overview of the building and … vol12 no2 dec...overview of the building and construction sector in...

JORIND 12 (2) December, 2014. ISSN 1596-8308. www.transcampus.org/journals; www.ajol.info/journals/jorind

OVERVIEW OF THE BUILDING AND CONSTRUCTION SECTOR IN THE NIGERIAN

ECONOMY

Ademola Adeagbo

Economic Policy Research Department

Nigerian Institute of Social and Economic Research, Ibadan

E-mail: [email protected]+234-803-452-0642

Abstract

This paper examines the role expected of the building and construction sector in actualising the goals and

objectives of the Nigeria’s Vision 20:2020; the performance of the sector with respect to its contribution

to the growth of the country’s economy over the years; and the challenges being faced by the sector which

are likely to constrain its performance and capacity to contribute towards actualising the dreams of

Vision 20:2020.The paper reveals that in 2008 and 2009 the sector was the 8th largest contributor to the

country’s GDP. However, between the third quarters of 2010 and 2012, the sector’s position as a

contributor to the GDP dropped to 9th position while it improved slightly to 8

th position among the twelve

sectors considered, in spite of the fact that the sector maintained increasing share of GDP between the

third quarter of 2010 and third quarter of 2013. It contributed between 1.56 per cent and 1.80 per cent to

the country’s GDP respectively between 2010 and 2013. The paper concludes that the building and

construction sector has a critical role to play in the country’s economic transformation agenda.

Therefore, there is the need to: create more conducive business environment for actors in the sector;

enhance capacity building for professionals in the sector; encourage production of affordable and quality

building materials; and enhance access to credit facilities.

Keywords: Building, construction, gross domestic product, multiplier effect, overview

Introduction

The Building and Construction sector is very

crucial in any nation’s social and economic

development. There are many factors responsible

for this. Apart from the sector’s potential with

respect to employment generation, the various

activities undertaken in the sector are very

germane to fostering effective sectoral linkages

and enhancing, as well as sustaining economic

development. For instance, efforts at ensuring

sound and sustainable national and economic

development cannot ignore the importance of

infrastructural development (transportation-road,

rail, air, sea modes), industrial development

(construction of industrial parks and factories),

construction of institutional buildings, and

provision of accommodation with respect to

construction of various types of buildings, among

others. These are areas where the building and

construction sector is indispensable.

The Building and Construction sector has been

relevant in the development of the Nigerian

economy. Housing is a major component of the

building and construction sector. As noted by

Kissick et al (2006), “housing is a key input in

economic, social, and civic development; many

housing-related activities contribute directly to

achieving broader socio-economic development

goals; it is a major driver of economic growth;

worldwide and especially in low-income countries,

housing construction creates job opportunities”. As

also noted by Glossop (2008), housing matters to

economic development as it enhances economic

performance. Similarly in Nigeria, the construction

sector has provided employment for different

categories of employees, especially in major

Nigerian cities where construction activities have

been immense. These include the Federal Capital

Territory (FCT), Abuja, the various State capital

cities like Lagos, Port-Harcourt, Ibadan, Kaduna,

Kano, among others. The sector is also pivotal in

sectoral linkage as its activities have multiplier

effects on the growth of other sectors, especially

the building materials industry, real estate

transactions, among others.

More importantly, the drive towards achieving the

goal and objectives of the Nigerian Vision 20:2020

blueprint has an anchor in the building and

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construction sector. In the blueprint, infrastructural

development is recognised as key to achieving

economic transformation. Most of the activities

lined up to be undertaken have strong role for the

building and construction sector. Efforts at

transforming the power, transport, housing and

industrial sectors are not likely to bear the desired

fruits without the active participation of the actors

in the building and construction sector as well as

the effective and efficient performance of the

sector.

There are challenges associated with the

performance of the building and construction

sector. These have always adversely affected the

sector’s contribution to economic development. In

view of the importance of the sector and the role it

is expected to play towards achieving the country’s

vision, there is need to address those challenges

and put the sector in a good stead for effective and

efficient performance in the years ahead.

Against this backdrop, this paper examines, among

others, the focus of Vision 20:2020 and the

importance of the building and construction sector,

the performance of the sector in the country’s

economic development, the challenges associated

with the performance of the sector and what should

be done to maximise the contributions of the sector

to economic development.

