Potential homeowners may abandon projects over rising cost of building materials
PERCY ANI writes about the impact of increasing cost of building materials on housing projects
In 2019, a trader at the Idi-oro market, jamiu Kasali, started constructing his house at Sango-ota, Ogun State. Having a roof over his head was his biggest dream and he worked hard to achieve it.
Kasali said every time he went to the site, he left with a feeling of fulfilment because he looked forward to the day he would move into the apartment with his family.
He noted that in 2020 when the COVID-19 pandemic broke out in Nigeria and most businesses were forced to shut down, he could not work to earn money to continue the project. By the time the lockdown ended and he continued his business, the prices of building materials, especially cement, had soared.
He said, “A bag of cement that used to cost about N2,400 and N2,500 now costs between N3,500 and N3,800. I do not even want to talk about the cost of other building materials. The budget I already estimated to complete the building cannot even execute half of the work now.’’
He lamented that due to his inability to complete the building project on time, he had to continue paying rent on his apartment in lagos. “I thought I would have completed the project and moved into the apartment by this time with my family. But here I am, incurring more cost because I have to pay for a rented apartment. The money I could easily have used to take care of my family,” he said.
Nigeria’s housing deficit
A World Bank report estimated that 75 per cent of the housing deficit in Nigeria affected families who earned less than three times the minimum wage. It noted that some of these people have to spend as much as 60 per cent of their average disposable income on rented apartments. This figure is higher than the 20 to 30 per cent recommended by the united Nations.
In a similar vein, a report by the Central Bank of Nigeria showed that in 1991, the country’s housing deficit was about seven million units but by 2007, the figure rose to 12 million units and currently sits at about 17 million units. To bridge this housing deficit, the World Bank estimated that it would cost about N59.5tn.
In 2018, the World Bank further noted that to solve Nigeria’s housing deficit problem, about 700,000 housing units were required to be built annually over 20 years to accommodate the increasing population.
In 2019, the Minister of Works and Housing, Mr Babatunde Fashola, faulted the 17 million often quoted as the country’s housing deficit figure.
He stated that there was no Nigerian city where there were no empty and unoccupied houses. He added that valuers owed the country the responsibility of explaining why the houses were empty, for how long they had been empty and what could be done to make them habitable.
Since independence in 1960, many administrations had embarked on many housing policies. Some of these housing policies included the National Development Plan 1, 2, 3, and 4, the National Housing Policy and the National Housing Programme. unfortunately, the policies were unable to effectively tackle the housing deficit.
Sunday PUNCH learnt that in the last few years, individuals handling housing projects including estate developers had witnessed an undue rise in the price of building materials. The prices of items such as cement, steel rods, granite, Plaster of Paris, tiles, etc, have almost doubled in a short time.
For instance, the cost of a bag of cement before the end of 2020 was between N2,400 and 2,500 but has now risen by about 45 per cent this year to about N3,500 –N3,800 for every 50kg bag. The current price also varies based on locations.
In April, the Senate during a plenary deliberated on a bill titled the ‘Need for liberalisation of Cement Policy in Nigeria.’ The bill, sponsored by Senator lola Ashiru, representing Kwara South senatorial district was cosponsored by five other lawmakers.
The upper legislative chamber after deliberations called on the Federal Government to create liberal policies such as the provision of industrial and larger tax incentives to encourage local investments in cement production in the country. The Senate added that in doing so, local investors would be encouraged to invest in the cement industry to increase cement production in the country and reduce price of cement in the market.
Rising building materials’ cost
like Kasali, a cloth designer, yemi Otokiti, also started work on his house project in 2019 with the hope of completing it before the end of 2020. But with the sky-high rise in the prices of building materials, especially cement, he told our correspondent that he had to halt work on the construction. He said one of the reasons he started the project was for him to be able to generate more income from rental, adding that with the rising cost of building materials, he now had to delay work on the project.
He said, “With the increasing prices of building materials every new week, one would think it was being intentionally done by some cartels to frustrate average Nigerians like me from having our own houses. I do not understand how the price of one bag of cement can change every week. I am now one of those who have abandoned house projects because they cannot afford to complete them.’’
Otokiti added that such situation was responsible for the increase in house rents especially in places like lagos State. He stated, “One cannot blame landlords who charge outrageous rents for their apartments these days. One wouldn’t expect a person who spent more money than was originally budgeted for a house project and still rent the apartment out to tenants at the cost of the initial budget. This is one of the reasons why the prices of houses keep soaring every daily.’’
An estate developer, Quadri Azeez-eyesan, who also lamented the continuous increase of building materials said his company was currently handling blocks of flats in the Yaba area of Lagos. Azeez-eyesan noted that the firm planned to build and make houses available for rent around the metropolis at subsidised rates, adding that with the constantly increasing prices of building materials the houses would go for higher rental rates.
