Coastal highway, building materials cost redefine construction industry in 2024

For the construction industry in Nigeria, the outgoing year is one not to forget in a hurry due to the upsets caused in the industry by building materials and the on-going construction of 700-kilometre Lagos-Calabar highway by the federal government.

Whereas the nearly 100 percent hike in the prices of building materials, notably cement and iron roads, caused major disruptions as reflected in delay in project timelines and site abandonment, in some cases, the coastal highway stoked the worst and most heated controversy the industry has seen in decades.

Following the removal of the petrol subsidy and the attendant inflation which was made worse by the central bank of Nigeria’s (CBN’s) monetary policies, the price of cement jumped from N5,500 in January to between N12,000 and 15,000 per 50kg bag in June-July, depending on brand and location.

At a point, prices came down and moderated at N7,500 per bag following federal government’s meeting with manufacturers. But this did not last long like any other commodity prices in an environment where inflation refuses to be caged despite central bank’s efforts.

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The price, therefore, jumped again to N8,500 and subsequently to between N9 000 and N10,000 per bag. This too depends on either brand or location or both. This is the fourth time the price of the commodity rose within the year, meaning that from January to date, the price of the commodity went up by nearly 100 percent from the beginning of the year.

“The immediate impact of these price increases is that project timelines were disrupted, causing safety concerns as contractors with depraved minds were under pressure to cut corners,” Sebastine Ovie, an estate manager, said.

Ovie fingered monopoly, inflation, high exchange rate and energy cost as major causes of the frequent price hike. He explained that there were only three major producers of cement in Nigeria. These are Dangote, BUA and Lafarge who, he said, control about 95 percent of cement production.

Other building materials’ prices also went up within the year. BusinessDay market survey early in November showed that the price of an iron rod or reinforcement, which gives buildings structural stability and integrity, increased from N220,000 in 2020 to N265,000 per ton in 2021, then N475,000 in 2022 to N1.2 million in 2024.

Similarly, prices of cement blocks surged as nine-inch blocks, which sold for N180 in 2019, stayed steady, then rose to N220 in 2021, N340 in 2022, and has reached N700 in 2024, while the price of six-inch blocks has climbed from N160 in 2019 to N510 in 2024.

These developments, apart from affecting delay in project timelines and site abandonment by developers and contractors who could not square up with the rising cost, caused many Nigerians to defer their home ownership dreams as construction cost pushed house price to a new high.

Additionally, new investment in real estate dropped significantly, leading to loss of jobs, variations in project costs and a considerable drop in the growth of the sector and its contribution to national GDP.

The commencement of construction work on the Lagos-Calabar Highway by the federal government in March this year opened a floodgate of controversies because of the strange developments it brought into engineering and construction of a coastal road of that magnitude.

The coastal highway is a 700-kilometer project that will run from Victoria Island, Lagos to Calabar, Cross River State. It will pass through Ogun, Ondo, Delta, Bayelsa, Rivers, and Akwa Ibom states, before ending in Calabar. The project is intended to connect the western and south-eastern regions of Nigeria and to improve cross-country connectivity and trade relations.

The first major controversy around the project, which actually redefined construction engineering, was its lack of Environmental and Social Impact Assessment (ESIA). The first Nigerian to raise alarm on this aberration in engineering was former vice president of Nigeria, Atiku Abubakar.

Atiku who was also uncomfortable with project’s procurement process, described it as “wasteful and a highway of fraud” over the claim by the Minister of Works, David Umahi, that the 700-km road would tentatively cost N15.6 trillion.

The obvious lack of ESIA raised concerns among Nigerians who reasoned that, in accordance with the provisions of the 1992 EIA Act, no project of that magnitude can take off without an approved EIA by the federal ministry of environment.

According to Funso Doherty, the African Democratic Congress (ADC) governorship candidate in Lagos State in 2023, the absence of an approved EIA is worrisome, adding that the manner in which the contract for the project was awarded without a transparent bidding process was also worrying.

“A deeper concern is the fact that the environmental impact assessment for the coastal road project has not been completed or shared for public comments even though the project has commenced and the hugely consequential step of demolition appears imminent,” he said.

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David Umahi, the minister of works, who is executing the project, dismissed these concerns as political mischief. In veiled reference to the cost of the project, Umahi, in a statement from his office, explained, “for the avoidance of doubt, the Lagos-Calabar coastal highway project is being done under EPC +F.

What does this type of funding entail? This is a project financing mechanism in which EPC+F contractors also arrange financing for the project. EPC+F is Engineering, Procurement and Construction plus Financing. Engineering here includes design and specification.”

Continuing, the minister said, “this initiative provides a fixed price, fixed date, and transfers risks to the contractor. This type of funding requires only a counterpart funding from the Federal Government. Such funds are sourced by contractors where they have confidence in the economic policies of government.”

But this argument paled into thin air when the Federal Executive Council approved N1.06 trillion for the construction of the first phase of the project that will stretch 47.47 kilometres starting from Lagos, and Messrs Hi-Tech Construction Company was announced as the contractor on the 10-lane superhighway without a transparent bidding process.

The controversy on the project heightened when the government started demolishing people’s properties to create right of way for the project. Landmark Africa’s over $200 million Beach Resort was a major victim. This happened despite assurances by Umahi that the investment would stay.

He revealed that he visited the managing director of Landmark Beach Resort, Paul Onwuanibe, as regards the Lagos-Calabar Coastal road project, adding that he took time and listened to Onwuanibe and told him that the project would not claim the landmark beach investment.