When Babatunde Raji Fashola delivered a keynote speech during the Julius Berger Nigeria Plc dinner held on Thursday November 30, 2023 at The Capital Club Lagos, he harped on the importance of critical infrastructure to the economy. He seized the opportunity to take a dig at politicians (though they did not win election) who said infrastructure should be relegated to the background of the economy.
According to him: “The structural industry remains optimistic, but at the same time vigilant regarding this type of people and their relationships with the public service, because in the field of the economics of progress these minds border on the heretical.
I recognize that economics means other things to other people. People who have a micro view of the economy only see things in their limited scope. For example, what is the exchange rate and the effect of inflation on the burden of living?
This is an accepted but very narrow view of the economy. Those who want to see the bigger picture will perceive that it is the lack of critical infrastructure, such as an oil refinery, that pushes an oil-producing country to import petroleum products.
Below is his full speech.
Nigeria’s construction sector outlook for the next 5 to 10 years
Babatunde Raji Fashola
On August 26, 2022, one of the presidential candidates in the last election made statements to this effect: “Infrastructure makes the economy grow. . . ” There is “. . . too much emphasis on infrastructure, the economy suffers. . . “
I’m happy to tell you that the user who did that didn’t win the election. Therefore, as far as policy is concerned, it is unlikely that there will be a conscious or planned policy of divestment in the provision of infrastructure.
In other words, the structural industry remains optimistic, but still vigilant about such people and their appointments with public service, because those minds border on heresy in the framework of progression economics.
I recognize that economics means other things to other people. People who have a micro view of the economy only see things in their limited scope. For example, what is the exchange rate and the effect of inflation on the burden of living?
This is an accepted but very narrow view of the economy. Those who want to see the bigger picture will perceive that it is the lack of critical infrastructure, such as an oil refinery, that pushes an oil-producing country to import petroleum products.
It is estimated that this import, caused by a lack of infrastructure, accounts for about 30% of our foreign exchange needs. If there is a relief in foreign exchange needs of up to 30% for petroleum products alone, what about fertilizers?and petrochemicals, which contribute up to 10%, according to the conjecture?
If this demand falls, common economic sense obviously suggests that the Naira will strengthen.
If petroleum products are locally made, some cost reductions such as shipping, insurance and port charges will be realised and for those who have a broader view of the economy, they will understand cost-push inflation reduction and its positive impact on cost of living.
The same applies to pipelines, as well as seas and airports, roads and bridges, as well as telecommunications infrastructure to supply broadband and similar infrastructure for economic expansion and employment.
Simply put, any economy looking for expansion, efficiency, and productivity will have to invest in the right infrastructure to achieve this.
Nigeria is one of those countries and, as I said before, we live on a lot of the infrastructure built in the ’70s and ’80s, because we spent much of the ’90s struggling to regain democratic governance.
We have a lot of buildings and structures to do and that follows from the new National Infrastructure Master Plan (2020 – 2043, estimated at around $2. 3 trillion over 21 years, or about $110 billion per year).
Therefore, in my opinion, the outlook for the sector in Nigeria over the next 5 to 10 years and beyond remains very positive, as can be deduced from the government’s master plan.
Of course, there will be possible choices to be made, dictated through limited resources, and as Minister of Works and Housing in the last administration, I had to make choices possible.
We set priorities for critical areas of our economy and the choices of roads we committed to reconstruct or rehabilitate.
One of our priority roads leading to airports and seaports, which explains the reconstruction of the Apapa-Oshodi-Oworonshoki road; and the Ikom Bridge in Cross Rivers; roads leading to foreign borders, such as the Kano-Kongolam Highway, the Lagos-Badagry Highway, and the Nigeria-Cameroon Bridge linking Ekok in Cameroon with Mfum in Cross Rivers State.
The bridges were a precedent that prompted the construction of the new bridge over the Niger River and the Loko-Oweto bridge over Nigeria’s two main rivers. The first crossing of the Niger River reduced connection times between Asaba and Onitsha from an entire day to a maximum of 30 minutes. , while the timing of crossing the Benue River reduced the connection time between eastern Nigeria and the FCT by 4 hours.
