
Related Article: Growth Forecast of Construction Industry
Financing issues are being addressed by government programs including the National Infrastructure Master Plan and the creation of the Infrastructure Corporation of Nigeria (InfraCorp). By 2030, InfraCorp hopes to raise $37 billion for infrastructure, having raised 1 trillion in seed capital. Furthermore, important projects like the Second Niger Bridge and important highways have been financed by mechanisms like the Road Infrastructure Tax Credit Scheme and Islamic Bonds (sukuk). The industry has room to grow, despite major obstacles such as a dependence on foreign supplies and fluctuating economic conditions. The need for housing, infrastructure, and urban development is still growing, and new finance models and public-private partnerships are being investigated.