Pre-election Spending Buoys Construction Activities in 2018

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Tuesday, March 05, 2019 11.30AM / By FDC  


The construction sector was one of the key sectors that outperformed GDP growth in 2018. The sector grew by 2.33%, from 1% in 2017. The sector’s growth of 2.33% compares with a GDP growth of 1.93%. In Q4’18, the sector’s growth also quickened to 2.05% from 0.54% in Q3, reflecting electioneering, favourable weather conditions and forex availability. Meanwhile, Finance Minister Zainab Ahmed stated that Dangote Industries, Unilever Nigeria and four other investors will construct 19 federal roads across Nigeria. The inclusion of private sector players in road development is positive news for the economy, as previous independent attempts by the government have yielded limited results. If the plan is also implemented in 2019, it is expected to sustain contribute positively towards the construction sector’s performance in the year.  The Lagos State government has disclosed plans to construct a new modern city in the widely acclaimed Ibeju-Lekki Epe area. Real estate players have hitherto viewed the area to have ample prospects, and the construction of a city confirms this. In the SSA region, the TransGambia bridge, the first bridge to cross the Gambia river, was inaugurated on January 21st. China Road & Bridge Corporation also won a 77bn CFA francs ($134mn) tender to build a bridge in Abidjan (Ivory Coast). This would bring the total number of bridges in the commercial city to five.


Nigeria Construction sector’s performance in Q4’18 and FY’18

The Nigerian construction sector expanded by 2.05% and 2.33% in Q4’18 and FY’18 respectively. The sector’s full year growth was underpinned by a stellar growth of 7.66% in Q2. Year 2018 saw some pre-election spending in road and rail that impacted positively the construction sector’s performance. The sector also benefited from relatively high oil prices and increased forex availability. The sector’s contribution to GDP increased to 4.72% in 2018 from 4.14% in 2017. It is expected that the Federal Government’s continued infrastructure drive, the approval of the 2019 budget and the disbursement of capital votes would sustain the sector’s positive trajectory into 2019. 

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Private companies to construct 19 federal roads in Nigeria

Nigeria's Finance Minister, Zainab Ahmed, has disclosed that six investors will construct 19 federal roads across 11 states in Nigeria. This is contained in the Executive Order 007, signed by President Buhari. The road project will span a total of 794.4KM across the six geopolitical zones of the country. The companies identified include Dangote Industries, Lafarge Africa,

Unilever Nigeria, Flour Mills of Nigeria, Nigeria LNG and China Road and Bridge Corporation Nigeria. In return, the federal government intends to grant investors tax holidays. The eligible road projects are expected to be published in an official gazette, and the government would agree with investors on modalities to kick start implementation.


Implications

The government’s attempt to invite private investors in road construction is expected to expedite the pace of infrastructure development in the country. Past efforts by the government to independently improve Nigeria’s roads have

yielded limited results. Meanwhile, roads are the most used means of transportation in the country. Improvement of the roads would ease the transportation and delivery of goods and services in the country. 


FGN to subject public buildings to  compulsory maintenance

The Federal Government plans to subject government owned buildings in the country to a mandatory maintenance check. This was contained in the national infrastructure maintenance framework presented by the Ministry of Power, Works and Housing to the Federal Executive Council (FEC) on January 9th. The FGN plans to start with buildings, before extending its efforts to roads, rails and power installations.


Implications

The compulsory maintenance of public buildings, roads and other infrastructure in Nigeria is expected to improve productivity and enhance the country’s business friendliness. Furthermore, it is expected to save the government the cost of repairs in future. Artisans in the informal sectors such as electricians, plumbers and carpenters would also benefit from the development.


Lagos State discloses plan to construct a new modern city

Lagos State plans to construct a new modern city, the Alaro Satellite City, at the cost of $249mn, as disclosed by Governor Akinwunmi Ambode. The project is located in the North West Quadrant of the Lekki Free Zone in the Ibeju-Lekki-Epe area. The project would be implemented in collaboration with private partners. Alaro City will be located on a 2,000 acre of land and will include residential buildings for different income groups, office spaces, schools, healthcare facilities, hotels, entertainment, parks and open spaces.


Implications

Since 2017, the Ibeju-Lekki area has been widely acclaimed by real estate agencies to be a promising part of the Lagos Metropolis. Thus, real estate firms have advised their clients and the general public to acquire land there. The Lagos State government’s attempt to construct a city in the area reinforces its prospects. More importantly, the construction of more residential and corporate buildings would ease congestion in other parts of Lagos. 


SSA

The Trans-Gambia bridge inaugurated 

The Trans-Gambia bridge, the first bridge to cross the Gambia river, was inaugurated in late January. Access to the bridge is restricted to cars and minibuses in the meantime. Lorries will be granted access in July 2019. The 1.8KM bridge is part of the wider Trans-Gambia road corridor, which is a vital economic and strategic link connecting the north and south of both Senegal and the Gambia.


Implications

The inauguration of the Trans-Gambia bridge is positive news to both Gambia and Senegal. The bridge will boost trade between the two countries and improve logistics and ease movement. In addition, the bridge will help reinforce cohesion among previously isolated communities in the project's zone of economic influence by improving access to regional markets and boosting economic growth. There is however a moderate risk that the bridge will result in the temporary loss of jobs (frictional unemployment) for ferry operators. 


China Road wins $134mn Ivory Coast bridge-building tender 

China Road & Bridge Corporation has won a 77bn CFA francs ($134mn) tender to build a bridge in Ivory Coast’s commercial capital, Abidjan. This will bring the total number of bridges in the city to five. The construction of the road will be funded by the Islamic Development Bank. The road will link Cocody to downtown Plateau.


Implications

The investment in the project is expected to have a positive multiplier effect on Ivory Coast’s GDP. The construction of the bridge would ease transportation and improve Abidjan’s appeal to tourists. 


Tanzania signs $250mn bridge construction deal in Dar es Salam

The Tanzania National Roads Agency (TANROADS) has signed a $250mn contract with Japanese Sumitomo Mitsui Construction Company (SMCC) to construct a four-lane bridge along Bandari Road of Gerezani in Dar es Salaam City. The bridge construction deal will be funded as a grant by Japan International Cooperation Agency (JICA). The sum of $222mn will be disbursed to the contractor. $28mn will also be allocated to Ingerosec Corporation of Japan, the consultancy company for the project. The bridge project in Tanzania entails the construction of a four-way bridge that will replace the two-way bridge currently used to reduce traffic volume in Dar es Salaam city. 


Implications

The completion of the bridge is expected to ease traffic congestion in Dar es Salaam, Tanzania’s largest city, and boost economic activities. The city is renowned for an international Airport, a large ocean port and several tourist attractions. 


Outlook

Nigeria’s general election in February is expected to slow activities in the construction sector. So far in the month, it has also rained intermittently across the country. This would distort construction activities to a significant extent.


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