BMI View: A fter an extremely poor first-half of the year, we are now forecasting the Nigerian construction sector will see a recession in 2016. Despite the relaxation of the naira peg, investors are remaining on the sidelines. Furthermore, renewed violence in the Delta region is exacerbating the government's struggle in raising adequate revenue to undertake the major infrastructure it planned in its 2016 budget. Chinese credit will be a key lifeline for growth, although will not benefit the whole industry.
Latest Updates And Structural Trends
We forecast -2.6% y-o-y real growth in Nigeria's construction sector over 2016, with growth only marginally set to recover in 2017 at 3.2%. The private sector remains on the sidelines in terms of investment and the government is suffering from reduced revenues making their expansive budget unrealistic. China has continued to sign major infrastructure deals which will support growth going forwards.
We expect the transport sector to outperform, given the Chinese credit line and the dominant position Chinese firms have in developing major projects in the sector. The 2016 federal budget also had a large focus on transport, although we note government financed projects are more susceptible to delays.
The residential and non-residential building sector has been hardest hit by the economic turmoil, as investment in the economy grinds to a halt due to capital controls limiting access to dollars and banks suffering from exposure to the struggling oil sector.
|f = BMI forecast. Source: National sources, BMI|
|Construction Industry Value, Real Growth, % y-o-y||-2.60||3.20||6.50||11.15||9.25||9.21||8.97|
|Construction Industry Value, % of GDP||4.4||4.2||4.1||4.2||4.2||4.3||4.4|
|Construction industry value, NGNbn||3,906.29||4,648.48||5,485.21||6,604.19||7,759.92||9,095.41||10,638.90|
The potential of Nigeria's infrastructure market has long been known, however a chronic lack of investment and the laborious high-risk business environment has limited its growth prospects. We highlight persistent risks hampering the implementation of major projects, ranging from deep-rooted corruption and violence perpetrated by militants to inefficient bureaucracy. Nigeria scores 39.8 in the RRI.
This overall RRI score is represents several quarters in a row where the rewards on offer in Nigeria's infrastructure market have reduce as investment levels have fallen. Despite the size of Nigeria's market,, given the low levels of investment currently mean Industry Rewards score just 27.5.
|Risk/Reward Index||Rewards||Industry Rewards||Country Rewards||Risks||Industry Risks||Country Risks|
The Nigeria Infrastructure Report features BMI Research's market assessment and forecasts covering public procurement and spending on all major infrastructure and construction projects, including transportation and logistics by land, sea and air; power plants and utilities, and commercial construction and property development. The report analyses the impact of regulatory changes and the macroeconomic outlook and features competitive intelligence on contractors and suppliers.
BMI's Nigeria Infrastructure Report provides industry professionals and strategists, sector analysts, investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Nigerian infrastructure and construction industry.
- Benchmark BMI's independent infrastructure industry forecasts for Nigeria to test other views - a key input for successful budgetary and planning in the Nigerian infrastructure market.
- Target business opportunities and risks in the Nigerian infrastructure sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Nigeria.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering infrastructure and construction, regulatory changes, major investments and projects and significant national and multinational company developments. These are broken down into construction (social, commercial and residential), transport (roads, railways, ports, airports, etc), and energy & utilities (powerplants, pipelines and so on).
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the infrastructure and construction sectors and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (up to 2012) and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key developments in the market and risks to the main forecasts. Indicators include:
Construction: Industry value (USDbn); contribution to GDP (%); total capital investment (USDbn); real growth (%).
Construction industry real growth forecasts (%) and industry value (USDbn) forecasts for industry sectors are split into Residential and Non-residential and Infrastructure sectors. Where the data is available for particular countries the infrastructure is further broken down into indicators for the transport subsectors of roads, railways, airports and ports and the energy and utilities sub-sectors of power plants and transmission grids, oil & gas pipelines and water infrastructure. This dataset is unique to the market.
The reports also include analysis of latest projects across the infrastructure sectors (transport, utilities, commercial construction).
BMI’s Infrastructure Risk Reward Index
BMI’s Risk Reward Index provides investors (construction companies, suppliers and partners) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points. These provide indices of highest to lowest appeal to investors, with each position explained.
An assessment of the competitive landscape and key challenges to entering the market. Details of the largest companies active in the sector across the sub-segments of the industry, including the key financial figures from some of the largest players in the sector.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Infrastructure reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.