What rising insecurity, material prices mean for building industry, homeownership
In January 2020, Chikezie Nnabuike, a manager at a private firm in Lagos, started building a house away from where he resides presently. Because of the COVID-19 lockdown work slowed on the building project being supervised by an engineer who was his roommate in the university.
He did not, however, give up on his plan to complete the building in 18 months, in which case he expected to finish the walling and roofing aspects of the building, latest, by the end of the second quarter of 2021. But that has turned out to be a dream deferred.
The house, today, is not yet 60 percent completed, meaning that he is still a tenant and will remain so for as long as only God knows when. The rising prices of building materials, particularly cement and iron rods, have, in the past six months, risen to a point where all building projections no longer make sense.
“I started out this project on a budget for the entire building. Now, I have not gone very far with the project, but I have already surpassed the budget because it is as if building materials are rising every day,” Nnabuike told our correspondent last Thursday.
“I have suspended that project, for now, because I can no longer keep pace with price increases, especially cement and iron rods, which I was told were needed for beams and columns. Besides the project, I have a family to feed. Even feeding does not come easy these days and so I have had to re-order my priorities, he said.
Nnabuike is not an isolated case. There are countless others like him out there and what this means is that homeownership for all of them remains a daydream. They have to continue as tenants where they are, enduring landlords’ arbitrary increases in rents and adding to the housing deficit.
In October 2020, a 50kg bag of cement was selling for between N2,400 and N2,500 in many states of the federation. But in November of the same year, the price of the commodity started rising and has increased to N3,800, depending on the brand and the location.
“In the last 24 hours, the price of cement has gone up from N3,450 to N3,800 and it will still go up. We are, therefore, rushing to get more that can take us for a while,” Kunle Adeyemi, CEO, Sterling Homes, confirmed to our correspondent in Lagos.
According to Adeyemi, at the current price, it means that cement price within the first quarter of this year has moved over 70 percent and it is so bad that some dealers are hoarding the commodity because they are sure the price will still go up further.
So many reasons have been adduced for the soaring price of cement. One of the major reasons is the scarcity of the product which, unfortunately, has to do with rising insecurity in the country, supply monopoly and also cost of inputs, which has also gone up considerably.
“Producers do not supply the commodity to some parts of the country because of insecurity. They fear attacks by kidnappers, bandits and other insurgents. Again, the roads are so bad that the suppliers avoid them, leading to scarcity and rise in the price of the product,” Adeyemi noted.
There is about a 40 percent cement supply gap, according to Dangote Group, the largest producer of the commodity with over 60 percent share of the market. Devakumar Edwin, Dangote Group executive director, strategy, portfolio development and capital projects, was quoted recently as saying that manufacturers were working to close the gap.
Edwin attributed the increase in demand to increase in construction activities as investors considered the industry good to hedge against falling local currency. Edwin, who spoke at an event in Lagos, insisted that their ex-depot price had not changed but that some retailers had taken advantage of the supply gap to increase their prices.
He also mentioned devaluation of the naira and the increase in Value Added Tax as reasons for the increase in the cost of critical components such as gas, gypsum, bags and machine spare parts.
The implication of these price increases is far-reaching. “The dream of an average Nigeria to own a home is now very slim. For us as developers, it is a huge challenge because we already have the prices of houses that are still being built. We cannot deliver at that price anymore,” Adeyemi said.
Continuing, he said, “I foresee doom because some developers may be forced to compromise on quality and standards of houses they put on the market. They may go for sub-standard materials in a bid to meet up with supply and that simply foretells housing collapse and construction failure.”
He canvassed the government’s intervention through what he called price control policy that will effectively regulate the price of the commodity, saying the government should also break the monopoly in the supply of the product which, he reasoned, was part of the causes of the product scarcity.