Conceptual framework and literature review

Housing is a major component of the building and

construction sector. In this regard the relationship

between the housing sector and the economy is

used to illustrate the importance of the building

and construction sector to the economy.

There are various conceptualisations about the

relationship between the housing sector and

economy. Willey et al (2008) present a framework

(as indicated in igure 1 below) that shows how

housing and the economy link. The linkage is

highlighted, as shown in the figure under the

following headings:

Housing as a residence and a

basis for place shaping

Housing and labour markets

Housing within areas of ‘growth’

and regeneration

Housing and the construction and

design sectors

Housing as a service provider

within local economies

Housing as a medium for capital

investment.

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Figure 1: The Linkage between Housing and the Economy

Source: Martin Willey et al (2008)

ECONOMY

Growth and Regeneration

HOUSING

Construction and Design

Services

Labour

Residence/Place

Capital Investment

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Housing as a Residence and basis for

place shaping

It is opined that decent homes in safe and cohesive

communities that themselves have recognised

‘function’ and identity (not shanties, squatter

settlements and slums) can inspire confidence in an

area as well as provide a secure base that offers

real opportunity enabling people to lead fulfilling

lives. Such a community is likely to deliver

economically active residents.

Housing and Labour markets

This has to do with the need for certain skills to be

available in steady and reliable supply to meet the

needs of local businesses. Where housing is not

affordable, there is problem getting low paid

workers which can restrict economic growth. Low

paid workers live elsewhere and they have to be

transported at high cost which may increase cost of

doing business.

Housing within areas of ‘growth’ and

regeneration

In areas designated for growth and regeneration,

increased supply of housing is pivotal in leading

development, to support the economic growth

taking place and to ensure greater sustainability of

development of the overall area.

Housing and the Construction and design

sector

The construction industry has contributed

significantly to national and local economies.

Housing development and refurbishment

programmes provide a major contribution to

economic activity, creating a range of employment

opportunities, for example construction workers,

project and site managers, designers, architects,

surveyors, engineers, etc

Housing as a service provider within local

economies

As a business, the housing sector contributes to

local, sub-regional and regional economies. There

are several services and activities associated with

housing. There are real and estate business,

housing and neighbourhood management services,

parks and gardening services, among others. Many

people are engaged in these services to earn a

living.

Housing as a medium for capital

investment

Housing provides an attractive form of capital

investment. Such investments drive the

development of particular forms of housing that

seems to be attractive and successful in increasing

quickly in value which at times could lead to ‘buy

and leave empty’ phenomenon as is experienced in

Abuja, where the increase in capital value alone

makes the investment worthwhile.

Wiley (2006), examined the impact of housing on

the economy of Philippine. He noted that the

Philippine’s housing industry has made substantial

contribution to the country’s economy. According

to him, every peso spent on housing activities

generates additional P16.61 pesos in the GDP

which means that every P10 Billion worth of

housing units can contribute a total of P166 Billion

of economic activity for the country. He attributes

this to the fact that more housing investments and

construction mean increases in job generation and

sales for allied industries of the shelter sector.

The HIA Economic Group (2010) examines the

economic multiplier effects of housing on

Australian economy. It was observed that in

2008/2009, Australia’s Housing and Renovations

Industry contributed approximately $64 billion to

the economy, accounting for 5.3 per cent of the

country’s GDP. According to the group, for every

$1 million of construction output, tens of

thousands of dollars are spent on primary

materials, transport, and property services. On a

wider scale, the group noted that though the

industry’s contribution accounted for $64 billion to

the country’s economy, when combined with those

primary and secondary businesses that indirectly

supply to the construction industry, the overall

effect is far stronger in terms of both employment

and output.

Pepple, the former Nigerian Minister of Lands,

Housing and Urban Development, also notes that

housing is universally acceptable as the second

most important human need, after food and that

under the Nigeria’s Transformation Agenda and

Vision 20:2020, the provision of accessible and

affordable housing is one of the strategic national

imperatives for guaranteeing the well-being and

productivity of the citizenry. The Minister also

acknowledged the job creation potential of the

housing sector. According to her, the construction

of housing unit requires the services of Architects,

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Engineers, Draughtsmen, Bricklayers, Tillers,

Carpenters, Moulders, Plumbers, Electricians, Iron

Benders, Painters and various vendors. She also

opines that the funding of sustainable housing

delivery promotes investments in the production of

building materials and boosts linkage businesses,

all of which generate employment in the economy

(Pepple, 2013).

