Intervene Urgently to Stabilise Construction Costs, NIQS Tells FG
The Nigerian Institute of Quantity Surveyors (NIQS) has appealed to the federal government to urgently intervene in stabilising construction costs in the country in the face of hyperinflation.
The President of the Institute, QS Kene C Nzekwe, stated this at a press conference on “Addressing the Impact of Hyperinflation on Nigeria Construction Industry: Urgent Need for Government Intervention for Stabilising Construction Costs in Nigeria,” that was held in Abuja recently.
According to QS Nzekwe, “The urgency of the situation cannot be overstated. The Nigerian construction industry is at a critical juncture, and swift government intervention is imperative to stabilise construction costs and safeguard the future of our nation’s infrastructure development.”
The institute made some recommendations it wants the government to implement and implored “the government to consider the recommendations put forth and work collaboratively with the Nigerian Institute of Quantity Surveyors and other relevant stakeholders. Together, we can overcome the challenges posed by hyperinflation and build a stronger, more resilient construction industry for the benefit of all Nigerians.”
The Institute blamed the current economic woes on various factors, including “government budget deficits, fuel subsidy removal, currency float, and insecurity, affecting productivity and leading to moribund industries.”
Recommendations
They proposed “strategic interventions to mitigate the impacts of hyperinflation”: Engaging Local Manufacturers: The knee-jerk reaction of persuading manufacturers to bring down the prices or face dire consequences at this stage may be counter-productive. Our recommendation will be for the government to sustain engagement with local construction material manufacturers to understand and address their challenges. Some of the challenges highlighted by the local manufacturers include exchange rate volatility which has seen our currency depreciate by about 300% in a few months thereby affecting the imported components of their manufacturing like spare parts, mining explosives and import tariff which is indexed in US Dollars.
Combatting Oligopolies: While addressing the challenges faced by the local manufacturers, it is also important that the government look at the structure of the building material manufacturing industries, especially cement manufacturing. Oligopolies and cartels in the construction materials manufacturing industry must be discouraged. Perfect competition should be the aim, aligning local production prices with international standards. The government should incentivise market entry for new producers into the construction material production space by lowering licensing requirements. This is in a bid to boost competition and drive down prices of basic construction materials like cement. Strengthening the Federal Competition and Consumer Protection Commission (FCCPC) is vital to guard against antitrust tendencies, especially in the construction material manufacturing sector.
Stabilising the Exchange Rate: The government must employ a mix of monetary policies and exchange rate policies to stabilise the exchange rate, making our currency competitive globally. The clamp down on saboteur Bureau de Change (BDC) that are distorting our economy should be sustained and the system cleansed until all forex transactions are transparently done in a regulated manner not hawking currency on the streets as it is currently being done.
Implementing Friendly Tariff Regime: A friendly tariff regime for imported materials and plants is crucial. Government should adopt a temporary measure of lifting restrictions on the importation of some construction materials which have been restricted hitherto to neutralise any attempt by local manufacturers to manipulate the prices.
Involvement of Quantity Surveyors: In a press briefing in October 2023, the Minister of Works, Engr David Umahi spoke about the challenge the Federal Government has been grappling with in recent times is the escalating fluctuation claims on road projects. The minister in the viral video of that press conference even advised the handlers of the project at the ministry of works to go and learn from the quantity surveyors how to manage price fluctuation from the first principle. This issue is poised to worsen in the current era of inflation, posing a significant threat to the financial integrity of government infrastructure initiatives. It is in this context that the engagement of quantity surveyors becomes crucial to assist the Federal Government in navigating these turbulent waters.