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How the 2016 budget favours Real Estate Development

Last week, the Federal Government released the breakdown of capital budgetary allocations to the key sectors for the 2016 physical year. Since the figures were made public, there have been various comments by industry analysts on the implications for the nation’s economy and well-being of the people.

Of all the sectors captured in the budget, Housing, Power and Works, have led the public discourse chart. It is, however, not hard to hazard a guess about this development given the parlous state of the roads, decayed infrastructure, and the entrenched homelessness that has become the lots of many Nigerians. While successive administrations reeled out bogus figures set aside for certain priority projects year-in year-out, the nation has continued to grapple with basic infrastructure challenges either due to poor implementation of budgets, mis-management, mis-application, outright stealing or a combination of all.

Appraising housing, infrastructure outlook from 2016 budget’s thrusts Why we retained Vono brand after merger with Vitafoam –Adeniyi Beyond the factors already enumerated, industry analysts have also attributed the parlous state of infrastructure in the country to giving primacy to recurrent expenditure at the expense capital spending. They, however, noted that the amount of money allocated to capital projects, coupled with the assurance of early release of funds for their prompt implementation, showed a clear departure from the past. According to them, with proper utilization and due diligence the budget presents a brighter outlook for the nation than the previous years A sectoral analysis of the budget revealed that Power, Works and Housing will gulp N456.93 billion.

Out of the amount, N134.4billion will be spent on the nation’s major arterial roads. Some of the roads are: dualisation of Kano-Maiduguri road (Section I-V) reconstruction and pavement strengthening of sections of Benin-Sagamu expressway, construction of Oju/Loko Oweto Bridge to link Loko and Oweto with approach Roads and Oshegbudu-Oweto road, concession of 2nd Niger Bridge, dualisation Odukpani- Itu-Ikot Ekpene road in Cross River and Akwa Ibom states. Others include, rehabilitation of Ilorin- Jebba-Mokwa-Bokani road, rehabilitation of Sokot-Tambuwal Kotangora- Makira road, Lagos-Ibadan expressway (Section I), completion of Gombe-Numan –Yola road phase II, rehabilitation of Apapa-Oshodi-Oworoshoki road, dualization of Kano-Katsina road phase I, dualisation of Ibadan-Ilorin section II, rehabilitation of Enugu-Onitsha road and dualization of Sapele-Agbor-Ewu road (Section I).

Similarly, as part of the moves to bridge the nation’s housing deficit gap, put at 17million units, the federal government also allocated N35.6 billion for the construction of 1,973 blocks of 7,068 housing units in the 6 geo-political zones and the Federal Capital Territory. Even the Minister of Power, Works and Housing, Mr. Raji Fashola admitted the huge infrastructure challenges while unveiling his blueprint for the sectors in Abuja. He noted that due to paucity of funds the present administration would pursue a programme of planned prioritisasion of projects execution. For instance, in the area of road infrastructure the minister said that whereas it would require N2 trillion to complete the 206 ongoing road projects spread across the six-geo political zones of the country, a paltry N13 billion was released out of the N18.132bn provided in the 2015 budget. In order to navigate the financial hurdle, Fashola explained that the ministry’s short term strategy was to concentrate on roads that connect states and those that bear the heaviest traffic. Confirming that infrastructure projects have suffered long years of neglect, he noted that ‘the records that have been made available from previous budgets show that the last time Nigeria budgeted over N200 billion in a year’s budget for roads was in 2002. It seems that as our income from oil prices increased over the last decade, our spending on roads decreased.

“As far as status reports go, the Federal Government budgeted N18.132Billion in 2015 and the Ministry of Works got N13 billion for all roads and highways in 2015, although it has contracts for 206 roads, covering over 6,000km with contract price of over N2trillion. “Our ability to achieve connectivity of roads depends on capital spending in 2016 to pay contractors and get them back to work. Our short term strategy will be to start with roads that have made some progress and can be quickly completed to facilitate connectivity. We will prioritize within this strategy by choosing first the roads that connect states together and from that grouping start with those that bear the heaviest traffic. Fashola lamented that the stoppage of the road projects due to failure of government to pay contractors had resulted in acute job losses, adding that over 5,150 workers had been laid off in four major construction companies in the country.

On the lingering housing deficit challenge, the minister averred that government would lead the aggressive intervention to increase supply by undertaking construction of public sector participation and ownership with a view to reducing the current housing deficit put at 17million units.

He admitted that the country must rev up national housing budget from the current N1.8 billion to hundreds of billions if it must meet its housing need. Commenting on the proposed capital budget, the President, Council for the Regulation of Engineering in Nigeria(COREN), Engr. Kashim Ali, said allocations for infrastructure projects under the current administration portend a quantum leap for the nation in terms of employment generation if properly implemented.

He clarified:”It portend a quantum leap for the Nigerian economy giving paltry sum allocated in 2015 budget. The importance of road is that it connects people and economic activities because with good road cutting across the country, you can can economic goods across the country at a cheaper cost since. This is more so because we depend on road ways in the country.” On whether it would lead to a better deal for the nation’s indigenous engineers, the COREN boss noted that, that could only be ascertained when implementation proper begins.

“For the engineers, we can’t say in hurray yet, until we know the level of personnel involved in the companies that will utilize this money. If the country depends solely on foreign companies to execute the road projects, we would still have lost woefully because sustainability would not be there.The government has set of laws and regulations concerning the utilization of expatriate in Nigeria. If only government would follow these laws and regulations, then we are good to go,” he explained.

On the housing component, the immediate past President of Real Estate Developers Association of Nigeria (REDAN), Chief Olabode Afolayan, maintained that the current administration deserved commendation for coming up with plans and programmes aimed at addressing the country’s perennial housing challenge. According to him, the production of the 1,973 blocks of 7,068 housing units across the country would not only help in stimulating economic activities, it would also help in the creation of direct and indirect job with its attendant multiplier effects on the purchasing power of the populace. Afolayan explained further that “whichever way we look at the development, we must appreciate this government for coming up with these housing plans.

This is about the first time in many years of governance in Nigeria that a government will make direct in- Fashola tervention in the production of houses after the Shagari administration and the little that was done by Abacha that brought the about construction Gwarimps, Lugbe and several otherex cross the country. “While Obasanjo administration can be credited for creating the enabling environment and programmes that enable private sector to play very significant role in advancing the cause of affordable housing, we noticed that during that era, government did not directly invest in housing as the current administration is proposing to do.

“It was during his administration that Federal Mortgage Bank of Nigeria(FMBN), following the recommendations of Prof. Akin Mabogunje’s technical committee, established the Estate Development Loans. It was also during his tenure that the Federal Ministry of Lands and Housing Development pursued aggressively the PPP programme whereby landed property owed by it across the country were given to private developers under a very workable programme.

We also had the coming on stream of a lot of primary mortgage banks who were providing National Housing Scheme facilities to enable a whole lot of people own their own houses.” He however, maintained that, beyond production of houses, government should address the issue of recapitalization of the FMBN to enable it have the needed financial capacity to provide mortgages to the people.

According to him, addressing the demand and supply side of housing chain would go a long way in addressing the deficits which have been on for several years.

Source: National Mirror

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