Roads connecting critical agro-productive areas, such as the Sokoto-Tambuwal-Jega, Akwanga-Keffi Makurdi and Kano-Maiduguri roads, on which heavy trucks circulate, as well as those used for the distribution of petroleum products, were also a priority. says Ilorin. -Jebba, Lagos-Ibadan, Sagamu-Benin, Suleja-Minna.
While these examples reflect the possible options that can be made with limited resources, it is instructive to note that while some of those projects have been completed, others are still ongoing.
I also recall that we chose roads within tertiary educational institutions and executed 2 to 3 kilometres internal roads in 77 institutions and completed 46 (figure correct as of March 2022).
The point here is to highlight the fact that schooling requires infrastructure and, interestingly, also physical attention, as we all know, but we want that; because one of those establishments was the University Hospital of Ibadan.
Therefore, we can see that roads were not just Roads. They were economic roads to reduce travel and connecting time, or to distribute petroleum products and heavy goods and to support transport of Agricultural products and boost education and healthcare.
But what most clearly testifies to the continued relevance of the construction sector and its positive prospects in Nigeria in the short and long term are the areas of economic activity that still need infrastructure to drive them.
Let me refer to three of them, namely, tourism, entertainment and sport; starting with the last two.
It is evident to those paying attention that, globally and locally, trades and professions are evolving from the classic professions of lawyers, doctors, engineers, etc. , although they remain applicable and necessary.
However, what were once mere vocations and hobbies are now sports and entertainment professions; And never in the history of mankind have the talents and abilities of herbs been rewarded as they are today, and I believe this is just beginning.
Our artists and singers are selling out the largest performance arenas abroad and looking for similar facilities to perform at home.
Sports is perhaps the largest profession and employer of young people in the world today and the answer to youthful unemployment is hiding in plain sight.
Similarly, tourism in Nigeria is waiting to be unleashed due to the need for critical supporting infrastructure such as railways, roads, bridges, and airports to join our tourism assets; and other supporting infrastructure such as hotels and hotels that want to be built.
The point, girls and gentlemen, is that these are apparent spaces of lack for our economy, and what the economy wants determines what is built.
I will now temporarily deal with the effect of structure on other aspects and spaces of our economy.
It seems to me that those who work in the structures sector have not shared the economic opportunities of the sector or those of connecting industries with society as a whole.
I know how many city dwellers appreciate the importance of mines and quarries.
The assets are located in suburban and rural areas, but their impact is felt most in urban centers, in the form of skyscrapers, luxury apartments, highways, and bridges built from crushed stone, marble, granite, stone dust, and even laterite. that wants to be mined, loaded, and transported.
As a result, very few sectors of the economy, such as shipping and oil, are for transport and the transport sector, such as construction.
From records of economic impact we kept in the Ministry of Works and Housing, I can report 1,704,300 truck trips of haulage of bitumen, diesel, laterite, sand, cement and reinforcement.
The average minimum cost of a 30-tonne truck was 200,000 naira per trip. Therefore, for a single ministry at the federal level, 36 states, and the FCT, this represents a remittance savings of 340. 8 billion naira over 8 years, or N42. 6 billion consistent with the year.
This is the employment of shipping companies with their workers and drivers, which is made imaginable thanks to construction.
Drivers were then paid averagely N5,000 – N7,500 per day.
I can report another 383,431 people hired in the structure and rehabilitation of 9,290 kilometers of roads and bridges, the installation of 2,270,319 linear meters of road signs and the installation of 254,690 road signs.
I can report that 1262 structure contractors were hired on housing to build 6000 housing complexes with fixtures and fittings at 46 sites in 35 states.
This is just a high-level summary of the structure’s far-reaching impact on the economy.
Apart from evacuating the quarry, all the trucks involved in haulage use fuel, lubricants and spares; this drives demand for other services provided largely by micro small, medium enterprises that are the heartbeat of every economy.
It is these businesses that put food on the tables of families, pays rent, school fees and medical bills and so much more.
As I say, structural corporations are not structural materials, they are only a minimum of fundamental equipment. Thus, when contracted and financed, they become the simplest way to legitimately distribute wealth in an economy.
Last time I checked before I left my job, the lowest paid painter in a painting only setup with limited or no skills will be paid around N3,000 per day. (This is equivalent to double the monthly minimum wage of N30,000 consistent with the month for a consecutive 5-day week).
