The implication of bad governance on Nigeria construction industry

Nigerias construction sector accounts for 1.4% of its GDP (Q310 est.) More important, is the fact that despite the growth seen in the construction sector output, (7 year CAGR of 35%, see figure 1 below), its contribution to total GDP has remained at abysmally low levels. In 1981, the construction sector accounted for 5.8% of Nigerias GDP and in the last three decades, Nigerias total GDP has risen to approximately 495 times its size. On the contrary, construction sector GDP has only grown to 125 times its size in 1981.

The dominant of the problem is corruption. After embezzling part of the fund to be used for the construction project, they award the contract to incompetent companies after those companies bribed them. Solutions ------- government should have a minimum salary scale for graduate members as well as other workers in the Nigerian construction industry

Inadequate production of raw materials by the country Ogunlana, Krit and Vithool (1996) noted that the reason for shortage of materials could be the defective supply of materials occasioned by general shortages in the industry, poor communication amidst sites and head office, poor purchasing planning and materials coordination. Nigeria still imports cement when her cement production potentials surpass any other African country except Egypt and that the 100 % raw materials required for cement production, is readily available in Nigeria (Eyo -Ita - Eyo, 2001) In another development, Makoju (2000) observed that 90% of the aggregate components for production and delivery of electricity in the country still depends on other developed countries because of incessant supply of electricity.

TELL (2002) also revealed that there were verifiable cases of corruption in the execution of some of the contracts awarded by the Petroleum (Special) Trust Fund (PTF). The Interim Management Committee (IMC) set up by President Obansanjo found that of the total 181.8billion naira that accrued to PTF for the three years it operated, as much as 16 25.6 billion naira was wrongly paid to contractors. These include inflated contracts, fraudulent over payment of contractors by some of the agency officials and undue receipts of interest on funds placed in banks by the agencies.

From a questionnaire, Clients believe that fluctuation of prices of materials also have a very significant effect on the cost of construction. They rank it fifth most important factor. Omoregie and Radfort (2005) came to the same conclusion after they studied the factors responsible for project delays and construction cost escalation in Nigeria. Although their survey revealed price fluctuation as the most severe cause of project cost escalation which they attributed to the limitation in exchange rate which in turn affects construction material prices and general price level. From survey, a country suffering from bad governance can never excel in an

Light at the end of the tunnel the next decade story We see the next decade or two as important to Nigerias infrastructural growth. More than ever, the emphasis on infrastructure deficit is laudable. While noting that the challenges (poor policy and budgetary implementation, lack of transparency in government contract procedures and the attendant abandoning of many projects) which mitigated the growth of the construction sector are somehow still inherent, we emphasise the milestones that have been recorded over the years. One of this is the significant rise in local cement production output (cement imports have dropped to about 30% of total consumption in 2010 (from 72% in 2005) and the planned projects still on-going to further increase local production capacity (Dangote Cement and Lafarge). With a local construction industry that has historically been plagued by high material prices from importation (cement and steel particularly), the boost in cement output is an indicator of better days ahead in the construction sector. Secondly, the fast growing emphasis on PPPs, at least over the last five years, is another case that supports our optimism. For instance, the Lekki Free Trade Zone, Eko Atlantic City are projects opening up major opportunities for construction activities in Nigeria. At least, the thought of an artificial Island would have been unimaginable in Nigeria a decade ago! Notwithstanding, we admit that the bottlenecks are still inherent, but then, the long term the next decade or so, holds exciting opportunities for the construction sector in Nigeria. Hence, we emphasise the robust long term potential of the construction sector.

Only about 30% of Nigerias 193,200 km total road network is paved, relative to an average of 70% and 58% for frontier and emerging markets respectively. The gap is wider when compared with advanced economies with an average paved road network of c.100%. (a survey in 2011 gdp). The deficiency in rail infrastructure is even worse, as Nigerias existing 3,528km rail network is grossly insufficent to cater for the rising need for mass transit of people and goods, given its large population (about 150 million; annual growth rate c.2.5%) estimated to be growing at an annual rate of c.2.5%. Apart from this, the design of the rail network (narrow gauge), quite obsolete thus limiting the capacity and type of trains

that can be used on the rails. According to the Federal Ministry of Transport, the rail transport sector recorded the highest volume of freight (2.4 million tonnes) in 1977 even as passenger numbers reached its highest of 15.5 million in 1984. However, from the World Banks latest yearly data, volume of freight transported through rail in Nigeria is about 77 million tonnes per kilometre, while passengers conveyed stood at 174 million passengers per kilometre.J