Nigeria’s construction industry declined by 7.7% in real terms in 2020, hit by both the containment measures and disruption caused by the COVID-19 pandemic. The steep decline in oil and gas prices, which accounted for around 65% of the government’s revenues, worsened the situation by further curtailing expenditure power on infrastructure.
However, the industry is expected to recover in 2021, with an expected real growth rate of 3.9%, driven by a sharp recovery in output levels compared to periods when works were not permitted or were severely restricted in 2020, says GlobalData, a leading data and analytics company.
GlobalData’s report, ‘Construction in Nigeria – Key trends and opportunities to 2025-(Q2-2021)’, reveals that the country’s construction industry is expected to post an annual average growth rate of 3.2% in real terms between 2022-2025, supported by the government’s plan to invest in the country’s infrastructure and energy sector.
The 2021 Appropriation Bill, presented by President Buhari to the National Assembly, is designed to continue achieving the goals of the Economic Sustainability Plan, which provides a road map for post-COVID-19 economic recovery to transition from the Economic Recovery and Growth Plan (2017–2020) to the successor Medium-Term National Development Plan (2021–2025).
Dhananjay Sharma, Analyst at GlobalData, comments:
“The expected passage of the long-pending Petroleum Industry Bill (PIB) may provide a much-needed impetus to Nigeria’s oil and gas sector, thereby creating multiplier effects across the entire construction chain and the Nigerian economy. The government’s decision to reduce deepwater royalties and other taxes to 5% from the earlier 7.5%, and increasing production levels to 50,000bpd from the earlier 15,000 bpd, offer optimism regarding the government’s intentions to pass the bill.”
In February 2021, President Muhammadu Buhari approved the development of an infrastructure company, Infra-Co, with an initial capital of NGN1 trillion ($2.7bn) that focuses primarily on the country’s infrastructure development. This is a public-private partnership, and the initial capital will come from the central bank, the Nigerian Sovereign Investment Authority (NSIA) and the Africa Finance Corporation.
“The focus on PIB augurs well for the Nigerian economy in general and the construction sector, in particular – given delays in implementing key legislative reforms that have compounded problems for the sector, which is still suffering under the weight of OPEC+ output cuts and the impact of COVID-19.
“Nigeria’s oil and gas construction projects have a combined value of $139.6bn, of which $88.5bn relates to projects in the pre-execution stages. If all projects do proceed as planned and spending is evenly distributed over the construction phase, annual spending for 2021 is expected to be $8.2bn and could reach $25bn in 2023.”