The Nigeria’s Vision 20:2020 and the building and

construction sector

Nigeria has always made efforts at improving its

economic status. This concern has resulted in the

preparation and implementation of many economic

blueprints. Examples include the National

Economic Empowerment Development Strategy I

and II (NEEDS I and II), the Seven-Point Agenda

and the current Vision 20:2020. The Vision

20:2020 is the economic blueprint prepared to

synergise the provisions of both the NEEDS

documents and the 7-Point agenda with the

ultimate aim of being among the first 20

economies of the World with a minimum GDP of

$900 billion and a per capita income of no less

than $4,000 per annum by the year 2020 (National

Planning Commission, 2009).

The Vision document focuses on four dimensions

(social, economic, institutional and environmental)

and anchors the fabric of the envisaged economy

on three pillars. The three pillars are:

Guaranteeing the productivity and

wellbeing of the people;

Optimising the key sources of economic

growth;

Fostering sustainable social and economic

development.

There is no gainsaying the fact that the Building

and Construction sector has a critical role to play

in undertaking all the activities involved in all the

four dimensions and the three pillars. This

becomes clearer if the first pillar – ‘Guaranteeing

the productivity and wellbeing of the people’ – is

unbundled as indicated below:

Eradicate extreme hunger and poverty

o Support for massive irrigation

schemes

o Increasing market access to rural

areas through massive

rehabilitation and construction of

additional rural roads

Enhance quality healthcare

o Sitting of at least one Primary

Healthcare (PHC) facility in each

ward

o Sitting of at least one general

hospital in each local government

area

Provide sustainable access to potable water

and basic sanitation

o Encouraging Community

Participation (CP) Private Sector

Participation (PSP) and Public

Private Partnership (PPP) in the

provision of water supply and

sanitation schemes and services

o Rehabilitating, constructing and

modernising existing water supply

and sanitation schemes,

distribution networks and facilities

for optimal operation.

Provide accessible and affordable housing

o Privatising the Federal Housing

Authority (FHA) to compete with

other players in the industry in the

provision of mass housing

o Providing incentives and the

necessary legal and regulatory

environment to attract Public

Private Partnership (PPP) in mass

housing development

o Rehabilitating all existing

professional, technical and

vocational training centres and

building new ones to ensure

sustainable production of skilled

manpower for the housing industry

o Providing targeted subsidies and

housing finance credit guarantees

to facilitate home ownership by

lower income groups/people with

disabilities, etc

o Working with states and local

governments to produce and

implement a unified and integrated

infrastructure development for

housing, open up new layouts and

provide site and services for the

private sector to develop

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affordable and decent mass

housing

The activities lined up for the first pillar as

highlighted above, if implemented as indicated, are

expected to provide opportunities for the Building

and Construction sector to play a major role in the

new dispensation. Additionally, with respect to

attainment of industrialisation ambition, the plan

indicates that industrial clusters will be built in

each of the nation’s geo-political zones. Priority is

given to the development of necessary

infrastructure for the industrial clusters. The

clusters’ development strategy focuses on the

development of four key facilities which are

highlighted as follows.

Industrial Parks, which will contain:

o An independent power unit up to

50/100MW

o A training school

o Internal road network and major

road links to the highways

o Security

o Newtown development

o Water supply/sewage treatment

o Airport within 100km radius, and

o Universities/polytech/nics within

300km radius.

Industrial Clusters

o Oases of industrial activities and

commerce, covering areas of

between 100 and 1000 hectares

Enterprise Zones to be located in both state

capitals and every Local Government Area

o Platforms of 5-30 targeted at

incorporating the informal sector

into the Organised Private Sector

(OPS).

