BUILDING INNOVATION

Nigeria 2020 | CONSTRUCTION & REAL ESTATE | VIP INTERVIEW

TBY talks to Lars Richter, Managing Director of Julius Berger, on public infrastructure projects, the current administration, and the housing deficit.

What major projects is Julius Berger currently involved in?

Julius Berger is one of the largest construction companies in Nigeria. We offer services covering the complete construction and development value chain. Our portfolio includes a range of projects in the building, infrastructure and industrial sector, including oil and gas industry and power projects. Julius Berger can tackle just about any project, but we have the strongest edge when it comes to large scale or technically challenging works, or projects with accelerated timelines. Therefore, we have been awarded several priority projects by the Federal Government, one of which is the Second Niger Bridge linking Asaba in Delta State with Onitsha in Anambra State. We commenced works in 2018 and have finished the piling structure. Works on the substructure, such as the sand filling and dredging works, as well as works for the super structure are ongoing. Everything is on track according to our schedule, and we expect to finish on time in 2022. This is a priority project by the Nigerian federal government under the umbrella of the Presidential Infrastructure Development Fund (PIDF). Our client is the Federal Ministry of Works and Housing together with the Nigerian Sovereign Investment Authority (NSIA), which is providing the funds. We expect this key project to be a success story for the government, linking the southern and western part of Nigeria and becoming a key part of West Africa's road network. We believe that our structure, being a 100% Nigerian company with a subsidiary in Germany through which we can transfer state-of-the-art technologies, coupled with our backwards integration and domestic production capacities provides for a unique model - that guarantees quality, reliably and innovation are prioritized for our clients' benefit.

Julius Berger is known as a first choice contractor for infrastructure projects. As such, you seem maintain a high level of Federal Government projects. Do you intend to maintain this strategy over the long term, or are there plans to diversify the company's clientele?

According to our company's strategy, infrastructure is one part of our core business in the construction sector, and we want to maintain and even increase our strength in this field. The Federal Government is therefore a very key client for Julius Berger, as the biggest contracts, such as the Second Niger Bridge, Abuja-Kano Road, and Lagos-Ibadan Expressway, are priority projects funded by NSIA and PIDF. Therefore, they are one large part of our construction pillar and strategy. However, our portfolio is dynamic and close to half of our client mix is made up of other clients, including private clients and investors. As well, we have some contracts with state governments and parastatal agencies. Still, diversification is a main theme and focus for Julius Berger. Considering the ups and downs in the Nigerian construction business due to economic and financial parameters, we see diversification as a key tactic to protect ourselves from this volatility. Our plan for the future is to grow a second pillar to our business, made up of new opportunities, some of which are currently under development. Since I transitioned into the role as Managing Director, in 2018, the company's focus has been diversification.

What is the business sentiment and investment climate like in the construction sector now?

The recession is behind us, and there is slight growth in the country now, in construction and even in different business sectors. But still, the construction sector is suffering because most of the major infrastructure projects are federal government projects, and funding has been limited. In 2018, we managed to grow slightly, and in 2019 we made a significant step in our turnover. This comes from the priority projects as well as from more investors coming into the Nigerian market. We believe that our growth and forward progress is also reflective of the sector as a whole. The sentiment is more positive, and it seems that the entire industry is hopeful for 2020 and for more international investors to return because we also need many more construction projects in the private sector, including in the oil and gas industry. The biggest project on the horizon is train seven at the Bonny Island LNG facility, which has been a long time coming. We are focused on tendering for such jobs and hope to win some of those bids in order to participate in this big project. Such awards would be wonderful in celebration of our 50th Anniversary since incorporation in Nigeria, which we are commemorating in 2020.

What has delayed narrowing the infrastructure gap in Nigeria?

Nigeria is a large country with tremendous population growth and therefore growing needs in terms of infrastructure, here we are not only talking about roads, but also the provision of power, rail lines, harbors, deep sea ports, and so on. The overall responsibility for the provision of this infrastructure rests mainly with the Federal Government, as does the financial responsibility. Meanwhile, private investors can get involved through mechanisms such as PPP models, but infrastructure development at this scale cannot be done solely by private investors. We have some PPP models in Nigeria, though only for some minor projects, and the frameworks and financial models for PPP in Nigeria are yet to be fully developed. President Buhari's administration is focused on infrastructure, and road infrastructure is a must along with power. Yet there remains a need for greater volume of continued intense investment by the federal government to cover the gap between the existing and ever-growing demand and what is actually on the ground.

While there is a 17 million housing deficit, there also seems to be an oversupply of high-end properties. What is your take on this?

Prior to the recession, Nigeria saw a continued growth and urbanization, with a rising middle and upper-middle class. At the time there were strong cases for investment in higher-end real estate, both residential and commercial offices, with a number of investors who invested in such buildings, and then the recession came, and there was insufficient demand to occupy all these new homes and offices. At the moment, the market has stabilized, companies are scaling back up, and imports are increasing. These are the first sign that the economy is getting back on track. It can be assumed that international investors will soon return, and that all these developments will continue to support local companies to grow and start employing more people. Hopefully from there, the luxury or high-end development market will bounce back. I am positive about 2020 as a year for rebound.