See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/267026082

GOVERNMENT ROLE IN DEVELOPING THE CONSTRUCTION INDUSTRY IN

NIGERIA

Article · December 2004

CITATIONS READS

3 7,022

1 author:

Nathaniel Aniekwu
University of Benin
32 PUBLICATIONS 389 CITATIONS

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Technology diffusion in developing countries View project

SUSTAINABILITY AND TECHNICAL TRAINING IN DEVELOPING ECONOMIES View project

All content following this page was uploaded by Nathaniel Aniekwu on 30 June 2016.

The user has requested enhancement of the downloaded file.

GOVERNMENT ROLE IN DEVELOPING THE CONSTRUCTION INDUSTRY
IN NIGERIA

BY

A.N. Aniekwu

Civil Engineering Department,

University of Benin, Benin City, Nigeria
ananiekwu@uniben.edu. anny aniekwu@yahoo.com.uk

November 2003

Keywords: Government intervention, systems and structures, productivity,

performance, Construction industry development board.

1
GOVERNMENT ROLE IN DEVELOPING THE CONSTRUCTION INDUSTRY
IN NIGERIA
by
A. N. Aniekwu
Civil Engineering Department, University of Benin, Nigeria
ananiekwu@uniben.edu. anny _ aniekwu@yahoo.com.uk

ABSTRACT
This paper posits that the growth and development of the Nigerian
construction industry should not just be a matter of abstract concern to the
government; rather it should proactively seek to protect and nurture it to
growth, as a deliberate and viable economic policy aimed at tapping the vast
potential of the industry, as has been done in many countries.

INTRODUCTION
Towards the end of 1995, the South African government through her
department of Public Works (DPW) initiated the development of a
Construction industry Policy. In 1997 this effort which involved all
stakeholders in the South African construction industry culminated in a white
Paper which reflected the deepest concerns of the industry as a whole. The
Construction Industry Development Board (CIDB) was constituted and
continues to build on this platform and drive the national strategy for
construction industry development on behalf of all stakeholders (Merrifield
2000).

The National Audit Office of the United Kingdom scrutinizes public spending
on behalf of Parliament and certifies the accounts of all Government
departments and a wide range of other public sector bodies. This office
continually monitors the British construction industry, commissions’ expert
studies, develops position papers and statutorily reports to Parliament. The
other bodies that shape policy for the British construction industry include the
Construction Clients’ Forum (CCF), the Construction Industry Board (CIB) and
the Government Construction Clients’ Panel (GCCP) (Comptroller and Auditor
General, 2001).

2
In 1967, the Israeli government Treasury Department drew up an ambitious
programme for reorganizing Israel’s engineering services to become a very
viable export commodity. The Ministry of Commerce and Industry was even
mandated to and started a company called Enchs, to act as a kind of
marketing agency with the task of securing jobs abroad and allocate them to
Israeli companies (Krivine, 1967).

The Japanese government’s role in creating a macroeconomic and financial

environment conductive to rapid industrialization and economic growth went
beyond maintaining price stability, (Vittas and Kawaura, 1995). The
government created a stable but segmented and tightly regulated financial
system that favored the financing of industry over other sectors of economic
activity.

The construction Industry is very vital for implementing all construction policy
objectives of governments. Usually a substantial percentage of the economic
resources laid out by a government in the form of budget proposals will be
devoted to the provision of infrastructural facilities and bases for other
developmental objectives and these resources will have to be expended in
and by the construction industry. In recognition of the importance of the
construction industry, most developed Countries monitor the industry’s
activities very closely and control the direction and development of the
construction industry.

The Nigerian construction industry lacks the capacity to implement the

construction objectives of the country. The poor performance of the
indigenous contractors in Nigeria has been the subject of many past papers
(Wahab 1977, Edmunds and Miles 1983; Okpala and Aniekwu 1987, Aniekwu
and Okpala (1988a), Aniekwu and Okpala 1988b). Thus although construction
accounts for a substantial percentage of the GNP in Nigeria and constitute
almost half of the total public spending, the indigenous construction industry is
slow to benefit from this trend (Kirmani 1988, Adeyemi, 2000).

