According to Nigeria’s National Bureau of Statistics, the construction industry since 2010 has enjoyed a real growth rate of 13%. Government infrastructure spending has been a major driver of this growth as well as private sector investment in both residential and non-residential construction activities.
So how can local and foreign investors take advantage of this growth?
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5 Investment Opportunities in Nigeria’s Growing Construction Industry
Here are five opportunity areas for investment, based on insights from experts, businesses and stakeholders involved in the construction industry.
According to Nigeria’s Bureau of Statistics, the contribution of real estate sector to the GDP has grown on an average of 17.5% between 2010 and 2013. But with a population of over 167 million people and a rising middle class, the demand for quality housing remains high. According to the Federal Mortgage Bank of Nigeria (FMBN), the country currently has a housing deficit of 17 million units.
Real estate projects are springing up in Abuja and Lagos. Those housing projects however make up only one percent of what Nigeria needs, says Vincent Nwani, director of research and advocacy for the Lagos Chamber of Commerce and Industry.
“For us at the chamber we feel that Nigeria is not doing so great in terms of explosion or revolution in the construction/real estate environment”, Nwani said. “We need investments in low cost housing to meet the demand from the teeming Nigerian households. The shortage of residential and commercial buildings means opportunity in the construction industry is very huge. We have not yet scratched the surface”.
Although government infrastructure spend has been a major driver of growth in Nigeria’s construction industry, analysts say the country remains heavily underserved with infrastructure. They agree a lot of construction is still required in both public and private infrastructure.
In February 2014, President Goodluck Jonathan announced the implementation of Nigeria’s National Integrated Infrastructure Master Plan will cost USD 2.9 trillion over the next 30 years.
Okey Ezenwa, a member of civil engineering consulting firm Yola Consultants, says investors can set up an equipment assembly plant and explore opportunities in road construction. “Road construction requires a lot of equipment”, he said. “An equipment company in Nigeria can produce or assemble road construction equipment such as cranes, bulldozers and welding machines”.
In addition, as corporate offices and hotels spring up in major cities such as Lagos, Ezenwa says standard reinforcements are needed, particularly, for high-rise buildings.
“Most of the standard ones, like those used by Julius Berger, are imported”, the civil engineer noted. “If a good operator will come in and put up a manufacturing unit that produces standard iron rods it will be good for the market and investor”.
The retail sector continues to stimulate growth in Nigeria’s construction industry. Data from the statistics office reveal that the services sector, which include retail services, made the largest contribution of 51% to Nigeria’s latest rebased GDP.
According to McKinsey’s recent growth estimates for the economy, annual sales in consumer goods could more than triple to $1.4 trillion by 2030 from the current $388 billion. That likely explains the expansion projects by multi-national companies such as Unilever Plc, Nestle Plc and Shoprite Holdings. The South Africa headquartered grocery store Shoprite, for instance, has announced plans to build dozens of new retail outlets across Nigeria.
Ado Bayero Mall opened in the northern city of Kano a few months ago. In the South, Effurrun Mall in Delta State and Onitsha Mall in Anambra will open to the public later this year.
PayPal recently launched in Nigeria. In its first week of operation, consumers were reported to have purchased items from Britain, China and the United States via its online platform. As e-commerce thrives in Africa’s biggest economy, global companies will need to set up stores closer to their customers base to facilitate improved service delivery.
Lekki Free Zone
The Lekki Free Trade Zone LFZ was launched in 2004 to harness the investment and tourism potential of Lagos. The emphasis is on manufacturing, real estate and tourism, said Chi Changgui, commercial controller of the Lekki Free Zone Development Company. It’s a mixed-use development.
The LFZ, according Changgui, has received diversified investment interest from Africa, China and Europe. Apart from well-known projects such as the USD 9bn refinery Dangote Group, Changgui said that a Nigerian garment factory and a food processing company from Ukraine, are slated for the trade area. He adds that some companies have started preliminary site work.
The Lekki Free Zone is part of the Lagos State Lekki Master Plan project, which includes the satellite estates and towns around Lekki, offering multiple investment opportunities.
“We have the free trade zone, the upcoming airport there and to the west side of it, the Grace Field Phoenix Estate, Orange Island and the Shell Estate, all coming up”, says Kunle Ladega, an urban and regional planner in Lagos. “There is also plan for a light rail project around that axis”.
Eko Atlantic City
Eko Atlantic City, another city being built from scratch in Lagos, aims to actualize the megacity dream of the Nigerian commercial capital.
“We wanted to tap into the experience of worldwide projects such as Cape Town and Dubai”, says David Frame, managing director for South Energyx, promoters of the Eko Atlantic City Project.
Eko Atlantic City allows anyone who wants to go into construction or the real estate business to think outside the box, Ladega notes. “The City provides opportunity for investors to test their dexterity in real estate”, he said.
Modeled after 5th Avenue in New York City, Frame says the city is being designed to hold 250,000 permanent residents and 150,000 visitors. The main district should be ready two years from now and open for visitors, he says, adding there are clients already developing buildings. Still, contractors and work-specific builders are needed to make the city a reality.
Nigeria’s First Bank plans to build a 52-story building at the site. The land was bought two years ago and Frame anticipates building will commence this year.