Nigeria Infrastructure Report Q3 2012

BMI View: Investment continues to flow into the Nigerian construction sector, bolstered by a growing oil industry and historically high prices. In line with our forecast, Nigeria continues to see strong growth within its construction sector and we anticipate annual average real growth of 9.2% between 2012 and 2016. This positive outlook is largely driven by our bullish view on the country’s transport and energy infrastructure; both sectors being a priority for the government. However, we likewise highlight significant risks to the implementation of any major project, ranging from deep-rooted corruption, violence perpetrated by militant Islamists and retaliatory forces, and a vast yet inefficient bureaucracy.

Key developments include: Nigerian infrastructure development company Bi-Courtney Highway Services (BCHS) has announced that it is to begin 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 more 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 western states.

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 construction of five new terminals at five different airports across the country, 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.

The Nigerian government and General Electric (GE)’s recent power deal ,(GE has signed an agreement to help Nigeria to develop 10 GW of additional electrical-generating capacity, amid a push to privatize the failing state-run Power Holding Company of Nigeria (PHCN), provides some optimism in terms of tackling the country’s epileptic power supply. Nigeria continues to be rocked by persistent violence perpetrated by militant Islamists and retaliatory forces, which threatens to escalate if not contained. 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 2012 will see a strong construction industry real growth of 9.5%, bolstered by investment and the consumer sector, as well as a growing oil sector, fuelled by historically high prices.