Building Materials Surge Contributing to Housing Deficit

Due to a combination of factors, including disruptions in the supply chain and heightened demand, the prices of building materials have skyrocketed.

Both property developers and homeowners have been hit hard by this surge, resulting in a worrying trend of abandoned properties.

A spike in cement prices particularly, presents a formidable challenge to property developers. As construction costs rise, developers are left with the choice of absorbing those costs, risking reduced profits, or passing them on to consumers.

In regions already struggling with affordability issues, such cost escalations further compound the challenges of accessing homeownership, potentially dampening demand.

Meanwhile, homeowners face escalating renovation and maintenance costs as a result of the surge in prices.

Homeowners are now faced with the dilemma of whether to invest in costly repairs or abandon their properties altogether. It is estimated that there are more than 60,000 abandoned homes across the country, as the financial strain of upkeep outweighs the perceived value of homes.

Dangote Cement’s Group Executive Director in charge of Strategy, Portfolio Development, and Capital Projects, Devakumar Edwin, had in 2021 attributed the high cost of cement in Nigeria to the global rise in demand for cement as a result of the COVID-19 crisis.

“ Nigeria has experienced a significant decrease in construction activity as a result of monetary policy changes and low returns on capital markets. Due to local demand, we had to suspend exports from our newly inaugurated export terminals, thereby sacrificing dollar earnings,” he explained.

In 2022, the Block and Concrete Producers Association, Enugu State chapter, decried the continuous increase in the prices of cement and other materials used for block production.

The President of the association in the state, Igwe Ukaegbu, had lamented that the continuous rise in cement price was negatively affecting the production output of and income of members of the association, urging the Federal Government to intervene in the situation by granting more licences to industrialists to produce cement.

Devakumar Edwin, the Group Executive Director of Dangote Cement responsible for Strategy, Portfolio Development, and Capital Projects, had recently  linked the high price of cement in Nigeria to the increase in cement demand worldwide brought on by Global Inflation.

Nigeria is not an exception, as the country has seen a notable surge in building activity as a result of changes in monetary policy as well as poor returns from the capital market. We had to halt shipments from our freshly opened export terminals in order to guarantee that we could fulfil local demand, which meant that we would lose out on dollar revenues,” he stated.

According to the current inflation rate, construction materials are now priced as follows

This is currently the situation of Real Estate construction in Nigeria.

The Block and Concrete Producers Association, Enugu State branch, protested the ongoing rise in cement and other construction material costs in 2023.  This is because, most of  these commodities are needed in the construction of blocks.

Igwe Ukaegbu, the state president of the association, had bemoaned how the association’s members’ income and production output were being adversely impacted by the ongoing increase in cement prices. He had pleaded with the federal government to step in and provide more licences to industrialists so they could continue producing cement. We are struggling because we are not making as many sales as we formerly did. We are pleading with the government to assist us by lowering the cost of supplies like cement.

It used to be possible to sell 3,000–5,000 blocks in a month, but now days it is quite tough to sell 1,000 blocks. In Enugu, a bag of cement currently costs N12,550. Some are asking N15,000 for the same goods.

The Cement Producers Association of Nigeria issued a warning in 2023, stating that the Federal Government’s current plan to install concrete roads might result in a price increase for cement from N5,000 per bag to N9,000.

In a statement, they urged the present government to permanently solve the issue of cement price hikes by encouraging greater involvement in the sector, pointing out that Nigerians had no business purchasing cement for more than N5,600 a bag.

The Nigerian Building and Road Research Institute had conducted extensive research on alternative building materials for Nigeria. The researchers have investigated other alternatives to iron rods, including bamboo.”

Recently, Nigeria’s Minister of housing and Urban Development, Ahmed Dangiwa, organized a meeting with the nation’s cement and other construction material makers in an attempt to curb the country’s rapidly growing costs for these materials and improve the supply of affordable homes.

He also questioned the country’s cement companies’ practice of sourcing almost all of their raw materials locally, which led him to question the price of cement in particularly persistent and excessive growth.

“It is depressing to see how much Nigerians have to pay for basic building supplies like cement, with the prices rising almost daily,” stated Dangiwa. This rise is unacceptable, and I fail to see why it has occurred. the minister stated.

Conclusively, Construction creates multiple employment opportunities which contribute to the country’s poverty reduction, so the price increase of cement could lead to unwelcome consequences.

Studies have shown that a surge in cement prices lead to a massive housing deficit, a high unemployment rate, and an increase in criminal activities such as banditry, kidnapping, and armed robbery. In addition to the 28 million housing deficit in Nigeria, the Federal Government needs to remember that cement is an essential element of the building industry, and an intervention to address it is urgent.

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