In a concerning development, Nigeria’s construction sector is confronting a substantial obstacle with a staggering 75% surge in building material costs. This unprecedented increase is not only causing disruptions within the industry but is exacerbating the existing housing shortage, estimated at around 28 million units. The situation adds an additional layer of complexity to an already critical issue.
The adverse effects of this surge are palpable as developers grapple with abandoned projects and navigate survival mechanisms to weather the harsh economic consequences. The removal of fuel subsidies and the subsequent devaluation of the Nigerian currency have created a perfect storm, leaving construction firms in precarious positions.
Gabriel Ogbechie, the CEO of Rainoil Limited, highlighted the negative impacts of fuel subsidy removal on the construction industry during the 15th annual lecture series of the Lagos State branch of the Nigerian Institute of Quantity Surveyors. He outlined the rise in construction costs and housing projects, emphasizing the higher expenses incurred by construction companies for building materials, transportation, and equipment.
The devaluation of the naira, coupled with increased import costs for construction inputs, has strained the capabilities of construction firms. This has forced operators in the industry to abandon projects due to economic challenges posed by these dual factors, impacting project schedules and causing a slowdown in construction activities across the country.
Cement, a fundamental building material, has experienced a rapid surge of 13.3% within just two months, intensifying challenges within the housing sector. Reports indicate that a bag of cement now costs over N5,000, widening the affordability gap and affecting both developers and homebuyers. Rental prices are on an upward trajectory, particularly in low-income settlements.
This surge in building material costs comes at a time when Nigeria is grappling with a housing deficit of approximately 28 million units. The high inflation rate, reaching 27.33% in October, has compounded the challenges faced by the construction industry. The removal of petrol subsidies and currency devaluation are identified as significant contributors to this inflationary trend.
Stakeholders in the building industry are urging the government to initiate policies that can alleviate challenges posed by the exchange rate, reduce taxes on imported materials, and streamline regulatory processes to boost accessibility to affordable housing. As BUA Group announces a reduction in cement prices, there is a collective call for a comprehensive approach that addresses the broader spectrum of building materials, infrastructure development, and accessible financing options.
Architect Simeon Kmakolam emphasized the need for implementing comprehensive land use and planning policies, digitizing land records, ensuring transparency in land administration, and introducing effective rent control policies. Another architect, Theodore Omokpo, highlighted the necessity for government investment in basic infrastructure such as roads, water supply, and electricity to make housing developments more attractive and sustainable.
Livinus Azosiwe, the CEO of CashLinks, emphasized the need for ready access to finance, promoting accessible and affordable mortgage financing systems, introducing microfinance initiatives, and encouraging public-private partnerships in the housing sector. Economist Dr. Francis Ogbechie called for targeted subsidies, grants, and mass housing projects to address the deficit, as well as the adoption of modern construction techniques and digital platforms for property registration.
The current surge in building material costs is not only an economic challenge but also a formidable obstacle to addressing Nigeria’s housing deficit. Decisive government intervention is imperative to steer the industry away from further stagnation. As developers grapple with abandoned projects and rising costs, strategic and immediate measures are needed to alleviate the strain on the construction sector and pave the way for sustainable growth.