Incubators – a start-up centre for new and

inexperienced entrepreneurs, graduates

tertiary institutions, inventors and

vocational persons

These provisions in the Vision 20:2020 underscore

the importance of the Building and Construction

sector as a critical one to be relied on to actualise

the nation’s ambition through effective and

efficient execution of various projects as

highlighted above. Thus, the relevance of the

sector to the country’s economic development

presently and in the nearest future is very strong.

Hence, a look at how the sector has fared so far,

especially in the last decade in its contributions to

economic development is imperative. This is to

enable identification of the grey areas and proffer

informed measures for strengthening the sector in

preparation for its role in the new economic

dispensation.

The performance of the building and construction sector in

the Nigerian economy

The strategic importance of the Building and

Construction Sector necessitates a review of how

the sector has fared in the recent past. This section

draws largely from National Bureau of Statistics’

(NBS) data and information contained in the

Nigerian Vision 20:2020 documents. Table 1

shows the situation between 2008 and the third

quarter of 2013. In 2008, the Building and

Construction sectors accounted for 1.84 per cent of

the country’s GDP, ranking 8th out of the twelve

sectors. It maintained the same rank in 2009 but

dropped to ninth position in the third quarters of

2010 through 2012 while it moved to eighth

position in the third quarter of 2013. It is however

noteworthy that the share of the sector increased

steadily from 1.62 per cent in the third quarter of

2010 to 1.79 per cent in the third quarter of 2013.

This is illustrated in Figure 1.

Again, the Building and Construction sector and

that of the Real Estate sector had a combined share

of 3.47 per cent in 2008 which increased to 3.61per

cent in 2009. However, this dropped to 3.18 per

cent in the third quarter of 2010 but steadily

increased to 3.28 per cent in the third quarter of

2011, 3.41 per cent in the third quarter of 2012,

and 3.59 per cent in the third quarter of 2013. This

trend is illustrated in Figure 2. The two sectors’

share of the overall GDP was ranked 7th in 2008

but dropped to 8th position in 2009. However, it

maintained 7th position in the third quarters of 2010

through 2011 while it moved to 6th position in the

third quarter of 2013. This is indicative of

increasing pace of activities in the Building and

Construction and Real Estate sectors during those

years. Nigeria rebased its GDP this year (2014)

and the figures from the rebased GDP for the

country, as shown in the last column of Table 1,

further underscore the importance of the building

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and construction, and the real estate sectors,

revealing that as at 2010, the Building and

Construction sector contributed 2.90 per cent to the

country’s GDP while the Real Estate sector

contributed 7.62 per cent.

Table 1 Sectoral contribution to real GDP (Constant prices 1990) (2008 – Q3 2013)

Sources: * NBS (2011) 2010 Review of Nigerian Economy (P.15); ** NBS (2012) Revised 2010 and

Estimates for Q1-Q4, Gross Domestic Product for Nigeria, NBS, Abuja; ***NBS (2014) 2012 and

Estimates for Q1-Q3, 2013 Gross Domestic Product for Nigeria, NBS, Abuja; **** Yemi Kale (2014) Re-

basing/Re-benchmarking of Nigeria’s Gross Domestic Product, National Bureau of Statistics (NBS),

Abuja, Nigeria; Note: ****(complete data for other sectors and other years not yet available)

Activity 2008* 2009* Q3

2010**

Q3

2011**

Q3

2012***

Q3

2013***

2010

Rebased****

Agriculture 42.13 41.70 44.35 43.64 42.62 41.93 n.a

Solid Mineral 0.32 0.33 0.39 0.40 0.43 0.40 n.a

Crude Petroleum and

Natural Gas

11.35 16.29 15.37 14.27 13.42 12.50 n.a

Manufacturing 4.14 4.17 3.48 3.51 3.53 3.58 6.60

Telecommunication and

Post

2.92 3.66 4.33 5.46 6.73 7.84 -

Finance and Insurance 3.81 3.70 3.08 2.98 2.92 2.84 2.29

Wholesale and Retail

Trade

17.41 18.14

17.55

18.29 18.81 19.20 -

Building and

Construction

1.84

(8th)

1.92

(8th)

1.56

(9th)

1.61

(9th)

1.68

(9th)

1.80

(8th)

2.90

Hotel and Restaurants 0.46 0.48 0.48 0.50 0.53 0.56 n.a

Real Estate 1.63

(9th)

