Nigeria’s road and bridge construction is expected to benefit widely from increased oil revenues, supporting the construction and maintenance of major interstate and tarred intrastate roads, Fitch asserts.
Oil revenues account for a significant part of public revenues in the country. Considering current forecasts, oil production in Nigeria will rise to an average of 2.5 million barrels per day between 2020 and 2030, according to Fitch Solutions.
Fitch’s forecasts show that Brent Crude prices will reach US$72.6 per barrel between 2022 and 2030, up from US$43.2 barrel per day in 2020. By extension, these forecasts are further supported by Nigeria’s well-stocked road infrastructure project pipeline.
In the long-term, hydrocarbons revenue growth, supported by an uplift in private hydrocarbons will lead to a slight acceleration of roads and bridges infrastructure. This is expected, following the passage and implementation of the Petroleum Industry Bill.
Based on available data, Nigeria’s roads and bridges project pipeline is sub-Saharan Africa’s second-largest, in terms of dollar value as well as the number of projects involved.
According to Fitch Solutions, demand for road infrastructure construction and improvement in Nigeria will be supported by a strong road freight outlook. This is due to the fact that, forecasts show road freight will remain Nigeria’s dominant freight mode over the next 10 years, accounting for more than 99 per cent of the total.
Also, Nigeria’s road freight volumes is expected to grow at a rate of 10.7 per cent in 2021, having contracted by 9.1 per cent in 2020. In a medium, Fitch expects Nigeria’s road freight volumes to grow an average rate of 5.6 per cent between 2022 and 2025.
Road construction outlook faces high level security risks
Inflation and unemployment will remain a drag on real household spending, however, this threat will not escalate to drastically reduce demand for road transportation, Fitch Solutions indicates. As such, Nigeria’s growing middle class and overall population growth will support import growth and demand for road transportation going forward.
“Strengthening public hydrocarbons revenues will support roads construction investment in Nigeria, as a positive road freight outlook and high urban population growth will keep demand for road infrastructure improvements elevated.”Fitch Solutions
According to United Nations forecasts, by 2035 Nigeria will host 50 cities with more than 300 thousand inhabitants— far more than any other country in Sub-Saharan Africa. Currently, the state of Lagos alone hosts a vehicle fleet almost as large as those of Zimbabwe or Zambia.
Nonetheless, crime and security risks in Nigeria are substantial. Investor confidence is dampened by the recurrent violence in restive areas such as the northeastern, northwest and Niger Delta regions.
Also, organized criminal groups are active across the country, and businesses are exposed to the threat of violent crimes such as robbery, kidnapping of foreign workers, as well as fraud and cybercrime, Fitch averred.
“Companies active in Nigeria’s road infrastructure sector are faced with high levels of security risk and corruption, as well as poor logistics.”Fitch Solutions
However, due to the strong need for low-skilled labour when developing road infrastructure, road construction will be supported by such labour in the country.