OBG talks to Ogunbusola Solomon, President, Federation of Construction Industry

Interview: Ogunbusola Solomon

What are the challenges to ensuring a competitive public tender process for construction companies?

OGUNBUSOLA SOLOMON: We have a legitimate due process law in place. If the law is followed as it is written, then there will certainly be transparency in the awarding of government contracts. The key is that we implement our due process diligently, and there is still room for growth here. If there is a legitimate process in place that incentivises more firms to compete for contracts then the overall industry will, of course, benefit. This is the goal.

To what extent can the government use public-private partnerships (PPPs) to finance infrastructure?

SOLOMON: Nigeria has a lot of issues when it comes to PPPs. Due to the lack of government continuity, PPPs can be problematic. When new administrations come into power every four years, they each have different priorities, and if stability is not assured, then PPP projects will suffer setbacks due to potential changes in government financing of the project. There is no PPP that lasts for only four years. Although in theory it is a great vehicle for credible investment, until overall governance becomes more affective and resourceful, the PPP model will have trouble in Nigeria.

How can foreign firms facilitate sustainable local content practices in a cost-effective manner?

SOLOMON: Initially, expatriate expertise had a significant impact on the technical development of local engineers. Nowadays, some foreign engineers do not even match up to local ones. This is mainly due to the security situation. The best foreigners no longer want to work in Nigeria due to the constant insecurity, and this has affected the knowledge-transfer process. Stability must be improved to create a more conducive environment for the transfer of technology and training resources for local engineers. We always welcome practical education and there is still a need for it.

China’s footprint is more sizeable by the day, enabled by the Nigerian government, but its approach to development is rather exploitative. Chinese investors tend to be focused on short-term returns, whereby we provide millions of dollars for a contract and within a few years they leave. What we really need are long-term investments with returns after five to 10 years as opposed to two to three years.

What are the primary constraints in terms of access to construction materials?

SOLOMON: Most of the construction materials we need are found in Nigeria. The problem lies in the processing of the final product. Often it may be cheaper to import cement rather than produce it locally due to the power and electricity shortages. Production costs skyrocket if a generator is left running 24/7, which is a typical practice for many firms. Aside from that, local companies must pay foreign experts to train their employees. Again, the insecurity situation forces foreigners to work for fewer hours and to invest in security details. Therefore, there is a lack of efficiency when it comes to the expertise that is available here. This keeps the price of materials high. That being said, most of our firms still use local production and the quality of cement is comparable to that from anywhere in the world.

What sort of incentives is the government able to provide to mitigate investment risks?

SOLOMON: As with any country seeking foreign direct investment, the government can provide certain incentives to attract investors. This can include tax holidays for the first five to 10 years of operations or liberal visa requirements, as opposed to the rigorous ones that have been in place for so long. The government should also provide a physical area in which the investor’s project will take place and at a good price.

Regarding oil market volatility and the consequent price changes, the government has a strategic emergency reserve account for when prices get too low.

This reserve account will enable the government to manage its budget if prices drop below a certain point.