1.69

(9th)

1.62

(8th)

1.67

(8th)

1.73

(8th)

1.79

(9th)

7.62

Business and Other

Services

0.87 0.89 0.81 0.82 0.84 0.86 n.a

Others 7.15 7.02 6.99 6.84 6.76 6.65

100.0 10.0

100.0

100.02 100.0 100.0

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Figure 1: Sectoral Contribution to Real GDP at 1990 Constant Prices (1999/2008 – Q3, 2013)

Figure 2 Trend in Share of Building & Construction and Real Estate Sector in Real GDP (2008-Q3 2013)

Though, the growth rate of the Building and

Construction sector, as shown in Table 2, dropped

from 13.07 per cent to 11.97 per cent in 2009 and

10.15 per cent in the third quarter of 2010, it

increased steadily to 11.32 per cent in the third

quarter of 2011 and 14.31 per cent in the third

quarter of 2013. The growth rate of the sector

improved from 7th

position in 2010 to 3rd

position

in the third quarter of 2013. The Real Estate sector

growth rate dropped from 11.97 per cent in 2008 to

10.94 per cent in 2009, increased to 11.68 per cent

in the third quarter of 2010 and dropped gradually

to 10.24 per cent in the third quarter of 2012 while

it increased to 10.35 in the third quarter of 2013. It

maintained 7th position in 2008 and 2009 but

improved to 6th position in the third quarters of

2012 and 2013. With respect to the combined

growth rates of the Building and Construction

sector and the Real estate sector, the trend is

illustrated in Figure 3. The growth rate dropped

from 12.3 per cent in 2008 to 10.92 per cent in the

third quarter of 2010, increased to 10.95 per cent in

the third quarter of 2011, dropped again to 10.88

per cent in the third quarter of 2012 while it

increased to 12.33 per cent in the third quarter of

2013. This shows a fluctuating trend which could

2008 2009 Q3, 2010 Q3, 2011 Q3, 2012 Q3, 2013

1.84 1.92

1.56 1.61 1.68 1.8

1.63 1.69 1.62 1.67 1.73 1.79

3.47 3.61

3.18 3.28

3.41 3.59

Building & Construction Real Estate Building & Construction and Real Estate

3.47

3.61

3.18

3.28

3.41

3.59

2008 2009 Q3, 2010 Q3, 2011 Q3, 2012 Q3, 2013

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Box 1 Potential of the Building and Construction Sector

“The construction industry is a sector of the economy which transforms various resources into constructed economic and social infrastructure and facilities. It is the sector that is responsible for implementing all construction policy objectives of the local governments. A substantial percentage of the economic resources laid out by the government in form of budget proposals in most developing countries will be devoted to the provision of infrastructural facilities and bases for other developmental objectives and these resources will have to be expended in and by the construction industry. The importance of the construction industry is not confined to the direct contribution it makes to the different measures of economic development and wellbeing but also its influence in generating non-constructional expenditure which suggests a high multiplier effect”. Source: AFRINVEST (West Africa) (2008)

be explained by other factors like unsteady prices

of cement and land, as well as cost of construction.

Table 2: GDP growth rate by sectors at 1990 constant prices (2009 - Q1, 2013)

Sources: * NBS (2011) 2010 Review of Nigerian Economy (P.15); **NBS (2012) Revised 2010 and

Estimates for Q1-Q4, Gross Domestic Product for Nigeria, NBS, Abuja; *** NBS (2014) 2012 and

Estimates for Q1-Q3, 2013 Gross Domestic Product for Nigeria, NBS, Abuja

Figure 3 Trend in Growth of Real GDP for Building,

Construction and Real Estate Sector (1999/2008-Q1

2013)

