4. Nigeria’s Construction Companies Should Reconsider Embarking on Government Projects
According to Deloitte’s 2018 African Construction Trend reports, the major capital-intensive projects in West Africa are predominantly owned by Governments; this accounts for 83% of projects in the region. From this report, Governments fund majority of the capital projects in the region.
This therefore implies that:
1. The construction firms executing these major Government projects have advantage positioning to dominate the industry.
2. By embarking on these capital-intensive projects, these construction firms have leverage and access to the financial resources required to expand their capital base and improve their financial position; thus positioning them as major industry players.
3. Only 17% of projects (by value) coming from the private sector are available to all other contractors not bidding for Government projects.
A valuable growth strategy for local construction firms looking to become industry players should involve embarking on Government projects. This is because the greatest percentage of the funding in Nigeria’s construction industry come from Government projects. On the flip side, they must find ways to deal with the attendant challenges of doing government projects especially corruption. Unfortunately, some foreign construction firms have adopted corruption as a cost of doing business to be recouped from revenues. This practice is unethical. It contributes also to why political heads prefer these foreign firms.
Besides this. other identified challenges are: delayed payments and cash flow problems, high cost of construction finance, financial demands from political heads, non-payment of interest on delayed payments, conflicting demands from multiple stakeholders and a declining demand for quality.
With proper risk management strategies, these challenges can be mitigated.