An order such as the Second Niger Bridge consumed around 26,900,000 litres of diesel, 80,000 tonnes of cement and 660,000 tonnes of aggregates that the contractor had to procure from suppliers and small and medium-sized enterprises.
At the time when diesel was N230 per litre, cement was N51,000 a ton and aggregates were priced at N3,600 per ton, the Second Niger bridge alone account for diesel business of N30.935 Billion, cement business of N4.080 Billion; and Aggregate business of N2.376 Billion.
Halfway through the reconstruction of the Apapa-Oworonshoki road, more than 5,000 laterite trucks from Ogun State have been delivered to the Lagos site.
The first section of the Lagos-Ibadan Highway, covering 44 kilometers (Lagos to Sagamu), built through JB, our hosts, contracted 29 subcontractors and 161 suppliers.
In the process, the businessman paid 39. 8 billion naira to his suppliers and 10. 6 billion naira to his own workers, while maintaining 75 permanent jobs throughout his career that made about 30 truck trips a day.
I have only opened the door to the structure and its multifaceted impact on the economy. There are many main points that time does not allow me to explore.
Then I’m making intervention plans about what it takes to build a road or a bridge.
But since the Marshall Plan to rebuild Europe after World War II, economists have linked infrastructure and structure to GDP expansion and the well-being of the economy.
When other young people threaten their lives to cross deserts and oceans in a desperate attempt to migrate, they do so in search of a better life, which is reflected in the quality of the infrastructure.
But it’s not just economists who have gotten the message about infrastructure, construction, and the economy; Many practical politicians have understood this and are doing something about it.
That’s why it’s hard to read the inauguration speech of a mayor, governor, prime minister or president without a decent mention of infrastructure.
This was the big commitment of the administration I served under President Buhari, that was followed with the Executive Order Number 11 of 6th of April 2022 for infrastructure maintenance to keep the assets in good operational working order, post construction and to maintain sustainable jobs in the process.
Funding the commitment to build infrastructure has been a challenge amid competing demands.
Policy, more than budget has been the biggest source of capital mobilization for infrastructure in recent times.
This explains initiatives such as the Sukuk which has helped to fund the construction of critical roads and bridges.
Draft policies such as the tax credit programme introduced by Decree No. 7 of 2019, over time, have begun to yield results.
Companies such as NLNG, Dangote Group, MTN, GZ Industries, BUA Group, and NNPC Ltd are adopting it as capital for construction.
In 2021, NNPC Ltd, in collaboration with FIRS, pledged 621,237 million naira to build 21 roads spanning 1,804 kilometers.
In 2022, NNPC Ltd has recommitted to spending N1. 9 trillion on infrastructure.
The construction of these roads will take time, and with the continuation of the tax credit system, there is a guarantee of financing for construction companies.
NLNG’s control of the recovered budget and source of dividend income were domiciled with the Nigerian Sovereign Investment Authority (NSIA) and committed to infrastructure, such as the Second Niger Bridge, the Lagos-Ibadan Highway, and the Abuja-Kaduna-Zaria-Kano Highway.
Through the Road Management and Development Initiative (HDMI), we have signed concession agreements on nine highways covering 1,423. 5 kilometers to mobilize nine billion for reconstruction and maintenance.
Obviously, President Bola Tinubu also links infrastructure to the economy, as will be seen in his inaugural speech when he said:
“We want to reform our economy to foster expansion and progress through job creation, food security and an end to excessive poverty.
Our government will also work with the National Assembly to expand an overarching jobs and prosperity bill. This bill will give our government the policy space to embark on labor-intensive infrastructure improvements, encourage sustainable production, and provide greater social assistance to the poor, elderly, and poor. and vulnerable.
We will continue the Buhari administration’s efforts on infrastructure. Priority should be given to progress towards national road, rail and port networks.
His words were followed by actions by announcing the creation of an infrastructure fund, which will undoubtedly be good news for the structures sector.
Having said that, I can correctly conclude that the outlook for the structural sector in Nigeria over the next 5 to 10 years is not only one of hope, but also of positive and valid expectations.
Thank you for listening.
Babatunde Raji Fashola, SAN
* Being the text of the keynote speech of the Julius Berger Nigeria Plc dinner held on Thursday November 30, 2023 at The Capital Club Lagos
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