Expectations from the building and construction

sector

It is widely acknowledged that the Building and

Construction Sector plays a very critical role in

economic transformation. This is acknowledged by

AFRINVEST (2008) as presented in Box 1 and by

12.43

11.45

10.92 10.95 10.88

12.33

2008 2009 Q3, 2010 Q3, 2011 Q3, 2012 Q3, 2013

Activity 2008* 2009* Q3

2010**

Q3

2011**

Q3

2012***

Q3

2013***

Agriculture 6.27 5.88 5.90 5.60 3.89 5.08

Solid Mineral 12.77 12.08 12.42 11.56 12.61 12.67

Crude Petroleum and Natural Gas -6.19 0.45 5.12 -0.38 0.08 -0.53

Manufacturing 8.89 7.85 7.91 8.38 7.78 8.16

Telecommunication and Post 34.02 34.18 34.79 35.13 31.57 24.42

Finance and Insurance 4.82 4.01 3.99 3.95 4.08 4.14

Wholesale and Retail Trade 14.02 11.48 11.84 11.82 9.62 9.03

Building and Construction 13.07

(4th)

11.97

(4th)

10.15

(7th)

11.32

(6th)

11.52

(5th)

14.31

(3rd

)

Hotel and Restaurants 12.94 11.89 11.92 11.79 12.33 13.66

Real Estate 11.79

(7th)

10.94

(7th)

11.68

(6th)

10.57

(7th)

10.24

(6th)

10.35

(6th)

Business and Other Services 10.13 9.39 8.34 8.51 9.11 9.20

Others 5.29 5.00 5.04 5.06 5.25 5.10

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Box 2Importance of Building and Construction Industry

“We risk not becoming one of the developed nations if we fail to get our building and construction industry right”... -Vice President Namadi Zambo, while declaring open the 2011 edition of the Roundtable

“Behind the magnificent buildings that glitter our cities, the bridges that connect people from different sides, road networks that facilitate easy travel from one point to another, air terminals where planes land, is the construction industry” -Patrick Achitabwino (2009)

the Nigerian Vice President, Alhaji Sambo as contained in Box 2. This is also

recognised in the Vision20:2020 document as the provisions in the

document expect much from the sector.

As shown in Table 3 and illustrated in Figure 4 the Building,

Construction and Real Estate sector, was expected to contribute

5.0 per cent to the GDP between 2010 and 2013, compared to its

average contribution of 3.1 per cent recorded for the period of

2004 to 2009. This implies that the sector was expected to

increase its 2004-2009 contribution by about 61 per cent.

Similarly, as shown in Table 4 and illustrated in Figure 5, the

sector, in order to meet the expected contribution to the GDP, was

expected to record an average growth rate of 35.8 per cent in the

2010-2013 period compared to an average growth rate of 10.3 per

cent recorded between 2004 and 2009. This also implies that for

the sector to record expected growth rate for 2010-2013, the

sector was expected to improve the figure recorded between 2004

and 2009 by about 247.6 per cent. In this wise huge amount of

money was planned to be expended on physical infrastructure

between 2010 and 2013, as shown in Table 5. The Physical

Infrastructure’s share of the total programme cost for the period

2010-2013 was 33 per cent. The Building and Construction

sector is a major player in the implementation of physical

infrastructure projects.

However, the question is whether the sector is free of challenges

that could have constrained its performance and constitute a cog

in the wheel of progress towards achieving the feat expected of

the sector in within the stipulated period and further

improvement in the sector in future. Some of the likely

challenges associated with the performance of the sector, which

should be addressed are examined in the next section.



Table 3 Projected sectoral distribution of GDP (%) at 1990 constant prices (2010-2013)

2004-2009

(%)

2010-2013

(%)

GDP 100.0 100.0

Agriculture 41.8 40.1

Building, Construction and Real Estate 3.1 5.0

Oil and Gas 22.7 14.7

Health 0.0 0.1

Finance and Insurance 4.0 3.5

Manufacturing 3.9 4.4

Mining and Quarrying 23.0 15.0

Other Services 1.4 1.6

Public Administration 0.7 0.7

Telecommunications and Postal Services 1.8 4.8

Transportation 2.6 2.6

Utilities 3.5 3.8

Wholesale and Retail Trade 14.3 18.3

Non-oil 77.3 85.3

Source: National planning Commission: NV 2020, NIP Vol. I, Page 43

360 359



Figure 4 Projected Contribution of the Building, Construction and Real Estate sector to GDP (2010-2013)

(%)

Table 4 Projected Growth Rate of Real GDP by Sectors at 1990 Constant Prices (2010-2013) (%)

Sector 2004-2009

(%)

