Qualitative Assessment of Risk-Taking Orientation of SME Contractors in the Nigerian Construction Industry

Abstract

Nigeria, as a developing country, has great demand for new buildings and infrastructure to serve its fast rising population, thus, presenting numerous opportunities in the country's construction sector. Risk and uncertainty is however, an integral component of every construction business due to the competitive nature of the industry. Hence, an in-depth understanding of contractors' risk-taking attitudes is required to guide construction enterprises in capitalising on the industry's numerous opportunities. The purpose of this research is to investigate the types of risks and risktaking attitudes exhibited by SME contractors in Nigeria. A semi-structured face-toface interview was conducted with a conveniently selected samples of owners and toplevel managers of contracting SMEs in Abuja and Lagos, Nigeria. The data collected was analysed using Content Analysis Technique. Findings show that SME contractors face a number of risks, including: uncertainty of obtaining projects due to high competition, political risks in the form of political meddling and changes in government, financial risk associated with delayed or non-payment for completed works, security and environmental risks, and so on. In terms of their risk orientation, the interviews revealed that most SME contractors exercise some level of caution in their risk practices, by taking only measured and calculated risks. The majority of contracting SMEs, however, expressed aversion to borrowing, particularly from banks, to address cash flow issues in their firms, citing worries such as high interest rates and inflation, among other factors. The study concluded that Nigerian contracting SMEs must improve their risk-taking proclivities, especially their willingness to incur debt in order to finance their businesses as well as their capacity to expand into new market territories. The paper recommends setting up a construction industry development bank to lend money to contractors at reasonable interest rates in order to accelerate the development of Nigeria's construction sector.