An Overview of the Nigeria Construction Industry
Introduction
The construction industry plays a crucial role in driving economic growth and development in any
nation. It contributes significantly to the gross domestic product (GDP), employment generation, and the
creation of crucial infrastructure that supports various economic activities. In Nigeria, the construction
sector has witnessed remarkable growth and transformation in recent years, fueled by rapid
urbanization, population expansion, and government initiatives to address the country's infrastructure
deficit.
This term paper aims to provide an in-depth analysis of the Nigerian construction industry, examining its
current state, the challenges it faces, the opportunities available for growth and development, and its
future outlook. The paper will delve into various aspects of the industry, including construction materials
and techniques, project management and delivery, human resource and capacity building, financing and
investment, as well as environmental and social considerations.
Overview of the Nigerian Construction Industry
2.1. Brief History and Development
The Nigerian construction industry has a rich history that can be traced back to the pre-colonial era,
when traditional building methods and indigenous materials were used to construct shelters and
structures. They provided several job opportunities to the community. However, the growth rate was
still pretty slow at the time, even with a few foreign players in the market.
During the colonial period, the construction industry experienced significant growth as the colonial
authorities undertook infrastructure projects such as roads, railways, and public buildings. After
independence, the industry continued to evolve, with the government and private sector playing a
central role in driving construction activities. Nigeria also experienced an “oil boom”. The government
set up favorable policies to promote investment as well. Due to oil production prospects, many foreign
investors entered the market and invested in infrastructure. Likewise, local construction companies
sprung up and claimed a larger share in developing infrastructure. Collaborations with international
firms improved the quality of output since they fostered more advanced technology and highly qualified
teams.
2.2. Current Size and Economic Contribution
The construction industry in Nigeria is a major contributor to the country's economy, accounting for a
significant portion of the GDP. According to data from the National Bureau of Statistics, the construction
sector contributed approximately [insert relevant percentage] to Nigeria's GDP in [recent year]. The
industry also plays a vital role in employment generation, with thousands of Nigerians employed in
various construction-related professions, ranging from skilled tradesmen to engineers and project
managers.
2.3. Major Sectors
The Nigerian construction industry encompasses several distinct sectors, each with its unique
characteristics and growth dynamics. The residential sector, which encompasses the construction of
housing units, apartments, and residential complexes, has been a major driver of the industry's growth,
fueled by the increasing demand for housing in urban areas. The commercial sector, including the
construction of office buildings, shopping malls, and other commercial spaces, has also experienced
significant growth, driven by the expansion of businesses and the need for modern facilities.
Infrastructure development, particularly in the areas of transportation (roads, bridges, railways, and
airports), energy (power plants and transmission lines), and water and sanitation projects, has been a
key focus area for the Nigerian government and a major source of construction activity. The industrial
sector, which involves the construction of factories, warehouses, and other industrial facilities, has also
contributed to the growth of the industry, driven by the country's industrialization efforts.
2.4. Key Players/ factors of Growth of the construction industry
Key players
The Nigerian construction industry is comprised of various key players, each playing a crucial role in the
sector's development and growth. The federal and state governments are major clients and drivers of
construction projects, particularly in the areas of infrastructure development, housing, and public
buildings. Private developers, both local and international, are also significant players, undertaking a
range of residential, commercial, and industrial construction projects. Contractors, ranging from large
multinational firms to small and medium-sized local companies, are responsible for the execution of
construction projects. These contractors often work in collaboration with consultants, including
architects, engineers, and project managers, who provide specialized expertise and services throughout
the project lifecycle.
Other key players in the Nigerian construction industry include material suppliers, equipment
manufacturers and suppliers, financial institutions, and regulatory bodies responsible for setting
standards, enforcing regulations, and ensuring compliance within the industry.
Key Factors For The Growth Of Construction Companies In Nigeria
Nigeria witnessed tremendous growth in the last two decades. Like other sectors, however, it also took
a hit from the effects of the 2020 global pandemic and its corresponding restrictions. Nonetheless, it is
picking up in 2021, with experts predicting a steady rebound. The industry has grown steadily over the
years due to the following reasons.
Economic Diversification
The steady growth of multiple sectors has been a major boost for Nigeria’s Construction
industry. The country has enjoyed an average growth rate of between 2% and 3% yearly since
2000 due to multiple industries like oil and gas, entertainment, tourism, among others.
Development in these areas encourages infrastructure, which consequently enables the growth
of the building industry.
Good Commodity Prices
The strong commodity prices in Nigeria opened the gateways for many companies to set up
their operations in Nigeria. Such conditions have attracted even more foreign actors to set up
construction companies, especially in major cities like Abuja and Lagos. More industries mean
more infrastructure, thus boosting the building industry growth in the country. Financial experts
already suggest that oil prices would remain strong in the long term, which creates an even
more promising environment for this trend to continue.
Availability Of Materials
Before 2013, the country faced a shortage of steel, cement, and other materials. However, since
then, multiple companies have filled this void and worked together with the government to
increase production. As a result, the building industry in Nigeria resumed its steady growth
pattern.
