infrastructure, local spend, nigeria, africa

By OMX | May 10, 2018

Earlier this month, AICCON estimated Nigeria's construction industry at N$1 trillion (USD$2.7bn or CAD$3.5bn) - with over 20% of that coming from the federal Ministry of Power, Works, and Housing.

However, over 75% of capital in this NS$1 trillion industry leaves Nigeria due to underdeveloped indigenous contractor participation. A recent editorial piece from Nigeria's Leadership Newspaper titled "Indigenous Contractors and the Economy" emphasized the need for local content and investment: "This is the only way [Nigeria] can attain sustainable development to match places like Singapore, China and other Asian Tiger economies."

 

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The only way Nigeria can attain sustainable development

In February this year, Nigerian President Muhammadu Buhari's issued an Executive Order to improve local content and spend, particularly in science, engineering, and technology procurements.

Buhari reiterated his administration's commitment to Nigeria's Public Procurement Act 2007 and ordered that all ‘‘procuring authorities shall give preference to Nigerian companies and firms in the award of contracts.’’

The Executive Order also prohibits visa permits to foreign workers whose skills can be found in Nigeria: "Consideration shall only be given to a foreign professional, where it is certified by the appropriate authority that such expertise is not available in Nigeria.’’

This week, the Nigerian Minister of Power, Works, and Housing also highlighted several improvements and initiatives to Nigeria's infrastructure spending including:

  • More regular and regulated payments to contractors
  • Equipment leasing to allow indigenous contractors to compete with more established international companies
  • A pilot maintenance program for government buildings
  • More general expansion to the maintenance sector where the partnership potential is massive

 

The situation in the rest of Africa

A 2008 World Bank report estimates the cost of re-dressing Africa's infrastructure deficit at USD$38 billion in investments per year with an additional USD$37 billion in operations and maintenance costs per year. 

Investment growth in Sub-Saharan Africa has been sluggish - from nearly 8% in 2014 to 0.6% in 2015. This is largely attributed to slow economic growth in the region.

The World Bank's 2017 biannual Africa's Pulse report noted that public-private partnerships in Sub-Saharan Africa are limited to a few countries: namely Nigeria, South Africa, Kenya, and Uganda.

 

Countries with sound public investment tend to have even more private investment

Lead author and economist at the World Bank Punuam Chuhan-Pole said:  “The analysis shows that the impact of public investment on economic growth can be improved if countries implement policies that make public investment more efficient. There is evidence that countries with sound public investment management systems tend to have even more private investment.”

 

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