3
Given the importance of the construction industry and its complexity in the
contemporary society, no government can afford to ignore the operations of
her construction industry, not just because of her importance in realizing
government objectives but also because of her export potentials. As the
major client to the industry, Government is well placed to influence its
development. However, current efforts by various Government departments,
States and local authorities in Nigeria are characterized by a lack of
coherence, ignorance, duplication of effort and the interpretation by diverse
public-sector agencies are compounding the complexity of the environment in
which the industry operates. It is in the interests of Government, industry and
the public that levels of industry efficiency and effectiveness be raised,
together with those of public-sector delivery agencies. A comprehensive
approach to tackling the interlinked and mutually reinforcing impediments to
industry development and the achievement of socio-economic objectives is
beyond the scope of the industry in isolation. A concerted national
governmental approach is necessary.

Structure of the Nigerian Construction Industry

Subsequent national development plans in Nigeria since the 1946/55 plan
period rightly show that the nation’s development policies consistently
emphasizes those sectors of the economy that pose special problems or offer
special opportunities. They have consistently accorded priority status to
industrial and agricultural sectors plus related social services as transportation
and manpower training (Federation of Nigeria (FON) 1962-74). The
construction industry has never been considered as least explicitly as either
constituting a special problem or offering a special opportunity within the
development process of the economy. Yet with all fixed investments requiring
some construction, this industry has ramifications within the entire plan which
markedly influence and directly affect the successful implementation of every
project in all the economic sectors (Aboyade, 1973). Although studies
undertaken by the World Bank have found that construction should normally
account for between 3% and 8% of GDP in developing countries (World Bank
1984), the contribution of construction to Nigeria’s GDP has hovered steadily
at around 2% for the past 15 years (FOS, 1997).

4
The construction industry in Nigeria provides the infrastructure which is
fundamental to the development of the country and since as much as 50 –
70% of the Country’s investments involve construction, the efficiency of
investment programmes and the pace of economic growth depend on the
efficiency and productivity of the construction industry (Usoro 1974). Even the
best conceived development programmes could be stalled by high costs,
delays and poor quality works of an inefficient construction industry. About
69% of the nation’s fixed capital formation is produced by the construction
industry (FOS, 1998). This implies that the construction industry represents
nearly 70% of the capital base of the national economy. However, despite its
significant position within the national economy, its performance within the
economy has been, and continues to be, very poor.

In a study by the World Bank, foreign contractors represented only about 9%

of the contractors in Nigeria, however the total income of this 9% far
exceeded the combined income of the rest of the industry (Aniekwu and
Okpala, 1989). A survey carried out by the Ministry of National Planning
established that in the 1970s, wholly owned Nigerian companies on the
average had lower total paid-up share capital compared with the foreign
indigenized firms. The total paid-up share capital of wholly-owned Nigerian
companies ranged from a minimum of N20,000.00 to a maximum of N1
million, an average of about N450,000.00 per company while the total paid-up
capital of foreign–based companies ranged from N200,000.00 and N12
million, an average of about N2.3 million ($2 = N1 at the time of report,
current rate is $1 = N145.00). This low capital base of indigenous firms,
amongst other factors, excluded them from handling big projects and put the
few expatriate-controlled companies in a monopoly position, thus reducing the
worth of competitive bidding (Adeyemi 2000). This observation is corroborated
by an evaluation of 1133 contracts awarded by the State and Federal
governments between 1974–1984, which showed that although only 258 of
these contracts were awarded to foreign contractors; it represented 93.04% of
the total contract value, (Figure 1) (Oseni 1980).

5
 Fig. 1: Federal highways construction Fig. 2: Federal highways construction
contracts up to N5 million (1979-1987) contracts above N10 million (1979-1987)

Indigenous Indigenous
15% 2.3%

Expatriate Expatriate
85% 97.7%
Fig. 3: Federal highways rehabilitation Fig. 4: Building construction projects below
contracts above N10 million (1979-1987) N5 million (1979-1987)

Indigenous Expatriate
10.4% 12.5%

Expatriate Indigenous
89.6% 87.5%

Fig. 5: Building construction projects over

N10 million (1979-1987)

