Nigeria Infrastructure Report Q2 2010

Nigeria’s construction industry is driven by several opposing factors that mean growth rates are somewhat below potential. Despite extensive investment, particularly from China, the country’s business environment scores and widespread corruption limit upside. In 2010 the construction industry is expected to be worth US$2.87bn. This represents growth of 6.65% year on year (y-o-y). Road and rail projects are on the rise, contributing the major stimulus for growth over the forecast period and boosting industry value to US$7bn by 2014 an impressive growth given the difficulties facing the country’s infrastructure sector.
Major project news has been dominated by announcements from Chinese companies involved in the Nigerian sector. Railway construction was a key driver. In January 2010, the government of Lagos announced that China Civil Engineering Construction (CCECC) has been selected as the main contractor to construct the first light rail project. The construction of the Blue Line is expected to be completed by 2012. Meanwhile, Team Nigeria and Nigerian construction firm Julius Berger won the tender for construction of the remaining 22km of the Ajaokuta-Warri railway line. China EXIM Bank also provided a concessional loan of US$500mn for the Lagos-Kano railway project.
In terms of its project finance ratings Nigeria faces severe issues. It remains firmly at the bottom of the regional table due to widespread corruption and the lowest scores for inputs in the table. Overall, the country scores 36.2 a considerable distance behind the regional average of 48. For its business environment the country scores little better with an overall score of 39.8. This places it in sixth place in part due to a slight advantage in the number of companies operating in the country. The Nigerian government’s 2010 budget proposal has presented legislature earmarking one-third of the total expenditure for infrastructure, power development and projects in the Niger Delta. The total expenditure figure envisaged in the 2010 budget has increased by 30% over 2009. We note that infrastructure development (including the power sector) and the development of the Niger Delta are inextricably linked, as one of the crucial problems in the Niger Delta, Nigeria's oil production heartland, is the dilapidated infrastructure. Therefore, any efforts to address development in the Delta will also need to see significant allocations for infrastructure.