In recent years, the building and construction industry has been grappling with significant challenges, marking one of its most difficult periods. Over the past two years, construction costs have surged by a staggering 200%, propelled by a confluence of factors, including fluctuating exchange rates, soaring prices of building materials, and escalating labor costs.
The inflation rate in Nigeria reached 28.9% in December 2023, primarily attributed to the removal of petrol subsidies and the devaluation of the official exchange rate. The building sector has been particularly hard-hit by the exchange rate crisis, impacting both imported materials, such as windows, doors, ceramics, tiles, and plumbing appliances, and local materials, which have seen increased production and transportation costs.
The depreciation of the naira’s value directly influences building material prices, constituting about 60% of overall construction costs. With the ongoing economic challenges and the devaluation of the naira, material costs continue to surge.
Essential building materials like cement, blocks, doors, reinforcement rods, sand, timber, paints, roofing sheets, glass, and tiles have witnessed a significant price hike, exceeding 75% in the last 12 months. This surge is a cause for concern among professionals in the built environment, particularly architects, who report a substantial increase of 100-200% in both materials and labor prices over the last two years.
For example, the cost of a 50-kilogram bag of cement jumped from N4,700 in January last year to between N6,200 and N6,500. Similarly, prices for other materials like iron rods, blocks, and paints have experienced substantial increases, impacting the affordability and accessibility of housing, especially for low and middle-income earners.
The rise in construction costs has also led to a surge in rental prices, particularly in low-income settlements. Rooms that were previously rented for N150,000 are now going for N250,000, reflecting the widespread impact on housing affordability.
Experts argue that without government intervention through deliberate policies aimed at lowering construction costs, the trend of rising prices is likely to persist. Suggestions include the establishment of a special discretionary exchange rate for imported materials, tax relief for construction companies, and the encouragement of local material usage.
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The President of the Commonwealth Association of Surveyors and Land Economy (CASLE), Mr. Segun Ajanlekoko, emphasizes the need for economic re-engineering to address the rising costs. He suggests interventions such as reducing bureaucratic bottlenecks, granting tax waivers, and promoting the use of locally produced building materials.
Similarly, the President of the Nigerian Institute of Quantity Surveyors (NITP), Nathaniel Atebije, attributes the cost increase to the sharp decline in the naira’s value, urging the government to reduce bureaucratic processes, strengthen institutions, and encourage the use of locally produced materials.
The Nigerian Institute of Architects (NIA) President, Omobolaji Adeniyi, points to the devaluation of the currency, high interest rates, limited access to affordable funds, and reliance on imported materials as factors contributing to the rising costs. She recommends government initiatives to stabilize the naira, lower duties for imported components, support local production, fund research and development, and implement effective regulations.
In conclusion, the current trajectory of rising construction costs poses significant challenges to the building and construction industry in Nigeria, necessitating prompt and strategic interventions to ensure sustainable development and affordability in the housing sector.
Culled From: Guardian