2010-2013

(%)

GDP 7.1 11.0

Agriculture 6.7 6.7

Building, Construction and Real Estate 10.3 35.8

Oil and Gas -2.1 3.9

Health 7.1 28.6

Finance and Insurance 4.1 6.1

Manufacturing 9.7 14.4

Mining and Quarrying -1.9 4.0

Other Services 14.2 8.2

Public Administration 5.5 15.5

Telecommunications and Postal Services 36.9 31.5

Transportation 14.0 7.3

Utilities 6.7 22.3

Wholesale and Retail Trade 17.7 12.1

Non-oil 9.7 12.2

Source: National planning Commission: NV 2020, NIP Vol. I, Page 44

2004-2009

2010-2013

3.1

5

361 360



Figure 5 Projected Growth Rate for the Building, Construction and real estate Sector (2010-2013) (%)

2004-2009 2010-2013

10.3

35.8

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Table 5 Sectoral distribution of programme cost (2010-2013) (%)

Sector Proportion (%)

Productive Sector 16.0

General Administration 3.0

Regional Development 10.0

Governance & Security 10.0

Human Capital Development 19.0

Physical Infrastructure 33.0

Knowledge based Economy 3.0

Capital Supplementation and Residual Items 6.0

Total 100.0

Source: NV2020 NIP Volume I (Table 23:P.75)

Challenges associated with the performance of the building

and construction sector

In spite of the importance of the Building and

Construction sector in the economic development

of nations, the sector is faced with some peculiar

challenges in Nigeria. These include difficult

business environment, dearth of technical

expertise, dearth of key building materials, and

constrained access to credit.

Difficult business environment

A look at table 6 shows that Nigeria is ranked 131st

among 185 countries, with respect to Ease of

Doing Business, according the 2013 World Bank

report on Ease of Doing Business, indicating a

worse situation compared to South Africa, Ghana,

Japan, China, United Kingdom and the U.S.A.

With respect to starting a business, Nigeria is

ranked 119th, performing better than only China, as

indicated in the table. With respect to dealing with

construction permits, Nigeria is ranked 88th, worse

than South Africa, Japan, United Kingdom and

U.S.A but better than Ghana and China. Nigeria is

also ranked below other countries in the table with

respect to registering property and enforcing

contracts. With respect to getting credit, Nigeria

ranks equal to Ghana and Japan, better than China

but worse than South Africa, United Kingdom and

the U.S.A. On the issue of protecting investors,

Nigeria also ranks below the selected countries

with the exception of China.

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Table 6: Ease of doing business in selected countries

Country Ease of

Doing

Business

Starting a

Business

Dealing with

Construction

permits

Registering

Property

Getting

Credit

Protecting

Investors

Enforcing

Contracts

Nigeria 131 119 88 182 23 70 98

South

Africa

39 53 39 79 1 10 82

Ghana 64 112 162 45 23 49 48

Japan 24 114 72 64 23 19 35

China 91 151 181 44 70 100 19

United

kingdom

7 19 20 73 1 10 21

USA 4 13 17 25 4 6 6

Source: World Bank (2013) Doing Business 2013 – Smarter Regulations for Small and Medium-Size

Enterprises, Comparing Business Regulations for Domestic Firms in 185 economies, The World Bank,

IFC, Washington D.C.

Dearth of technical expertise

The activities in the Building and Construction

sector are often technical and specialised. They

require adequate availability of skilled

professionals and artisans. Unfortunately, they are

not available in required quantity and quality. This

affects the performance of the sector.

Dearth of key building materials

Availability of Building materials in adequate

quantity and quality is crucial for the activities in

the Building and Construction sector. However, the

situation is such that the materials are often not

available in the required quantity and quality. This

adversely affects cost of construction and quality

of projects executed. The case of cement was so

serious until recently due to expansion of

production, especially by Dangote cement

company.

Constrained access to credit

Activities in the Building and Construction sector

have serious cost implication. In most cases, actors

in the sector are required to pre-finance projects

before they are mobilised while the time lag

between period of contract completion and final

payment is often long. The situation is

compounded by constrained access to credit. As

shown in Table 7, the Real estate sector and related

Public Utilities sectors are classified under Less

Preferred Sectors and their shares of total credit to

the Core Private Sector in 2006 were 5.9 per cent

and 0.9 per cent respectively. As at 2011, their

shares of the total credit constituted 6.2 per cent

and 0.9 per cent, respectively.

