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GlobalData: Nigerian construction industry set to return to growth in 2021

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World Cement,

The Nigerian construction industry is expected to rebound in 2021, driven by a sharp recovery in output levels compared to periods when works were not permitted or were severely restricted in 2020. 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.”

The energy and utilities sector holds enormous potential for the Nigerian construction industry as well as the overall economy. According to GlobalData’s projects pipeline, the sector has a total pipeline value of US$190 billion as of January 2021. The pipeline includes all projects from pre-planning to execution with a value above US$25 million, and is skewed towards late-stage projects, with 75.7% of the pipeline value being in projects in the pre-execution and execution stages as of January 2021.

Sharma adds: “Crude oil dominates Nigeria’s economy, accounting for approximately 90% of export earnings, which has hit the country’s economy hard in the wake of the COVID-19 pandemic. The PIB aims to increase government revenue from oil and establish a strong legal and regulatory framework for the Nigerian oil industry, but has faced legislative delays since 2007, preventing its passage; however, the bill is now expected to be passed into law by the end of the first quarter of 2021. The expected passage of the PIB may unlock the country’s huge natural gas potential, thereby transforming the economy.”

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