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Nigeria Infrastructure Report Q4 2009
Market |
Construction |
Report Type |
Market Research |
Country |
Nigeria |
Published |
10 September 2009 |
Number of Pages |
68 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
In May 2009, General Electric and the government of Nigeria finalised an agreement pertaining to collaboration in Nigeria's infrastructure sector
We have revised upwards our forecasts this quarter on the back the sustained bounce in the price of oil and better than expected gross fixed capital formation and real investment growth figures. Nigeria’s government revenues – and the economy as a whole – remain highly dependent on the price of oil (Nigeria’s key export). West Texas Intermediate (WTI) was trading at US$68/bbl at the time of writing (August 2009), considerably higher than the level of US$37/bbl witnessed in December 2008, at the bottom of the commodity correction.
The improving health of government finances is only one side of the infrastructure story in Nigeria.
Efforts to foster the development of public private partnerships (PPPs) as a means to finance and develop critical infrastructure were bolstered in July 2009 with the creation of the Project Steering Committee to audit and support the work of the Infrastructure Concession Regulatory Commission, which was created in November 2008. However, the unpredictable, complex and nebulous legal and regulatory system governing PPPs and prevalent corruption are deep structural problems that will continue to deter investors.
In this context, we now forecast Nigeria’s construction industry to contract by 5.2% in real terms in 2009, compared with our earlier forecast of -10.8%. We envisage largely flat sector growth in 2010. We do note, however, that although the economic story was the stronger factor this quarter and propelled the upward revision of our forecasts, the slow progress in addressing structural weaknesses in the PPP market will pose a long-term downside risk to our forecasts.
In spite of the hurdles, Nigeria’s attractiveness for foreign companies was highlighted when in May 2009 General Electric (GE) and the government of Nigeria finalised an agreement pertaining to collaboration in Nigeria's infrastructure sector. One aspect where collaboration was agreed was in the rail sector, where GE could supply new locomotives and be responsible for signalling.
The sector where GE's business in Nigeria could witness the strongest growth, however, is in the field of energy, power and water infrastructure. Certainly one of the sectors to watch is mid-stream energy. With the West African Gas Pipeline finally operating and the Trans-Sahara pipeline in the works, Nigeria will feature some of the largest mid-stream energy infrastructure facilities globally. The sector is poised for further growth.
Nigeria sits in mid-table in our Project Finance Ratings, with a placing of fifth out of nine African countries. Nigeria scores reasonably solidly in the Commissioning and Operating phase relative to other African countries, in large part owing to strong inputs for the Energy and Utilities variable. However, the country is let down by its performance in Design and Construction phase, owing to a poor regulatory environment and a poor score for inputs.
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