364



Table 7 Credit to the core private sector, 2006-2010 (%)

Source: CBN (2012) 2010 Annual report, CBN, 31st December, 2011published July 16, 2012.

Conclusions

The fact that the Building, Construction and Real

Estate sector is very crucial to Nigeria’s economic

transformation and the actualisation of Vision

20:2020 has been further affirmed in this paper.

The performance of the sector in the Nigerian

economy, especially with respect to its

contribution to GDP, is improving but still below

the potential contribution of the sector. The sector

has a critical role to play in the economic

transformation of the country, based on the

projected contributions of the sector to the

country’s GDP between 2010 and 2013 and

throughout the lifespan of Vision 20:2020.

However, for the sector to perform to the extent

that its contribution to economic development will

be maximised, the associated challenges should be

addressed. The business environment should be

made more conducive to ease the activities and

operations of actors in the sector. There is need for

capacity building for professionals and experts in

the sector. Similarly, building material

manufacturing companies should be encouraged to

produce adequate and affordable materials to meet

the huge demand for the various building materials

in the sector. The tempo of increase in cement

production which is a key building material should

not be relaxed as demand for it will continue to be

on the increase. Access of actors in the Building

and Construction sector to credit facility should be

enhanced. Banks should make more funds

available for the benefit of the actors in the sector

while conditions for accessing such funds should

be attractive.

References

AFRINVEST (West Africa) (2008) Nigerian-Non-

Financial sector-The Forgotten

Plenty, Making Steady

Progress

Central Bank of Nigeria (CBN) (2012) 2010

Annual report, 31st December, 2011published

July 16, 2012. CBN, Abuja.

Central Bank of Nigeria (2011) ‘Economic

Report’, second quarter, 2011.

CBN, Abuja.

Glossop, C. (2008), Housing and Economic

Development, Moving forward

together, Centre for Research

and Market Intelligence, Housing Corporation.

HIA Economic Groups (2010), The Economic

Multiplier Effects of Housing, The

Importance of Housing

to the Wider Economy, Housing Industry

Association Ltd, January, 2010

Sectors 2007 2008 2009 2010 2011

1. Priority Sectors 25.9 26.2 25.2 30.4 36.1

Agriculture 3.2 1.4 1.4 1.7 3.5

Solid Minerals 10.7 11.3 12.7 15.3 17.7

Exports 1.4 1 0.5 0.6 0.5

Manufacturing 10.4 12.5 10.6 12.8 14.4

2. Less Preferred Sectors 41.2 42 46.9 47.8 45.8

Real Estate 6.2 6.2 8.3 8.7 6.2

Public Utilities 0.6 0.6 0.8 0.7 0.9

Trans. & Communication 6.8 7.2 8.3 10.7 17.3

Finance and Insurance 9.4 9.5 13.1 11.3 4.1

Government 3.7 1.9 3.7 4.9 6.8

Imports and Domestic trade 14.5 16.4 12.8 11.7 10.3

3. Unclassified 32.9 31.8 27.9 21.8 18.1

Total (1+2+3) 100 100 100 100 100.0

365



Kissick, D., David, L., Morey, K., John B., Jerome,

A. and Joseph, E. (2006) ‘Housing

for All: Essential

to Economic, Social and Civic Development’,

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Abuja: NPC

National Planning Commission (2010) The First

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Implementation Plan (2010

2013), Vol I

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District, Abuja

www.nigrerianstat.ng, accessed on June 18, 2014.

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Q4, Gross Domestic Product for Nigeria,

NBS, Abuja, www.nigrerianstat.ng, accessed on

June 18, 2014.

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Gross Domestic Product for Nigeria, NBS,

Abuja, www.nigrerianstat.ng, accessed on June 18,

2014.

Patrick, A. (2009) Construction Industry and

national development,

http://pachitabwino.blogspot.com/,

August 26, 2009, accessed on June 20, 2012

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366


http://www.nigrerianstat.ng/



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