What are challenges and trends in the Nigerian construction market?
CHIDOZIE NWANKWO An increasing number of Chinese companies are entering African markets and creating tough competition, particularly in manufacturing. However, the majority of Chinese products are not of high quality. This influx of cheaper material will not help our economy, and such competition is not healthy for the local industry. With this in mind, we have approached the Minister of Industry. The government must enforce restrictions and implement them quickly because the local industry is already feeling the negative effects. In terms of what is on offer, there is an oversupply of high-end properties and an undersupply of low-end properties, simply because the interest rates are high. If one is building a high-end building, one has to spend large sums of money. Those who can afford to take out loans do not need to recoup that money. Thus, companies are not interested in building low-end properties because the cost cannot support the interest rate.
STEFAN EUCHENHOFER When it comes to construction, people often do not want to invest in more advanced products as they believe labor costs are cheap in Nigeria. In reality, there is about five times more personnel required for a job than in more advanced countries for productivity reasons. Regarding the market, after the drastic drop in oil revenues starting in 2014, Nigeria's GDP declined by 34% between 2014 and 2017 in USD terms. Among the hardest hit sectors was construction. Many public projects stopped receiving funding almost overnight, when the federal government had to cut expenditures. Construction companies cut investments, which in consequence affected PERI's business. But the situation is improving gradually, and we should now see an increase in investment, both public and private. When the government invests more again, there will be more money in circulation. We can already see the effects of an increase in public investment as some of our customers, who were not buying our products during the recession, resumed doing major procurements related to new projects, partly replacing material that has worn out.
What does the future hold for you?
CN Two of our directors will visit from the UK, and we will look at the business together to determine focus areas for 2020. We are moving toward developing a one-stop shop for high quality building materials, and we will build more real estate. The company is set to grow. Moving forward, our strategy is to realize more of our potential and introduce even higher-quality products. Our paint, cables, and roofs are the best anyone can find in Nigeria. In early 2020, we will also launch our electrical cable factory. We want to make sure our workforce is updated and that its training reflects any upcoming challenges. Customers choose Wichtech because they know its quality is unmatched. This is our niche.
SE Our big 2019 project, Julius Berger's Second River Niger Bridge, is a special project and technically interesting for us, as are the projects of EchoStone. The challenge in 2020 will be to maintain this momentum. PERI's more important concern is to invest in its staff and train them. We have 20 employees currently, and 11 will go for courses abroad in 2020. We are providing courses in Nigeria as well, by employing local and foreign trainers. As we continue to grow, it will be important to employ and train additional staff. So far, we have only a yard in Lagos and a sales representative in Port Harcourt. When our staff are skilled enough, we will station them at other locations in the country, where we hope to eventually set up other yards and storage facilities. In comparison, South Africa is our largest market in sub-Saharan Africa, where we employ over 600 staff in nine branches. From South Africa, we also handle projects in neighboring countries and export from there. Nigeria offers this potential for West Africa. Regulations, however, prevent exporting material that was once imported to Nigeria. If such regulations changed, PERI could make the subsidiary in Nigeria a regional hub and create additional jobs.