How to Start a Construction Company in Nigeria

Construction company
photo by PhotoMIX Company

Starting a construction business in Nigeria gives budding entrepreneurs a potential chance in the vibrant and quickly increasing construction industry. With the country’s growing infrastructure and urbanization, there is a considerable need for construction services in a variety of sectors. However, going on this trip necessitates careful planning, legal expertise, market research, and an efficient business strategy. In this article, we will discuss how to start a construction company business, the advantages of starting a construction business, opportunities and challenges of a construction company business.

What is the Construction Company Business Like in Nigeria?

A construction company is a business that specializes in the construction of buildings, roads, bridges, and other forms of infrastructure. It entails project planning, design, and execution using materials, tools, and equipment to satisfy the client’s standards. Construction companies use a variety of building materials, including concrete, steel, and wood.

Construction firms in Nigeria and Africa are critical to the development of the region’s infrastructure. With a compound annual growth rate (CAGR) of 3.6% between 2015 and 2020, the industry has risen dramatically in recent years. The construction industry has also created jobs for millions of people in the region, with approximately 30 million people employed in the business as of 2021.

According to research, the construction industry contributes greatly to a country’s economic prosperity. The construction sector in Nigeria accounts for around 5% of the country’s gross domestic product (GDP). Similarly, the construction industry in Africa accounts for around 8% of the continent’s GDP. Investing in the construction business, as a result, can fuel economic growth and development.

How to Start a Construction Company Business in Nigeria

You don’t expect to start conducting federal road projects or buying caterpillars and tractors in three months. Nonetheless, with proper management, it is achievable. The steps to starting a construction company are as follows:

#1. Draw up a Business Plan

A business plan is required since it helps you arrange yourself properly and gives you a focus on what you want to achieve. Creating a business strategy might also help you stay focused on your goal. How much potential your business plan demonstrates will have a significant impact on your chances of success if you intend to seek an investor. As a result, your business plan must include pertinent information such as financial targets, time frames, and employment objectives, among other things.

#2. Apply for Funding

This is an obvious first step in launching any meaningful business. To start a construction business, you must seek appropriate funding. You will also require resources to acquire a facility to keep your equipment. There are several ways to obtain funds in Nigeria. You can obtain a loan from a bank, find a partner with cash, or find investors.

#3. Choose a Good Location

Finding a suitable site for your office and warehouse You’ll need a nice place to store your equipment, as well as parking for your vehicles and office space for your important personnel. It is generally good to start your business from home in the early stages; this will save you money and time later on.

#4. Register Your Company and Learn the Laws

Registering your business not only provides you peace of mind but also gives your customers assurance of your company’s legitimacy. You must register your business with the Corporate Affairs agency or any other agency in your state or city because not everyone will award a contract to an unregistered company. Hire a lawyer to help you through this process, or better yet, walk into any CAC office in your region and follow the steps they will lay out for you.

#5. Buy the Required Equipment

The next stage is to obtain the equipment required for simple building or construction jobs. Because there is so much rivalry in the construction industry, if you want to succeed in business, you must make your presentations stand out by using unique architecture and plans. Purchase the necessary tools to help your construction company stand out.

#6. Hiring Creative Staff

I recommend that you hire a civil engineer and an architect, or better yet, collaborate with them. You will also need to hire a lawyer to walk you through the laws governing contracts and business legalities. An accountant will also be required to perform tax reviews and payments while maintaining your financial standing; he or she will conduct audits after each successive business year, extracting important documentation for such audits.

#7. Advertise Your Company

Social media and the internet have made this once-difficult task easier. Traditional radio and print advertising still reach many people, but rarely the target audience. Websites are growing more popular; networking displays your company to the public and is now considered a way to distinguish serious organizations. Create company accounts on Facebook, Instagram, Vconnect, Twitter, etc. A #360 Facebook post boost can generate a lot of views from the proper audience, and Jobs will soon follow.

You will agree with me when I say that the sort of structure design developed in the 1980s is not the same type of structure design that people desire to build now. Times change, and things change with them; if you want to be competitive, you must modify your style as well. People want their buildings to stand out from the crowd, whether it’s a bank, a fashion house, a shopping mall, or a museum; they want the best, and you must be able to provide the best in terms of both quality and innovation.