Indiginous
20%

Expatriate Figure 1
80%

The Nigerian post-colonial history has been that of recurrent attempts by

subsequent governments to indigenize the Nigerian economy. The early
attempts date back to the last few years of the pre-colonial era and
culminated in the Indigenization Decree of 1972. The Nigeria Enterprises
Promotion Decree of 1972 has as one of its main objectives, to promote
Nigerian indigenous enterprise with a view to increasing indigenous equity
participation in the National economy. Thus each new government sought the
complete emancipation of Nigeria economically and politically, with all the
attendant consequences to foreign business. In 1983 a new government
introduced fiscal measures, which included a serious limitation on the
percentage of earnings a foreigner can repatriate from Nigeria. These were all
attempts to secure more indigenous control of the Nigerian economy,
sometimes with adverse consequences on some sectors of the economy.

These results indicate that the construction industry in Nigeria is far from
emancipation and cannot be said to be developing, hence the efforts of
subsequent governments in Nigeria to indigenize the industry, sometimes

6
through, not so well thought out fiscal and other policies. A comprehensive
approach to tackling the interlinked and mutually reinforcing impediments to
industry development and the achievement of socio-economic objectives is
beyond the scope of any single Government department, or of the industry in
isolation. A concerted national approach is necessary. The government will
need to take over leadership of the construction industry, as is the case in
most developed Countries (Vittas and Kawaura 1995, Merrifield, 2000, Krivine
1967). She should set up an appropriate organ for monitoring and
development until such a time that the industry can not only fend for itself but
will win a place for itself in the export market, especially given that the
government is the biggest client to the construction industry (Aniekwu 1995).

Developing a stable delivery environment

Improving the capacity and capability of the construction industry is important
to most developing Countries. The operational systems and structures must
offer some control and protection for the local construction industry, only thus
can the industry survive under the pressure of sophisticated international
competition. Systems of affirmative action, local industry inclusion policies,
export market souring, credit base support, capital equipment support, etc,
must all be considered as a deliberate support policy for the local construction
industry. The development of the construction industry must seek to positively
direct the effects of these factors and therefore respond to the following broad
social and economic imperatives as the focus of governmental intervention:
• Sustainable economic growth and productivity of the sector.
• Rapid and efficient delivery of quality assets to the public
• Sustainable employment creation
• The active promotion of small and micro-enterprises (SMEs).
• Stabilized and enabling labour relations within the framework of labour
regulation.
• A human resource development strategy which is holistic, sustainable
and accessible.
• Competitiveness and appropriate posturing for international business

7
• The development of public–sector capacity to manage the delivery
process.
• Government’s role in promoting an enabling environment for industry
development, and greater private-sector participation in the delivery
process.
The systems and structures, which influence and control the activities within
the construction industry, must be reviewed with a view to making them more
positively effective. In meeting the wider objectives of the construction
industry, the industry and Government must overcome a range of
fundamental constraints. Some of these fundamental impediments to industry
growth and development include the following:
• Interconnected structural problems existing within the industry, which
are complicated by unforcastable and volatile nature of construction
demand.
• The impediments posed by the constraint and inability to access
finance and credit. The government’s limited capacity to manage its
procurement function as the major client to the industry, which has
given rise to delivery bottlenecks and has escalated the cost of
development to both industry and the public.
• Limited investment in physical infrastructure, constrained by public–
sector fiscal incapacity and the limited ability to mobilize private-sector
finance, as well as vocational or management training for the industry.
It is against the background of the need for accelerated delivery and
development that the combined and mutually reinforcing effect of the
constraints outlined here can be characterized as an industry-wide crisis.

Government Influence in enabling the construction Industry

The strategic aim of a construction industry policy is to establish an enabling
environment in which the objectives of reconstruction, development and
growth are realized in the industry. The goal is a construction industry policy
and strategy that promotes stability, fosters economic growth and international
competitiveness and creates sustainable employment as it generates new
industry capacity for industry development. It presupposes a growing and

8
active industry supported by an effective institutional framework
representative of all parties who embrace this vision. It is premised on the
ability of Government to exert its influence to foster operating practices
conductive to an enabling environment. The role of Government is
sacrosanct and must ensure a balanced application of the instruments at its
disposal. These include the following systems of:
• regulation
• procurement policy
• human-resource strategies in accordance with industry development
priorities
• direct support, including financial support; and
• Institutional support.

