Soaring Material Costs Threaten Nigeria’s Construction Boom
For an industry already gasping for breath in the face of the high cost of energy, logistics and falling purchasing power, a correspondingly high cost of cement and other building materials portends a bleak 2025 for construction operators and may impede infrastructural development in Nigeria, reports Festus Akanbi
As operators in the nation’s construction industry and allied businesses wrap up their activities for the year and set an agenda for 2025 operations, one issue that will bother many of them is the rising cost of building materials and the biting effect on the nation’s construction industry.
Today, the construction space and the Nigerian property development market are being faced with a lot of challenges and the most pressing of them all is the rising cost of building materials as occasioned by the ailing Nigerian economy.
The industry is facing rising prices of essential construction inputs such as cement, steel, sand, and gravel, with industry watchers saying the development has made it increasingly difficult for developers, contractors, and homeowners to undertake construction projects.
Builders are grappling with budget overruns as inflation drives material costs up, forcing many to scale back projects or seek alternative materials. This situation not only stifles the growth of infrastructure development but also affects housing affordability, exacerbating the already pressing housing crisis in the country. As construction timelines extend and funding becomes more challenging, the ripple effect threatens job losses and undermines economic recovery efforts in the sector, highlighting the urgent need for policy interventions to stabilise prices and support industry stakeholders.
Interestingly, none of the major cement makers has announced a price increase in recent times. The current factory price of a 50 kg bag of cement from Dangote, BUA and Lafarge is officially set between N7,000 and N8,000 depending on locations. This price was agreed upon following discussions between the federal government and cement manufacturers to address high cement costs. However, in the market, the retail price is often higher due to distribution and demand challenges.
Additional Costs
Market watchers, however, explained that by the time the issue of logistics is added, the prices shoot to between N9000 and N13,000 depending on locations. In some parts of Ogun, Oyo and Ekiti states, for instance, a 50kg bag of cement was sold at prices ranging from N9,200 and N11,000, while it is higher in some other states.
According to analysts, this is where the issue of the bad infrastructural situation and logistics in the country comes in. “You can imagine how much the company set aside for road transport and the repair of their trucks. The cost of diesel is prohibitive, not to mention the damage to the trucks conveying these products to end users,” an industry analyst said
Apart from the additional cost incurred on product distribution, there seems to be little or nothing that could be done by cement manufacturers to determine the real prices of products in the market as some distributors are cashing on the current economic situation to hoard the products in a manner to make the prospective buyers cough out higher amount for them. This explains why cement prices are higher in the rural areas than in the urban areas.
Earlier in the year, construction workers and estate developers had heaved a sigh of relief when cement prices came down to N5,500 in some locations after a public uproar.
However, after what seemed like a moment of reprieve, market reports said distributors have raised the prices of products like those of Dangote Cement, BUA and Lafarge, among others, while the price of 9-inches block is in the range of N900 and N1,000 per unit.
Other key building materials like steel rods, concrete, laterites, roofing sheets, windows, doors, tiles, nails, plywood, and aluminium roofing sheets, among others, have been on the rise in recent times.
For developers that have been able to keep pace with the rising cost of building materials, the cost of delivering real estate projects is high thereby making the houses available but not affordable to investors and real estate consumers who need the buildings.
Equally, the labour cost of hiring professionals for real estate development is on the rise. The hyperinflationary trend in Nigeria has eroded the purchasing power of consumers, and the only way to meet the economic challenges is for professionals to charge reasonably high.
Recent data from the Shelta Afrique Development Bank indicates that Nigeria’s housing deficit stands at about 27 million, which is about 40 per cent of the entire continent’s deficit.
A real estate developer, Musa Ibrahim, said that with the current rise in the prices of building materials, affordable housing for all will remain a mirage until the government takes deliberate action to crash prices.
“What the government keeps telling Nigerians is that they want affordable housing for all, but no efforts at all to ensure the success of the programme, rather their policies have made it even more elusive to have affordable housing.
“It is even becoming worrying now that not only housing but rents as landlords wake up to increase rent at will, citing the high cost of building materials, the situation is just unfortunate,” he lamented.
Market watchers also listed macroeconomic factors like the high exchange rate, rising inflation, high cost of importation, naira devaluation and of course the very fragile economic and political environment as some of the threats to the growth of the property development sub-sector of the Nigerian real estate space.
Property developers in Nigeria depend largely on the importation of materials needed to develop the Nigerian economy’s housing needs. Analysts, therefore, think that as long as the exchange rate remains high and fluctuating, planning and achieving set goals by developers will remain a challenge.
Housing Affordability Compromised
Certainly, the pains of the unfavourable scenario in the construction industry are being felt by all as analysts noted that the high cost of building materials has impeded infrastructure development, limiting the government‘s ability to invest in critical projects such as roads, bridges, and public buildings, a development said to have not only hampered the country‘s overall development but has also weakened its competitiveness on the global stage.
The reality is that small and medium-sized contractors and developers are particularly affected, as they struggle to absorb the escalating costs or pass them on to consumers, leading to project delays and cancellations. This, in turn, has hindered job creation and economic growth in the sector.
According to a registered Estate Surveyor and Valuer and the Lead Partner at Patrick Ogunjobi & Co, Mr. Patrick Ogunjobi, “Housing affordability has also been compromised, making it challenging for low and middle-income families to access decent shelter. As a result, the housing deficit in Nigeria continues to widen, exacerbating social inequalities and hindering sustainable urban development.
On his part, an industry analyst, Efe Ufuoma said the housing deficit in Nigeria stands at a staggering 28 million units as of 2023, with an estimated investment of N21 trillion required to address this shortfall. He regretted that given the current state of the economy, the conventional construction methods in Nigeria are becoming increasingly unsustainable, and as such we need to start looking inwards at readily available, more sustainable and more affordable building materials to bridge this housing deficit.
“Nigeria’s construction industry has become overly reliant on cement, which is used extensively in various building processes such as casting, block molding, and tiling.
“In contrast, many other parts of the world utilise a diverse range of materials like wood finishes, wooden floors, and rammed earth houses, reducing their dependency on cement. We need to have reduced demand for cement to reduce the price increase and this can be achieved by diversifying the materials used in construction and promoting alternative building methods that are both sustainable and cost-effective,” was quoted as saying.
His idea was shared by another operator in the construction industry, Mr. John Adeokhor, who pointed out that there is a need to create an alternative for cement to curb the continuous increase in cement prices., saying while cement serves as a binder in construction, diversifying materials used in a building can help mitigate the impact of price fluctuations in the cement market.
The federal government must, therefore, implement robust policies, ensure timely project funding, and foster private-sector partnerships to secure the construction industry’s stability and growth in 2025.
