Cement: ‘Government has to be deliberate about breaking the monopoly in this market’
It is a disquieting situation in the Nigerian building materials market at the moment as prices of cement and other inputs continue to rise to unaffordable levels, making homeownership all the more a day-dream. In this interview, the CEO of Sterling Homes, KUNLE ADEYEMI, offers insights on the causes, implications and solution to this problem. He speaks with CHUKA UROKO.
Rising building material prices is threatening homeownership in Nigeria today. The price of cement, particularly, is a major source of worry. What exactly is happening in the building materials market?
In the last 24 hours, the price of cement has gone up from N3,450 to N3,800 and may not stop there. It is not even readily available. I want to believe that the dealers have decided to create artificial scarcity to justify the increase in price. At the current price, it means cement price within the first quarter of this year has moved up 70 percent. Some dealers are hoarding the commodity because they foresee further price increase.
What are the implications of this and where, in your view, will this lead us to in terms of home ownership?
What this means is that the dream of an average Nigeria to own a home is now dim. For us as developers, it is a huge challenge because we already have prices fixed on houses that are still being built. At the present cement price, you cannot deliver at the fixed price any more. Our costs have already gone up by N4,000 per bag of cement and that is just on cement alone. The price of iron rods has gone up too. And these are major building component that you cannot do without.
From your experience over the years, what do you think should be done by developers, government and manufacturers? Can importation solve this problem?
What I think the government should do immediately is to come up with a price control policy on essential materials in the construction industry like cement and iron rods. On the part of the manufacturers, if they see that the raw materials used to produce these building components are not locally available, they should explore the importation option.
But Given that the raw materials for producing these component are in abundance locally, the price of cement should not have gone this high. What is necessary now is for the government to provide the enabling environment for these materials to be produced.
Attempts by government to regulate prices in other sectors have always raised arguments about Nigeria being a free market economy where market forces dictate price. How do you think price control can succeed in the building materials market?
Petroleum, for instance, and building are two different industries. Housing affects everybody directly, being one of the basic needs of man. Everybody deserves a shelter over his head. Cement is one of the most essential materials required for construction. So, the country has no choice but to look at price control or regulation for this commodity.
Some developers say the cement market is a monopoly being controlled by just two or three manufacturers. Do share that view? If yes, what can be done to check the situation?
It is clear that this market has been monopolized. There are just a few players who have monopolized the market and government has to be deliberate about breaking this monopoly. The price of this important commodity should not be dictated by just a few individuals. Government succeeded in doing this in the textile industry. That success story should be replicated in the cement industry.
What do you see as challenges ahead for the building industry as prices of these essential commodities continue to increase?
Though government, to a large extent, has succeeded in regulating the quality of building materials, I foresee doom with this rising prices because some developers may be forced to compromise on quality and standards of housing they build. They may go for sub-standard materials in a bid to meet up with supply.
In construction, one thing that is not subject of debate is safety and what guarantees safety is quality materials and adherence to standard practice. If these two are compromised, it can lead to loss of lives. If government does not move swiftly into action and begin to regulate prices of essential materials like cement and iron rods, some developers may be forced to compromise on quality which will lead to building collapse and construction failures. Because of the drive for profit maximization which is essential for business survival, developers may be tempted to go for substandard materials.
With high exchange rate, import duty and rising material prices, should developers now begin to think of home-grown designs for affordable housing delivery?
If we are to address the issue of housing deficit which is about 20 million units now, developers have to be deliberate about their designs. You cannot deliver mass housing with aesthetics and imported designs. We can build a three-bedroom house with N10 million. We can as well build another three-bedroom with N500 million. The difference is in the design and the finishing. So, developers have to be deliberate about design. Again, our construction method has to change because it encourages waste.
Like other developers out there, you still have to remain in business in spite the rising input prices and other challenges on your way. What will you be doing to remain afloat?
One of our unique selling points as a business is our cutting edge construction methodology and tailor-made housing designs which help us to cut down on waste and maximize profit. Both have helped us to deliver and remain in business.
Another thing that we do uniquely that has helped us to stay afloat is the after sales service we give to our customers. They start with us and we know that they want to become home owners. So, we take them through the journey of being land owners to becoming home owners. And our flexible payment system is second to none. That too has helped our business a great deal.