With the support of an industry coordinating statutory authority and other

infrastructure-delivery departments, the government alone can initiate and
sustain the continuous review of the systems and structures in the industry to
ensure that these do not constitute barriers and major handicaps to
construction procurement. The simplification and standardization of tender
and contract documentation and the wider dissemination of information and
transparent adjudication processes for certain categories of public-sector
contracts for instance will constitute a major stepping stone in the ability of
small enterprises to access work opportunities. Almost all the measures that
will involve a fundamental shift in position will require government
intervention, viz;
• Enabling a continuous flow of work
Only the government can promote a sustained effort to ensuring a steadier
and forcastable flow of work suitable for various categories of small and
emerging businesses. It is possible to extract information on the amount and
types of work suitable for various categories of small and emerging
businesses, and to direct these opportunities through applicable procurement
mechanisms and foster greater participation of indigenous capacities. This
initiative will also encourage private sector investment in the construction
industry.

9
 • Access to finance
The difficulties in securing credit for construction projects on reasonable terms
from Lending Institutions, especially for interim construction financing, is
identified as a very important problem of the Nigerian construction industry. A
prerequisite for improved access to finance, is the regularization of this market
to reduce the uncertainly which informs the investment decisions of financial
institutions. Various programmes have been suggested to encourage the
banks to establish specific loan-assistance programmes for emerging
businesses but only the government can promote and sustain such
programmes. Even access to a loan-guarantee fund can be established for
encouraging emerging construction businesses. In addition, mechanisms can
be worked out to enable SMEs to cede contract payments to financial
institutions until their loans are repaid.
• Payment and surety arrangements
Sureties or performance guarantees for certain low-risk public-sector
contractors could be waived by government. However, these facilities will
only be accorded to enterprises with a demonstrable capacity to perform.
Registration and accreditation procedures, as well as performance monitoring,
will minimize and limit risk in such cases cash.
• Skills formation and access to training
Access by emerging contractors to requisite construction skills is tied to
reorientation of the structure and funding of industry training, in co-operation
with industry stakeholders. The government through her appropriate agencies
should promote the principle of equitable and manageable payment towards
training costs and the ability of contractors to access both artisan and
entrepreneurial skills training through the auspices of a Sectoral education
and training Authority. Generally, most small and emerging construction
businesses are run by persons who may or may not have vocational training
experience but are unlikely to have received any formal management training.
Training schemes directed at enterprise owners and managers should be
encouraged.
• Construction Industry development Council

10
It is strongly recommended that government should, as a matter of urgency,
establish and overarching Council for the construction industry, as a
coordinating organ for the professions in the built environment, with functions
relating to national policy and legislation. This council will exercise leadership
and foster the cooperation of industry stakeholders to pursue development
objectives, improved industry practices and procedures, which will enhance
delivery, productivity, profitability, and the industry’s long-term survival in an
increasingly global arena. The composition of the council should mirror the
make-up of the industry with appointed members who are innovative, forward-
looking and influential in their constituencies. Membership should be drawn
from all the branches of industry; constituents, contractors, materials
manufacturers and suppliers, academic, labour research and development
practitioners, clients and the professions – without necessarily representing
particular organizational interests. In constituting the council, it is important to
bear in mind that the clients of the industry are the driving force of many
change programmes, and implementation of any such programme begins with
them. The construction industry exists to serve its clients and client needs
must be met by the industry. Clients therefore have a substantial role to play
in setting standards and demanding improvements, and their role must be
reflected in the make-up of such an organ.

CONCLUSION
The growth and development of the Nigerian construction industry should not
just be a matter of abstract concern to the government, rather it should seek
to protect and nurture it to growth, not as a favour to the practitioners in that
industry, but as a deliberate and viable economic policy. We must now
recognize the force of the technological logic in the face of which one must
bend, if we must develop the construction industry in developing economics.

