Consumer durables is a cataloguing of consumer goods that are not essential to be bought very often as they are fashioned in a way so as to last for an extended period of time. Profits in the consumer durables sector were most profoundly…
BMI View: Investment continues to flow into the Nigerian construction sector. Following a political
agenda of economic reforms, the cabinet's approval of the long-awaited final draft of the Petroleum
Industry Bill (PIB), and the continued unbundling and privatisation of the state-run Power Holding
Company of Nigeria (PHCN) confirm this. Thus, in line with our forecast, Nigeria continues to see
strong growth within its construction sector and we anticipate an annual average real growth of 8.2
%between 2013 and 2017. However, we also continue to highlight the persistent risks hampering the
implementation of major projects, ranging from deep-rooted corruption, violence perpetrated by militant
Islamists and retaliatory forces, and a vast yet still inefficient bureaucracy.
Key developments include:
Nigerian infrastructure development company Bi-Courtney Highway Services (BCHS) has
begun its redevelopment of the Lagos-Ibadan Expressway at the Ibadan end. The US$559mn
project involves the reconstruction of both existing carriageways, as well as the addition of two
carriageways in each direction between the Lagos-Sagamu interchange. BCHS has been awarded
a 25-year concession contract to manage the expressway, which links Lagos with Nigeria's
Nigeria's Minister of Aviation has announced the plan to construct a new international airport in
Abuja. The planned airport would thus join a fleet of already ongoing projects within the airport
transport subsector: we already note the US$683mn construction of five new terminals at five
different airports across the country awarded to China Civil Engineering Construction
Corporation, as well as the redevelopment of five existing terminals, approved by the
government in February 2011.
Intels Nigeria was awarded a contract by the Nigerian government for Phase 4 of the Onne Port
Complex at Port Harcourt in Rivers State. The US$370.5mn project includes land reclamation,
the widening of the channel entry, the construction of three new berths and the Federal Ocean
Terminal, and the enhancement of existing facilities at the port. Intels, which has already
completed the first three phases of the project, will undertake the work in order to allow the port
to handle an increase in gas and oil shipments.
Attempts to unbundle and privatise power utilities previously owned by the state's Power
Holding Company of Nigeria (PHCN) have started to bear fruit. Nigeria's state-run power utility
has been split into 6 generation and 11 distribution companies, and in September 2012 Nigeria
announced the winning bids for five state-owned electricity plants. The preferred bidders now
have six months to make full payment before the plants are handed over. Disposal of the
remaining generation company, Afam, has been delayed after some controversy.
Preferred bidders for the 11 distribution companies were announced in October 2012.
The Nigerian government and General Electric (GE)'s have signed an agreement to help
Nigeria to develop 10 GW of additional electrical-generating capacity, amid a push to privatise
the failing state-run Power Holding Company of Nigeria (PHCN). This provides some
optimism in terms of tackling the country's epileptic power supply.
Another step forward in restructuring the economy and realising Nigeria's vast wealth is the
cabinet's approval of the long-awaited final draft of the Petroleum Industry Bill (PIB), which we
think is likely to be passed towards the end of 2012. The PIB should bring more regulatory
certainty and could unlock billions of dollars in investments in the country's oil and gas industry.
That said, some of its aspects remain highly controversial which could, yet again, delay its
ratification by parliament.
Nigeria continues to be rocked by persistent violence perpetrated by militant Islamists and retaliatory
forces, which threatens to escalate if not contained. Recently work on the Kano - Western bye-pass has
been stalled due to ongoing security threats.
Meanwhile, the removal of fuel subsidies spurred nationwide protests, including a general strike, putting
immense pressure on the government and eventually forcing it to partly back-paddle. However, to sustain
long-term growth the country will need to press ahead with the ambitious, and necessary, economic and
business environment reforms, and develop a plan to address the root causes of violence in the Niger
Delta and the Middle Belt.
Hence, while significant hurdles will need to be surmounted, we still expect that 2013 will see a strong
construction industry real growth of 10.0%, bolstered by investment and the consumer sector, as well as a
growing oil sector, fuelled by historically high prices.