#9. Manage Inventory

This is crucial to the business—you must know what equipment is deployed, how many have been sent, and how many have been returned. If equipment is frequently lost, it could bankrupt your company; make sure all tools and equipment are returned to the inventory after use. No matter how cheap anything is, don’t buy anything you don’t need. Business owners sometimes develop the habit of buying equipment they don’t require right away.

The construction industry is a goldmine for individuals who work hard to promote their businesses. Good luck starting a business now that you know how.

How to Find a Good Location for Your Construction Company Business in Nigeria

You must determine the optimal site for your commercial or industrial project. As a business owner, you must consider where your employees, customers, and delivery will be most comfortable. And, as an investor, you must consider the optimal location for your desired renters.

But once you’ve decided where you want to go, you’ll need to find the land. This is when professional assistance can be beneficial. Choose the proper specialist, and they will know what land is available and how to get you the best price.

Another factor to consider is whether the real site is suitable for constructing the type of building you require. This is critical since it can have a significant impact on your construction costs. Make sure you hire a commercial and industrial building specialist to assess the land and ensure it’s suitable for developing what you need without boosting construction costs.

The Advantages of Owning a Construction Company Business in Nigeria 

The following are some of the advantages of starting a construction company business in Nigeria

  • Employment creation: The construction sector is a major employer in Nigeria and Africa, employing both skilled and unskilled laborers. 
  • Infrastructure development: Construction firms play an important role in the construction and maintenance of infrastructure such as roads, bridges, airports, and buildings.
  • Foreign investment: Construction operations attract foreign investment, which contributes to economic growth and opens up opportunities for local businesses to collaborate with multinational ones.
  • Real estate development: Construction firms are involved in real estate development, which helps the property market flourish and provides housing for inhabitants.
  • Tourism development: The construction of hotels, resorts, and other tourist amenities can help the tourism industry in Nigeria and Africa thrive.
  • Foreign exchange earnings: Construction companies that export goods or services generate foreign exchange earnings.
  • SME development: Construction operations can generate chances for SMEs to supply services such as transportation, catering, and security.
  • Poverty alleviation: Construction operations can aid in poverty alleviation by creating job opportunities and providing infrastructure and services to rural and disadvantaged communities.
  • Disaster resilience: Construction companies can help develop disaster-resistant infrastructure and homes, reducing the impact of natural disasters.

Construction Company Business Opportunities in Nigeria 

There are a lot of construction company business opportunities in Nigeria that are unknown to people. The following will outline some of those opportunities:

  • Supply of building and construction materials: A construction company can specialize in delivering building materials such as cement, steel, blocks, and sand.
  • Construction equipment leasing: Another business option for construction organizations is leasing construction equipment to other construction companies, such as cranes, excavators, and bulldozers.
  • Real estate development: Construction businesses can invest in real estate development by purchasing land, developing structures, and then selling or renting them.
  • Property management: Property management entails managing properties on behalf of the owner and can be a profitable business opportunity for construction businesses.
  • Renovation and remodeling: To boost the value of existing structures, construction companies might specialize in renovation and remodeling.
  • Road and Bridge Construction: Construction businesses might specialize in road and bridge construction due to the increased demand for good road networks and bridges.
  • Water and sanitation facility construction: Construction businesses must focus on the construction of water and sanitation facilities such as boreholes, wells, and public toilets.
  • Electrical and plumbing services: As part of their business, construction companies might provide electrical and plumbing services.
  • Pre-fabricated buildings: Construction businesses can also make pre-fabricated buildings, which are becoming increasingly prominent in the construction industry.
  • Construction project management: Offering project management services to other construction companies is another business option for construction organizations.
  • Building maintenance and repair: Construction firms can also offer building maintenance and repair services.

