‘Govt should evolve innovative funding to encourage indigenous construction firms’
ALHAJI NASIRU DANTATA, is the President, Federation of Construction Industry (FOCI) and Director, Dantata and Sawoe construction company. In this interview with BERTRAM NWANNEKANMA, he speaks on high construction cost, foreign domination and other factors affecting the sectors’ disappointing contribution to the nation’s Gross Domestic Product.
A report on Road Infrastructure Development in Nigeria (2009-2013), which compared costs of constructing roads in Nigeria to some African countries, found the cost in Nigeria to be outrageous. Do you agree with that? What is responsible for that?
Without argument, the said report needs to be properly referenced and scrutinised to verify its claims. Everyone knows just as the cost of living varies across the world, the cost of construction is also different depending on the labour value, material value, material availability, ease of transportation, procurement method, foreign exchange rates, etcetera. The major costs of constructing roads are the materials and the equipment. Most of the materials are sourced locally, except bitumen while all the equipment are imported. Even the locally sourced materials, like laterite for example, that is a common fill material in most regions in Nigeria, companies need to buy the land and negotiate with communities to open a borrow pit, at the same time there is a token charge paid to Federal Government as royalty. In some other countries, several lands have been secured as approved borrow pits and government is at liberty to use it when the need arises. It is also possible that the design of the roads here in Nigeria is superior to those in comparison due to our higher traffic count as well as the terrain in some parts of Nigeria that makes construction expensive. Instead of looking at the cost of a road per kilometre, we need to evaluate the value we get per Naira spent. Even within Nigeria, you can see that ‘’cheaper’’ works do not last.
Local construction firms always complain that foreign companies are often given priority by government to their detriment. How true is that? How can the trend be reversed?
Foreign firms in the construction industry are often given large -scale projects due to their capacity to handle such. Construction demands large investments and many companies grow from small to medium and large. There are a number of locally owned companies that you can say are not in the medium and going to large category. Companies will last long only when they are able to execute quality projects. It is very difficult for companies to add capacity due to our high interest rates and inefficient contract management procedures that delay most projects.
To encourage locally owned contractors to gain capacity and the much-desired competitive advantage, the following needs to be done:
Government Policies: The Government needs to do more in the implementation of the local content policy and the executive order
5. It needs to patronise these indigenous companies so that they can grow in the construction industry and also encourage large companies to sublet some aspects of large projects to locally owned firms.
Stronger technical partnerships and commitment to knowledge transfer: Infrastructural projects typically require a broad mix of diverse skills and competencies for successful delivery. The level of competence required for successful and timely execution of these projects is usually built over several years of successful project design, development, and delivery. Unfortunately, Nigeria is challenged on this front as there is a dearth of skilled manpower and only a limited number of infrastructure projects have been successfully delivered in the country over the last five decades. Nigeria must therefore forge stronger relationships between local manpower and foreign technical partners that have significant experience in successfully delivering infrastructural projects in other countries. To address this further, the government should ease the immigration charges on expatriate workers to promote a sustainable learning opportunity for Nigerian workers in indigenous companies while following up to ensure that Nigerians do take over these jobs as desired.
Innovative funding arrangements: The primary challenge of indigenous construction companies in Nigeria has been identified as “funding”. The Nigerian economy is dominated by short-term financing of three to five years terms, traditionally provided by domestic commercial banks. It is important that the economic policy of the Central Bank of Nigeria is done in such a way that it helps the construction companies maintain a sound capital base to remain successful.
Collaboration with stakeholders: There is also need to explore alternative business models where opportunities exist to collaborate with other stakeholders in the value chain, such as equipment and material suppliers, and other vendors. This would help to reduce the initial cash outlay for projects.
Lack of basic insurance of life and property in Nigeria seem to be a major challenge in construction industry. How big is the challenge and how is FOCI handling the issue?
FOCI does not have a challenge with this issue. Members of FOCI obey the Law. The Law requires that every owner or contractor of any building under construction with more than two floors, must take an insurance policy to cover liability against construction risks caused by the negligence of the contractor, owner, servants, agents, consultants which may result in death, bodily injury, or property loss. In addition, FOCI members procure life insurance for their staff and insure their equipment as well, which is standard when working with the government.
Over the years, government has owed members of FOCI for contracts executed, how much is this debt? What measures have your association put in place to ensure government reduces the debts?
FOCI appreciates the efforts made by the present government to pay debt which as at 2015 was N600 billion and is significantly less now and not as aged on average. Our wish is for all tiers of government to put heads together and come up with a better model of funding infrastructure projects. To just delay a due payment is not acceptable.
Statistics from the Raw Materials Research and Development Council (RMRDC) showed that between 2010 and 2015, Nigeria spent N13.6 trillion importing raw materials, especially building materials. How do you react to that?
I am sure these materials are mainly for the building sector where heavy manufacturing is involved and Nigeria has little capacity to satisfy the demand in the sector. There are several attempts at opening up factories within Nigeria and I believe with an improved power sector this trend will be accelerated. Our financial institutions should be encouraged to finance such local explorations and productions. The size of our population and economy makes economic sense to have local productions of all consumables and building materials. We have already become an exporter of cement, the government and private sector should continue with these types of policies. We have seen how the price of cement is no longer 100per cent reliant on foreign exchange. Without local production the price of cement will be about double what it is today. We have seen what works already, just need to implement in other areas, perhaps have a master plan of 20 or more years and identify the large imported items to replace the local in an orderly fashion.
The real estate and construction sectors disappointing performance in the nation’s gross domestic product has contributed to the weak macro-economic environment. What are the challenges facing the construction industry?
Each sector of the economy contributes its quota based on demand and supply. We know that we have the demand for the products of construction industry. Such as housing, roads, public structures, portable water and irrigation. The funding gap is the main challenge. However, there is capacity underutilisation as often times contractors keep equipment idle and let go of workers when projects are not funded well. The private sector cannot replace government in our sector. For example in education the citizens have the option to exclusively attend private schools while for roads it must be a collective responsibility. We need to understand the value of our investments in infrastructure and have a way of getting the users to pay for it. As an industry we are ready to contribute more to the economy, just let the demand pay for the supply being made in a timely manner. The contribution of telecoms to the economy has increased because individuals use voice and data, mostly prepaid. Try the prepaid model with our roads and public works also. You will be amazed how much more we can contribute.
The National Union of Civil engineering, Construction, Furniture and Wood Workers accused FOCI of negligence and unwillingness to improve the welfare of workers despite the harsh economic times. How true is this accusation? In what way has your association complied with the rules of engagement outlined in the National Joint Industrial Council?
The Construction and Civil Engineering Employers Association of Nigerian, CCEEAN, is responsible for negotiating terms and conditions of employment with the Junior and Senior Unions. CCEEAN is housed and operates under FOCI.
We make bold to say that CCEEAN is one of the foremost unions in Nigeria and has a long history of peace and harmony with our employees. Our National Joint Industrial Council meets every two years to negotiate and the agreements signed, are implemented by our member companies. The minimum wage in our industry is far above the national minimum wage and the terms and conditions of employment are well spelt out. With or without national minimum wage improvements, our terms of service are improved every two years. We had negotiations ongoing when the covid19 lockdown came and we were able to finalise and sign an improvement to all workers after the lockdown. I believe we are an exception in this regard and I believe the workers have appreciated it. They know what their counterparts are getting in none FOCI companies and they are grateful to be working for FOCI member companies.
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