Equipment Rental And Leasing Opportunities In The Construction Industry In Nigeria; The Feasibility Report

The global construction equipment rental market size is expected to reach USD 136.5 billion by 2027, growing at a compound annual growth rate (CAGR) of four point nine point percent (4.9%) over the forecast period (2020 to 2027), according to a new report by Grand View Research, Inc.

The key factor driving the market is the growing construction industry, particularly in developing countries, owing to various growth opportunities in infrastructure, residential, and non-residential sectors. Shifting trends towards renting construction equipment due to various cost-benefits is also expected to propel the growth of the market.

Avoidance of initial purchasing cost, lower repair and maintenance cost, and shielding from market fluctuation are also some factors that promote the use of these heavy machines on rental basis.

The dynamic nature of the construction industry leads to rising overall project costs, hence renting equipment would provide a cushion to the construction companies from any unpredictable financial downturns that may arise. Thus, augmenting market growth over the forecast period.

Based on product, the construction equipment rental market is categorized into material handling machinery, earthmoving machinery, and concrete and road construction machinery. Earthmoving machinery emerged as the largest segment by product.

Widespread adoption, mobility and ease of operation, and the high cost of excavators are the prominent factors that make rental of such equipment a preferable option. The earthmoving machinery comprises of loaders and excavators prominently used for application in the agriculture, construction, and mining sectors.

Material handling machinery such as trailer mounted crane, truck mounted crane, and crawler crane is anticipated to gain market share by 2027.

The growing popularity of these types of machines owing to features such as high lifting capacity, high rigidity, and better transportability has fostered market demand. Additionally, the growing trend of high-rise buildings and mega infrastructure schemes is anticipated to give a boost to the demand for these types of machinery on rental basis.

The Nigeria construction industry plays a vital role in meeting the need of the nations’ infrastructural and economic development. About seventy percent (70%) of the nation’s capital investment goes into the construction industry annually (Dantata, 2008).

The building construction industry in Nigeria is expected to record a compound annual growth rate (CAGR) of thirteen point nine percent (13.9%) to reach NGN 10,671.3 billion by 2024. The residential construction industry in value terms increased at a compound annual growth rate (CAGR) of four point two percent (4.2%) during 2015-2019. The commercial building construction market in value terms is expected to record a compound annual growth rate (CAGR) of twelve point five percent (12.5%) over the forecast period (2015-2024).

Nigeria being a developing country requires massive infrastructural development in term of road, earth dam, parks, canal channelization and drain. Earth moving equipments such as Bulldozer, Excavator, Pay-loader, Roller, Grader and Low-bed (carrier) are used daily at enormous cost associated with the industry for these projects.

These projects engage the services of construction equipment leasing companies in order to cost their cost of operations. Such equipments are required in bush clearing, levelling, excavating, construction works and sand filling.

Specialized company such as Julius Berger, PW, OGORMA and Hi-tech are fully engaged and overstretched in-terms of equipment capacity. They now also sublet contract to equipment vendor to execute on their behalf and pay upfront.

This report seeks to examine the financial viability of establishing a construction equipment rental / leasing company in Nigeria.

The company would start operation with One (1) Foreign Used Catepillar Bulldozer D6h, One (1) Foreign Used Catepillar Excavator 320 BL, One (1) Foreign Used Catepillar Payloader 966 C, One (1) Foreign Used Catepillar Grader 12 G, One (1) Fairly Used one hundred and twenty (120) tons Low Bed with one (1) Fairly Used truck head.

Table of Contents

EXECUTIVE SUMMARY 1. Business Overview 1.1 Description of the Business 1.2 Vision and Mission Statement 1.3 Value Proposition 1.4 Critical Success Factor of the Business 1.5 Current Status of Business 1.6 Description of the Business Industry 1.7 Contribution to Local and National Economy 2. Marketing Plan 2.1 Description of service 2.2 Location 2.3 The Opportunity 2.4 Pricing Strategy 2.5 Target Market 2.6 Promotional Strategy 2.7 Competition 3. Technical Analysis 3.1 Description of the Location 3.2 Production Technology / Equipment 3.3. Legal Requirement 3.4 Service Cost 3.6 Pre-Operating activities and expenses 3.6.1 Operating Activities and Expenses 3.7 Project Implementation Schedule 4.0 Organizational and Management Plan 4.1 Ownership of the business 4.2 Profile of the promoters 4.3 Key Management Staff 4.3.1 Strategic Business Units 4.3.2    Management Support Units 4.4 Details of salary schedule 5. Financial Plan 5.1 Financial Assumption 5.2 Start up Capital Estimation 5.3 Source of Capital 5.4 Security of Loan 5.5 Loan Repayment Plan 5.6 Financial Projections 6.0 Business Risk and Mitigation Factor 6.1 Business Risks 6.2 SWOT Analysis

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