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Just Released: "Nigeria Infrastructure Report Q3 2013"

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2013-07-01 09:34:54 - New Construction market report from Business Monitor International: "Nigeria Infrastructure Report Q3 2013"

Investment continues to flow into the Nigerian construction sector. This is reflected in the recently announced 6.5% GDP growth over 2012, a political agenda of economic reforms, and the continued unbundling and privatisation of the state-run Power Holding Company of Nigeria (PHCN). Thus, in line with our forecasts, Nigeria continues to see strong growth within its construction sector and we anticipate an annual average real growth of 9.2% between 2013 and 2017. We note that after a strong performance in 2012, we have revised our forecast for the construction industry upwards. However, we also continue to highlight the persistent risks hampering the implementation of major projects, ranging from deep-rooted corruption, violence perpetrated by militant Islamists and retaliatory forces, and a

vast yet still inefficient bureaucracy.

Key developments include:

* Roads & Bridges: Nigerian infrastructure development company Bi-Courtney Highway Services (BCHS) was dropped from its redevelopment of a section of the Lagos-Ibadan Expressway on account of its failure to progress with the project. The US$559mn project involved the reconstruction of both existing carriageways, as well as the addition of two carriageways in each direction between the Lagos- Sagamu interchange. BCHS was been awarded a 25-year concession contract to manage the expressway, which links Lagos with Nigeria's western states. Julius Berger Nigeria was awarded the work and is now in the running with seven others for the tender to construct the whole highway. A decision is due by mid-2013.
* Airports: The airport sub-sector will post the strongest growth within the transport sector in 2013 according to our forecasts. Informing this belief are a number of major developments within the sector which are set to keep growth at high levels at least over the medium-term. In October 2012, China Civil Engineering Construction Company (CCECC) won a contract to substantially upgrade Nigeria's airport capacity. Abuja, Lagos, Kano, Port Harcourt and Enugu will all have a new passenger terminal and cargo terminal built, with Asaba just receiving a new cargo terminal. The deal - worth US683mn - is a significant component of our outlook, and work is due to commence in June. Elsewhere, regional airports have else been benefitting from investment; both Bayelsa and Akua Ibom State airports have plans for new terminals and control towers. ALCON and Gitto began construction at Akua Iborn State Airport in March.
* Ports: APM Terminals are looking to invest in a new port facility in Lagos, in addition to their current operations at the Apapa Terminal in the Port of Lagos. The new facility would be located at Badagry, some 40km west of Lagos. In its first phase (of three), the container terminal at the new port would have two berths totalling 650 metres (m), with a draught of 14.5m of water alongside it. Its annual boxhandling capacity would initially be 1mn twenty-foot equivalent units (TEUs), to be expanded on in subsequent phases. Further to the container-handling facilities, the new port at Badagry would also be able to handle ro-ro and general cargo, and have a small free zone. Construction could start towards the end of 2013 with phase I opening during 2016.
* Energy & Utilities: As of May 2013, around 25% of the price bid by all the successful bidders in Nigeria's power auctions have been paid as deposits, and transfer of assets will be made later in the year. The investors, mainly a mixture of Nigerian firms teamed with international players like Siemens and Kepco, will now be responsible for operating the separate distribution companies, making the necessary investments to improve the distribution network, and customer service, in line with the objectives of the federal government.
* Energy & Utilities: In recent developments which will also aid fuel security for Nigeria's power generation, in April 2013 the World Bank signed a US$145mn Partial Risk Guarentee (PRG) with the Egbin state power authority, Chevron Nigeria and Deutsche Bank. The deal will secure gas supplies to the Egbin power station over lifetime of the 10-year deal. PRGs shelter private lenders against the risk of a public entity defaulting on the payment or contractual obligations. Fuel supplies to power stations have been a serious factor in Nigeria's power shortages.
* Oil & Economy: We are seeing tentative steps forward with restructuring the economy and realising Nigeria's vast oil wealth. 2012 GDP growth came in at a strong 6.5%, and the cabinet approved the longawaited final draft of the Petroleum Industry Bill (PIB). If implemented - and there is no certainty that it will - the PIB should bring more regulatory certainty and could unlock billions of dollars in investments in the country's oil and gas industry. That said, some of its aspects remain highly controversial which could, yet again, delay its ratification by parliament.
* Violence: Nigeria has recently seen an uptick in violence, causing the President to declare a state of emergency in the three northern states.
* Protests: The removal of fuel subsidies spurred nationwide protests, including a general strike, putting immense pressure on the government and eventually forcing it to partly back-pedal. However, to sustain long-term growth the country will need to press ahead with the ambitious, and necessary, economic and business environment reforms, and develop a plan to address the root causes of violence in the Niger Delta and the Middle Belt.

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