The creation of an enabling environment in which growth and development

benefits are maximized in the construction industry is a long-term endeavour
of co-operation between Government and other industry stakeholders.
Recognition of this reality makes it imperative to begin the process now. To
ensure policy alignment and maximum co-ordination, Government should

11
constitute an inter-ministerial Committee comprising the key national
ministries engaged in infrastructure delivery. This committee will ensure
focused political support and co-ordination of measures aimed at enhanced
infrastructure delivery, construction-industry growth and improvement, and
development of the required institutional capacity.

REFERENCES
1 Aboyade. O. Some features of the building and construction activities in
(1960) Nigeria. NISER Conference Proceedings, 1960, pg.1– 19
2 Adeyemi A. Y. Multinational Construction Contractors in a cyclical
(2000) Economic environment. Nigerian Journal of Engineering
Management, Vol. 1, No. 2 April – June 2000, pg. 46 – 53
3 Aniekwu A.N. The Business Environment of the Construction Industry in
(1995): Nigeria. Journal of Construction Management and
Economics . U.K. Volume 13, 1995 pg. 445 – 455.
4 Aniekwu, A.N & The Effect of Systemic Factors on Contract. Services in
Okpala, D.C. Nigeria. Journal of construction management and
(1988) economics. Vol. 6, 1988. Pages 171 – 182.
5 Aniekwu, A.N. & Contractual Arrangements and the Performance of the
Okpala, D.C. Nigerian Construction Industry (The structural
(1987) components). Journal of construction management
economics. Vol.5, 1987, Pages 3 – 11.
6 Aniekwu, A.N. A Survey of the problems of the construction industry in
and Okpala Nigeria: Vol. 1, A research report commissioned by the
D.C. (1989): World Bank, Washington D. C. Project No. AF4IN. 1989.
7 Aniekwu. A.N. Understanding the Nigerian construction Industry. Mindex
and J. Publishing Co. Ltd. 2002, 287 pgs 2002. ISBN 978 –
Nwachukwu 02) 35900 – 6 - 5
8 Comptroller and Modernizing Construction. National Audit Office Report:
Auditor General HC 87 Session 2000 – 2001: 11 January 2001, HMSO,
(2001): London, pp 58 – 66, ISBN: 0-10-276901-x.
9 D. Vittas. and A. Policy–Based Finance, Financial Regulation, and
Kawaura. (1995 Financial Sector Development in Japan

12
 10 Edmonds, G.A. Foundations for change: Aspects of the Construction
& Miles, D.W.J. Industry in Developing Countries, IT. Publications London.
(1983)
11 Federal of Federal Office of Statistics (FOS) (1997) National
Statistics (1997) Accounts of Nigeria 1981 to 1996. Abuja, Nigeria.
12 Federal of Federal Office of Statistics (FOS) (1998) Review of the
Statistics (1998) Nigeria Economy 1997. Federal Office of Statistics, Abuja,
Nigeria.
13 Federal Nigerian Enterprises Promotion Decree No.4 (1972).
Republic of Published in supplement to official gazette extra-ordinary
Nigeria (1972) No. 10, Vol. 59, 28th Feb. Part A.
14 Federation of Development Plan – 1962 – 68 Lagos, 1962 pg. 22, 2nd
Nigeria (1962) National Development Plan, 1970–74 Lagos 1970, pg. 35.
15 Kirmani, S. The Construction Industry in Development: Issues and
(1988): Options. Infrastructure and Urban Developing
Department. The World Bank, Report No. INUIO Feb.
1988.
16 Krivine D. Ambitious Government plan to step up export of
(1967) Engineering know-how. The Jerusalem Post, Thurs.
January 26th 1967.
17 Merrifield A Infrastructure Mandate for Change 1994 – 1999: The role
(2000) of the Construction Industry in the delivery of
Infrastructure in South Africa. HSRC Publishers, South
Africa. Chap 4.
18 Oseni, F. A. Measures to reduce construction cost of Engineering
(1980) project in Nigeria. The Nigerian Engineer. Vol. 5, No.2
April. 1980.
19 Usoro, E. J. The Dynamic Role of the Construction Industry in
(1974) Nigeria’s Development. Proceedings of the 1974 Annual
Conference of the Nigerian Economics Society, 1974, pg.
61 – 67.

13

View publication stats