Construction


A complex and dynamic sector, the construction industry is significant to the world-wide economy. It is generally characterized by its features of outputs; its size and dynamism, variety of construction technology, nature of output demands, structure of the industry and governments being main clients. The industry involves multi-organization and complex relationships, including client/owner, designer, contractor, supplier, consultants and so on. It is also a multi-stage process which includes conceptual activities, design, construction, maintenance, replacement and decommissioning. The construction industry has a global remarkable impact on the GDP of countries, personal earnings and creations of layers of sustainable employment. Lessons learnt from developed countries suggest that infrastructure development helps to lower productivity costs, improve national wealth distribution and contributes to economic growth; hence, earn its place as one of the most integral parts of public policies.

In Nigeria, the vital role played by the construction industry cannot be over emphasized. It is vivid that the activities of the industry impact almost every aspect of the economy. The growth in the industry has been relatively stable contributing 3.05% to Nigeria real GDP in 2013. The sector employs about 25% of the nation’s work force making it the highest employer of labour after agriculture (male dominating with more than 90% of the work force). Construction materials make up to 97% of intermediate goods. Wages and salary are the most common form of employee compensation.  It is predicted to, in the near future; overtake oil and gas to become the third largest contributor (nearly 16%) to the GDP, after trade (17%) and agriculture (16%). The growth of the construction industry is aided by a number of factors; population increase being one of the major contributor, followed by a rising number of  middle class citizens that demands better conditions of living (better houses, road networks etc.) and  improved social infrastructure. It is little wonder therefore, that Nigeria’s estimated need for housing is put between 17 to 23 million units at the current population figure of 170million citizens.  

Construction of infrastructure drives the Nigeria construction value chain. However, its performance is highly dependent on many other factors including labour supply, input materials, construction equipment manufacturers, cement plants, steel mills, sand and rock quarries etc. Other key demand for the sector to be more productive is a well-functioning regulatory framework.  

The Nigerian construction value chain industry is made up of 78% indigenous firms and 22% foreign firms. The indigenous firms are predominately small and medium in size. Even the larger indigenous construction firms could be categorized as small enterprises when compared to most foreign firms. Governments, as the major clients of the industry (with a construction share of 65%), plays a significant role in controlling the construction market. However, their roles within the industry are majorly as regulators, purchasers and financiers. Public Private Partnership (PPP) in the sector is robust and fueled by the inability of government to provide the necessary expertise and skills to execute projects. The rest of the construction share (about 35%) goes to the aggregate micro firms/businesses and individuals operating within the country. Innovation in the industry is continually triggered by the increasing influx of contractors from abroad, as a result of the available opportunities within the country. These contractors continue to pose challenges to local builders by setting higher quality standards (including modern high-rise buildings that demand higher precision and technology). The rising middle class housing preference is continually changing; local contractors have no choice but to raise their standards and quality of work. Customers satisfaction in the construction industry is now considered as a dimension of quality and measurement tool in the development of the construction value chain. Quality is seen as precedent of customer satisfaction and is regarded as the fulfillment of expectations (i.e. the satisfaction). 

Due to the complex nature of construction, demand for innovation and the special characteristics of projects, the Nigeria construction value chain has had several problems in producing quality in a customer oriented manner. (Sami, 2009). Evidences of poor performance in terms of cost over runs, time over runs, poor quality of work, low productivity, poor workmanship; rework, high accident rate, poor work practice and conflicts, among others,  are abounding in the Nigerian construction industry. A sample survey by ….. (below) portrays common constraints in the Nigerian construction industry. 

GEM intervention will focus on assisting the effectiveness and efficiency of the value chain, especially in areas that can enhance MSMEs growth,  technical skills  and employment. Industry experts agree that one of the major problems with the construction value chain in Nigeria is how to reconcile the need for supply of high productivity manpower in carrying  simplified sequential operators and retain a substantial number of craftsmen capable of undertaking high skill oriented assignments. Even though Nigeria is endowed with ample manpower, authors posit that the situation in the sector is at best sarcastic. The stock of competent skilled construction workers is dwindling (Odusami & Ene, 2011); with a 15% annual decline of artisans in the construction sector. Jobs, hitherto meant for Nigerians, are gradually being taken by expatriates from other West African countries leaving the indigenous artisans without work - especially those with poor skills. In summary, skilled craftsmen shortage is not a shortage of workers; rather it is a shortage of adequately trained and skilled workers available for certain jobs in the industry. This shortage of skilled craftsmen is one of the most pressing issues today in the Nigerian construction value chain and it is already having serious implications for both businesses and the overall national economy.

Other areas of GEM intervention will also include conducting extensive market analysis to identify areas of market failures with clear focus on why the market is not responding to these failures. Technical Assistance will also be provided to review the licensing and regulatory requirements in specific subsector of the construction industry, where investors are active. The support will also establish public private dialogue mechanisms at local/state/federal government level as appropriate to the specific investment climate issues.   Specifically, the intervention will include support to facilitate private sector investment in the area of:

  • Supporting the development of quality work production processes
  • Supporting capacity building in modern production processes and techniques
  • Supporting the establishment of means  for  raw materials and finished products testing
  • Supporting Business Linkages

Interested firms can participate by either applying here as individual firm or through published Call for Proposals (CFP). The CFPs are usually designed (under two intervention grants window: Institutional and innovative) to address specific value chain problems. CFPs are usually published in at least two widely circulated national dallies in order capture and invite reputable public and private organizations with capacity to provide innovative and market driven solution(s). Firms responding to any published CFP are expected to download the required forms here www.bigportal.org.ng and complete the Business Plan Application Form template and the Project Financial Modelling template.  
 

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