Construction Company Business Challenges in Nigeria

Despite the profitability of construction company business in Nigeria, they also have their challenges. Some of them include

  • Lack of Access to Funding: A major difficulty for construction enterprises in Nigeria is a lack of access to funding. Most banks and financial institutions have stringent lending criteria, making it difficult for small and medium-sized construction firms to obtain money for their projects.
  • Bureaucracy and Corruption: Bureaucracy and corruption in the Nigerian and African construction industries can be serious challenges. Due to bureaucratic processes, obtaining construction permits, licenses, and approvals can take a long time, and corruption can further delay and increase prices.
  • Poor Infrastructure: Poor infrastructure is a big barrier for Nigerian and African construction enterprises. Construction companies may find it challenging to function successfully due to poor roads, inadequate power supply, and limited access to water and other resources.
  • Limited Skilled Workforce: The construction sector in Nigeria and Africa is experiencing a skilled worker shortage, making it difficult to locate qualified staff to execute projects.
  • Political Instability: Political insecurity in some African countries may wreak havoc on construction projects by generating delays, raising expenses, and creating uncertainty.
  • Environmental restrictions: Construction enterprises in Nigeria and Africa may face stringent environmental restrictions that necessitate compliance and contribute to project expenses.

Construction Company Business Tips in Nigeria

If you are starting a construction business in Nigeria, the following tips will aid in making the right decisions

  • Know Your Profit Numbers: The most important thing is to know your profit numbers. Profit figures are profit goals or targets that should be checked frequently to avoid closure.
  • Understand Your Equity Numbers: Equity, also known as net worth, is the actual value of your company, excluding intrinsic value. It is the total of your assets minus your total obligations. It’s at the very bottom of your balance sheet or financial statement.
  • Understand Your Overhead Numbers: Making a net profit begins with understanding how much money you need to produce and collect to pay your fixed expenses.
  • Know Your Contract Numbers: Successful construction business owners are aware of their contract numbers. These include both completed and ongoing jobs.

The Construction Company’s Busiest Season in Nigeria and Africa

Weather conditions, construction material availability, and government policy are all elements that influence construction company business in Nigeria and Africa. As a result, determining a precise peak season for construction in the region might be difficult. However, construction activity tends to peak during the dry season, which in Nigeria and other West African nations typically lasts from November to March. During this time, weather conditions are often more favorable, and the ground is less likely to be soggy, making construction tasks easier.

Furthermore, variables such as population expansion, urbanization, and government regulations can all have an impact on the demand for construction services. For example, the Nigerian government has been pushing for higher infrastructure investment in areas such as roads, bridges, and housing, which has increased demand for construction services. The African Continental Free Trade Area (AfCFTA), which intends to expand commerce and investment in the region and hence create new opportunities for construction companies, is also projected to help the construction industry.

How Much Capital Do I Require to Establish a Construction Company in Nigeria?

A construction company must be either a private limited liability company or a public limited liability company. As a Nigerian, the minimum allowed share capital for a private limited liability company is one million shares. It should be noted that this is the monetary value of the registration.

What Are the Requirements for Registering a Construction Company in Nigeria?

The following are the general requirements:

  • The COREN Application Form (online)
  • Certification of CAC Registration
  • Company brochure.
  • Form C02 of the CAC
  • Form C07 of the CAC
  • Annual Return CAC Form 10
  • Engineers on the firm’s Board of Directors must provide a curriculum vitae, COREN Registration Certificates, and valid practicing licenses.

Is It Possible for a Foreigner to Wholly Own a Company in Nigeria?

Except for a few sectors reserved for Nigerian natives, including small-scale businesses, agriculture, and cottage industries, the NIPC Act allows for 100% foreign ownership of corporations in all sectors.

In Nigeria, Who Regulates Construction Companies?

CORBON was formed by the Federal Republic of Nigeria Act Cap No. 40 (previously known as Decree No. 45 of 1989) and is now established under the BUILDERS REGISTRATION ACT CAP B13LFN 2004.

What’s the Difference Between NSE and Coren?

COREN is a federal government body established by law with the authority to regulate and manage the practice of the engineering profession in all its dimensions and ramifications, whereas NSE is a non-governmental organization that serves as an umbrella organization for engineers in Nigeria.

Conclusion 

The demand for construction services is always high, particularly in emerging countries. This is owing to the rising demand for new buildings and structures, as well as the renovation of existing ones. Thus, if you intend to start a construction company, keep in mind that there will be a lot of work to be done. 

References

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