Why indigenous construction firms in Nigeria need govt’s backing

The Nigerian construction industry is said to be doing well with a significant contribution to the country’s GDP. Yet, indigenous indigenous construction firms performance remains sub-optimal. Temitope Runsewe, MD/CEO, Dutum Company Limited, in this interview with Chuka Uroko of Business Day, explains why the industry is skewed in favor of foreign firms. He makes case for indigenous firms; points outgrowth potential and the way forward for the industry. 

The construction industry in Nigeria was rated among the top-performing sectors with 4% growth in the second quarter of 2021. What, in your view, were the drivers of this growth?

  • I would divide the factors into two. First, the growth was driven by the federal government’s investment in Infrastructure through the Ministry of Works and Housing. We have also seen heavy investment in the energy sector. All of these have multiplier effects on the industry. On the private sector side, we have seen increased eagerness by investors who had their projects stalled by Covid-19 to restart them. What that means is that the 2020 and 2021 projects are now being compressed into projects of a single year. That has translated into the construction sector being active in the year. The industry is still dominated by foreign firms such that most big-ticket projects go to them. 

What are the reasons, lack of confidence, or incompetence of indigenous construction firms in Nigeria? 

  • I would not say it is a case of incompetence on the part of local operators. It is just a matter of preference and taste for foreign things. You notice that generally, Nigerians like foreign things. People would always choose a foreign one whenever they have to choose or buy anything. We forget that if we don’t go for local products, the local firms won’t develop. So, it is just a matter of taste and that has translated into people believing that if it is not handled by foreign firms, it cannot be well done. Yet, we have a lot of developments that have been done and are still being done by local operators. Again, if you look at those foreign firms, most of their staff are Nigerians. So, it means we can take over the industry if given the opportunity and the enabling environment to perform. Agreed, we have a lot of room for growth and development, but there should be that government support and patronage for us to grow. I believe there are so many things the government can do to make the local operators grow. One is to give them a chance to improve themselves. Again, even where it is obvious that a project is beyond their capacity, give it to the foreign firms but ensure they take on local operators as their partners. 

Given this foreign dominance, how realistic is the projection by the Nigerian Bureau of Statistics (NBS) that the industry will post an annual average growth rate of 2.8% in real terms from 2022-2025? 

  • The sector must grow despite the dominance of foreign firms. If there were deliberate efforts at localizing the sector, there would be a higher level of growth and the multiplier effect would also be higher because the money would not be taken to anywhere in terms of capital flight. We can only spend the money here or invest it in our industry. So, the industry would grow better if there were deliberate efforts to push indigenous capacity. 

How do you think this industry can contribute to growing the post-Covid-19 economy in the face of rising costs and falling value of the Naira?

  • All over the world, when the government wants to boost employment or economic activity, the sectors they look at are construction and housing. This is because both have huge multiplier effects. So many people are engaged directly, while many others are engaged indirectly. The solution to the falling value of the naira is for us to buy locally. If this is done, the issue of foreign exchange volatility will begin to reduce. Yes, there should be that initial complaint about quality, but the only way to grow is to continue to push for localization. All the countries that have grown started that way. They shut themselves in and forced themselves to develop. They also shielded the local firms, especially manufacturers, from external influence. 

Recently, you commended the Central Bank of Nigeria (CBN) for its proposed N15 trillion Infrastructure Fund, saying it is key to job creation and economic growth. Tell us about this fund. 

  • This infrastructure fund is very critical to infrastructure investment in Nigeria, especially for economic recovery. In the last 15 years, we in the construction industry have been canvassing for this type of intervention fund. What this fund is out to do is to give the private sector the capacity to invest directly in the infrastructure space. Currently, most of the funds that go into infrastructure space are from the public sector. But the private sector should be the biggest investor in infrastructure. We expect to see the private sector coming into developing roads or airports which could be concessioned to enable them to recoup their investment. We also expect that indigenous firms like us will benefit from the fund. 

It is challenging times in Nigeria with rising costs, galloping inflation, and worsening security situation. What is your experience, and how is your company, Dutum, getting along?

  • We are all part of the country. But as a developing nation, there are challenges we must pass through before we arrive at our destination. Be that as it may, there must be deliberate efforts by our leaders to move us in the right direction. To see the light at the end of the tunnel, we must begin to develop our capacity and place ourselves above our challenges. We must look inwards to understand what the people want. Again, we need peace in the country because if there is no peace, we can’t develop. As a company, we are faced with the challenge of starting a project with N10.00 and finishing up with N20.00. We must continue to face frontally the challenges of the moment. A major passion that is driving us as an organization is that we have a critical role to play in the growth of the economy. Because of that, we are not going to give up. We employ people directly, and also there are indirect benefits of our activities in the economy. We also cannot give up because there are so many people whose lives depend on what we do.

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