Public And Private Partnerships
Nigeria’s business policies greatly encourage both local and foreign investors, which has
bolstered great partnerships. Intra-industry collaborations lead to better quality outputs since
they can acquire better technology and skilled personnel. Such a trend has greatly contributed
to Nigeria’s construction industry
2.5. Regulatory Framework and Policies
The Nigerian construction industry is governed by a comprehensive regulatory framework and various
policies aimed at promoting sustainable development, ensuring quality and safety standards, and
fostering a conducive environment for investment and growth. The primary regulatory body is the
Federal Ministry of Works and Housing, which oversees the formulation and implementation of policies
related to the construction industry.
Other relevant regulatory agencies include the Council for the Regulation of Engineering in Nigeria
(COREN), which regulates the practice of engineering professions, and the Architects Registration
Council of Nigeria (ARCON), responsible for regulating the practice of architecture. The Nigerian Institute
of Building (NIOB) and the Nigerian Society of Engineers (NSE) also play important roles in setting
standards and promoting professional development within the industry.
In addition to these regulatory bodies, various laws and policies govern the construction industry in
Nigeria. These include the National Building Code, which sets minimum standards for building
construction, the Environmental Impact Assessment (EIA) Act, which mandates environmental impact
assessments for certain construction projects, and the Public Procurement Act, which regulates the
procurement process for public construction projects.
Challenges and Opportunities
3.1. Challenges
3.1.1. Infrastructure Deficits
Despite the significant progress made in recent years, Nigeria continues to face a significant
infrastructure deficit, with inadequate transportation networks, housing shortages, and a lack of basic
utilities in many parts of the country. This infrastructure gap poses a major challenge for the
construction industry, as it limits the ability to undertake new projects and hinders economic growth
and development.
3.1.2. Financing Constraints
Access to financing is a persistent challenge for the Nigerian construction industry, particularly for small
and medium-sized enterprises (SMEs) and local contractors. Limited access to credit, high interest rates,
and a lack of investment from both public and private sectors have hindered the growth and
development of the industry. This has led to delays in project execution, cost overruns, and a reliance on
foreign contractors with more access to financing.
3.1.3. Skilled Labor Shortages
The Nigerian construction industry faces a significant shortage of skilled labor, including craftsmen,
technicians, and professionals such as engineers and architects. This shortage can be attributed to
factors such as inadequate training and education programs, brain drain, and a lack of incentives to
attract and retain skilled workers in the industry. The shortage of skilled labor has implications for
project quality, productivity, and the overall competitiveness of the Nigerian construction industry.
3.1.4. Corruption
Corruption remains a major challenge in the Nigerian construction industry, manifesting in various forms
such as kickbacks, inflated contracts, and the use of substandard materials. Corrupt practices not only
undermine the integrity of the industry but also lead to project delays, cost overruns, and compromised
safety and quality standards. Addressing corruption will require concerted efforts from all stakeholders,
including the government, regulatory bodies, and industry players. Also government organizations are
often in charge of big building projects. They call upon private construction firms to do the work for
which they have to bid. Given the corruption that thrives within the government and major
corporations, these lucrative jobs typically go to a select few. This trend breeds various problems,
especially when better firms miss out on projects because they do not have the connections to take
them on. It fosters an uneven playing field within the industry.
3. 1. 5. Inadequate Funding And Financial Policies
Most upcoming companies in the construction sector suffer from limited funding available to them. The
industry carries high barriers to entry that could be unbearable to smaller construction companies,
especially in cities like Lagos. Furthermore, fiscal policies passed in recent years have taken a toll on
construction industry players by increasing operational costs for some of them. For local investors,
chances of getting government grants and bank loans are often pretty low as preference goes to foreign-
backed firms.
3 1. 6. Poor Quality Control
A large portion of the construction industry is greatly affected by poor quality control. This issue is
largely due to corruption, inadequate funding, especially for government firms, negligence, among
others. Personnel in many cases do not do their due diligence, causing adverse effects like poor quality
structures that lead to construction accidents and the like. Such occurrences cause irreparable damage
to many firms in the sector.
3.2. Opportunities
3.2.1. Urbanization and Population Growth
Nigeria's rapid urbanization and population growth present significant opportunities for the construction
industry. The increasing demand for housing, commercial spaces, and infrastructure development in
urban areas creates a fertile ground for construction activities. By leveraging these demographic trends
and implementing sustainable urban planning strategies, the construction industry can contribute to the
creation of livable and resilient cities.
3.2.2. Government Initiatives
The Nigerian government has initiated various programs and initiatives aimed at boosting the
construction industry and addressing the country's infrastructure needs. These include the National
Housing Programme, aimed at providing affordable housing; the Presidential Infrastructure
Development Fund, focused on financing critical infrastructure projects; and the Road Infrastructure
Development and Refurbishment Investment Tax Credit Scheme, which encourages private sector
participation in road construction and rehabilitation.
3.2.3. Public-Private Partnerships (PPPs)
Public-Private Partnerships (PPPs) offer a promising opportunity for the Nigerian construction industry.
By leveraging the resources and expertise of both the public and private sectors, PPPs can facilitate the
development of large-scale infrastructure projects, such as roads, bridges, and power plants. However,
the successful implementation of PPPs requires a robust legal and regulatory framework, as well as
effective risk-sharing mechanisms and clear delineation of roles and responsibilities between the parties
involved.
In Conclusion
The Nigerian construction industry presents a dynamic landscape with both significant challenges and
promising opportunities. By addressing the existing hurdles, embracing innovation, and encouraging
collaboration, the industry can play a critical role in propelling Nigeria's economic growth and fostering
sustainable development.
