In a disconcerting turn of events, the construction landscape in Nigeria is grappling with a formidable challenge – a staggering 75 per cent surge in the costs of building materials. This unprecedented spike is not only sending shockwaves through the industry but is also exacerbating the existing housing shortage, currently estimated to hover around 28 million. The situation adds another layer of complexity to an already critical issue.
The adverse effects of this dramatic increase are palpable as developers find themselves wrestling with abandoned projects and navigating survival mechanisms to weather the harsh economic consequences. The removal of fuel subsidies and the subsequent devaluation of the Nigerian currency have collectively created a perfect storm, leaving construction firms in a precarious position.
Speaking at the 15th annual lecture series of the Lagos State branch of the Nigerian Institute of Quantity Surveyors, Gabriel Ogbechie, the Chief Executive Officer of Rainoil Limited, underscored the negative impacts of the fuel subsidy removal on the construction industry. He highlighted the rise in construction costs and housing projects, outlining 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 further strained the capabilities of construction firms. Operators in the industry are being forced to abandon projects due to the economic challenges posed by these dual factors. The consequences extend beyond financial strain, 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 per cent within just two months, further intensifying the woes of the housing sector. Reports indicate that a bag of cement now costs over N5,000, adding an additional layer of complexity to an already intricate problem. The affordability gap is widening, affecting both developers and homebuyers, and 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 per cent in October, has only 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 now urging the government to initiate policies that can ameliorate 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.
Commenting, an architect, Simeon Kmakolam, noted that fixing the housing sector in Nigeria requires a multifaceted approach that addresses various challenges and incorporates strategic policies and initiatives.
According to him, there is the need to implement Land Use and Planning Policies. “Implement comprehensive land use and planning policies that streamline the acquisition and use of land for housing projects. This includes digitising land records and ensuring transparency in land administration. Also, there is the need to introduce effective rent control policies to protect tenants from arbitrary rent increases and provide a stable housing environment.”
Another architect, Theodore Omokpo, who practices in Lagos, cited the need for the government to invest in the development of basic infrastructure such as roads, water supply, and electricity to make housing developments more attractive and sustainable. “Improve transportation networks to connect residential areas with commercial centers, reducing the need for expensive and time-consuming commutes,” he said.
However, the chief executive of CashLinks, Livinus Azosiwe, harped on the need to have ready access to finance. According to him, “Establish and promote accessible and affordable mortgage financing systems to enable more Nigerians to own homes.This includes partnerships between the government, financial institutions, and the private sector. Introduce microfinance initiatives tailored to support small-scale developers and low-income earners in accessing funds for housing projects.
“Encourage and facilitate PPPs in the housing sector to attract private investment, expertise, and innovation. This collaboration can help bridge the funding gap for large-scale housing projects. Provide tax incentives and other favorable conditions for real estate developers to encourage increased investment in the housing sector.”
An economist and economic affairs analyst Dr. Francis Ogbechie, told NATIONAL ECONOMY that the federal and state governments have treated the issue of housing deficit with levity over the years. He stated that there is the need to implement targeted subsidies and grants to make housing more affordable for low and middle-income earners. “Undertake mass housing projects to quickly address the deficit and provide quality, cost-effective housing options. Encourage the use of modern construction techniques, such as prefabrication and modular construction, to reduce building costs and construction time,” he said.
He further stated that Nigeria needs to adopt the utilisation of digital platforms for property registration, transactions, and documentation to enhance transparency and reduce bureaucracy.
“Implement training programs for artisans and construction workers to enhance their skills and promote the use of quality materials and construction practices.
“Involve communities in the planning and development processes to ensure that housing projects meet the needs and preferences of the residents,” he added.
The current surge in building material costs is not merely an economic challenge; it is a formidable obstacle to addressing Nigeria’s housing deficit. The industry is at a crossroads, and decisive government intervention is imperative to steer it away from further stagnation. As developers grapple with abandoned projects and rising costs, the nation faces the pressing need for strategic and immediate measures to alleviate the strain on the construction sector and pave the way for sustainable growth.
