How funding of construction sector can revive economy, by experts

With the second wave of the ravaging COVID-19 pandemic still taking its toll on economies across the globe, the received wisdom amongst discerning Nigerians is that the funding of the built and construction subsector can revive the economy significantly.

Speaking in an interview with our correspondent, Mr. Benson Nnamdi Ezem, a renowned architect said funding of the sector becomes inevitable if the economy must bounce back.

The businessman who spoke against the parlous state of the construction industry badly impacted by the pandemic in 2020, maintained that with proper funding of the sector, the economy can indeed be revived.

“We must pump money into the sector to trigger growth and development. There should be a deliberate policy the government to fund the sector because it is going to going lead to a rippled positive effect across the value chain with many small businesses including suppliers, labourers, vendors, and others being gainfully employed and the economy will be better for it,” he stressed.

The sector had contracted by 31.8 per cent year-on-year in the second quarter of 2020 and recovered in the third quarter. But experts believe the sector is poised to achieve significant growth for the Nigerian economy in 2021.

Out of Nigeria’s total budget of N13.5 trillion for 2021, capital expenditure corners N3.85 trillion, meaning that, where budget discipline is allowed, the country will witness an avalanche of construction activities, creating jobs and leading to the provision of critical infrastructure such as roads, rails and bridges.

With over N3.85 trillion budget for capital expenditure, investment in the construction industry will be  driven by government spending on infrastructure in a bid to drive economic growth,”Rasheed Mayowa, a real estate expert said, adding, “over the next few quarters, we expect growth across residential, commercial, industrial, and institutional sectors in Nigeria.”

The NBS has projected that the construction industry will record a Compound Annual Growth Rate (CAGR) of 16.6 percent to reach an all-time high of N13.2trillion by 2024 thus it is the view of experts that players in the real estate and construction industry to exploit the attendant opportunities for growth that will be presented.

Besides the budgetary allocation, the construction industry will also benefit from the N2.3 trillion Economic Sustainability Plan which was approved in June 2020 by President Muhammadu Buhari with expectation that it will deliver 30,000 social housing units alongside rural roads, create jobs,  as well as employ the services of both established developers and young small-medium scale professional contractors such as architects, engineers, quantity surveyors, accountants, etc.

Meanwhile, GlobalData, a leading data and analytics company, expects the industry to grow by 4% in 2021 and grow at an annual average rate of 2.8% thereafter, to reach US$48.2 billion in 2025, measured at constant 2017 US dollar exchange rates.

GlobalData’s report, ‘Construction in Nigeria – Key Trends and Opportunities to 2025 (Q1 2021)’ reveals that growth in 2020 had been impacted by the severe lockdown in the second quarter, when most projects came to a standstill and the industry contracted by a steep 31.8%. The industry was also affected by weak public investment, alongside limited foreign direct investment (FDI) coupled with lower oil prices and production contributing to lower government revenue and tighter foreign exchange liquidity.

Dhananjay Sharma, Construction Analyst at GlobalData, comments: “Assuming that there is no repeat of the severe lockdowns that were in place in Q2 2020, the recovery in 2021 would be driven by a sharp 40 – 50% year-on-year (YOY) growth in Q2 2021. The 2021 Appropriation Bill, presented by President Buhari to the national Assembly in October 2020, and the expected passage of the Petroleum Industry Bill (PIB) would also drive growth in 2021 and over the rest of the forecast period by ushering in investments in the oil and gas sector.”