He said before commencing the building project, the company had drawn up a budget which they were confident would complete the houses and still be enough to fix fittings in the apartments. He stated that the plan was altered with the rising cost of building materials as they now had to spend more than they bargained for.
Azeez-eyesan said, “It makes no sense that in less than two months, the price of cement has changed more than two times. If it was only cement prices that keep fluctuating like this, it would not be so challenging. But together with cement, the price of tiles, Plaster of Paris, steel rods, also experienced increases in the same period.
“As if that was not enough, there has also been an increase in the cost of transporting building materials from the market to building sites. Every time the prices of these building materials go up, I know that to transport the building material to sites would also give an increase. It is something that happens often. It gets worse when one is building a house in certain parts of lagos. There are places in lagos where once one buys building materials for housing projects, one would have to pay some hoodlums around the area before they allow the truck to go. This happens every time one buys building materials. It is an unnecessary addition to one’s expenses.’’
According to him, they have already overshot the budget for building materials by over a million naira.
“unfortunately, the extra expenses will be borne by the tenants who will eventually rent the houses. “One cannot blame developers or house owners for charging exorbitant prices for house rents these days. It is the price of building materials that determine how much a house will eventually cost. If the government can help us find a lasting solution to the constant increment in prices of building materials, houses would be cheaper,” he added.
Nnamdi Offor had always had a dream of building a house in his village in Ebonyi State. A dream fuelled by the promise he made to his father before he died to construct a proper house dedicated to his name. In 2019, Offor said he believed he had made enough money from his spare parts business to commence the building of a house in his hometown.
He said in less than six months, he made considerable progress as the construction workers he employed worked round-the-clock to ensure that the one-storey building was completed early. “Seeing the speed at which the house was being constructed and the joy in my mother’s voice each time she called to inform me of the progress being made at the construction site, I was elated and felt I was finally fulfilling the promise I made to my late father,” he added.
But according to Offor, the speed the building project enjoyed was slowed down when the building materials he bought at the start of the project got exhausted. He explained that by the time he went to the market to buy more bags of cement and other building materials, the price had almost doubled.
He lamented that if he had known, he would have bought more bags of cement and steel rods when he first started the project. “The number of building materials I bought when I initiated this project can only be bought with twice the amount now. In such a short time, I wonder how prices can go up so fast,” he said.
He noted further that the promise he made to his father would take a little longer before it came to fruition as it was no longer
‘ Before now, when prospective homeowners came to the market to ask for the price of tiles, I could quote a price for them and if they returned a month after to make purchases, the price would still be the same. But that is no longer the case as prices of building materials change every day’
feasible to continue building the house at the pace he started. He blamed the development on the fluctuating prices of building materials.
Offor stated, “I cannot outdo myself. With the economic situation in the country, I cannot afford to continue with the project while also catering to my young family and some of my siblings. The house will have to wait. It is only those who are alive that can build and live in houses.’’
A hotelier, Joshua Obasogie, said last year, he embarked on a new hotel in the Sagamu area of Ogun State. Obasogie said he sold one of his lands in a choice area in Edo State, noting that ordinarily the amount he got from selling the land including the money he saved up was enough to build a small bungalow hotel.
He however said that he received the shock of his life when the prices for the materials increased beyond what he had envisaged. “In the past, when I invest a certain amount of money into the construction of a new hotel, I know where the building would get to before I run out of cash. But to my shock, after I had spent over N6m on the hotel project, I realised that I had not achieved much. It was frustrating.” he stated.
He noted that the cost of building materials was twice the price when he went to the market to restock them.
Obasogie added, “Erecting pillars alone cost me more than it usually did and the price of sand and steel rods were more than I spent during previous building projects. This has been my most expensive building project. The money I spent so far constructing this bungalow would normally have nearly completed a one-storey building for me in the past. But since the price of building materials shot up, it costs twice more to build a house.’’
He stated that he had to spend more money to make sure he didn’t abandon the building project halfway.
He further said that the depreciation of the naira was one of the factors responsible for the undue increase in the price of building materials in the country. “Every time I go out to purchase building materials, I get a new price. This is frustrating because it means I cannot go to the market with a price in mind as prices might have changed by the time I get there,” he said.
Obasogie further stated that the situation had negative effects as it contributed to the abandoned building projects across the country.
He said, “If you travel around the country, you will find plenty of building projects abandoned halfway. This is because the owners cannot afford to continue construction due to the overly expensive price of building materials. Those who can manage to complete their houses charge outrageous prices to recoup the huge amount spent on the house.
“No one can blame the house owners for doing this. You do not expect a person to spend a lot of money building a house and then charge normal rents for it afterwards. The only problem is that this means average Nigerians cannot afford to live in good apartments unless they can afford the extremely high rent demanded for the houses.”
The Senate has also called on the Federal Government to introduce liberal policies such as the provision of industrial and larger tax incentives to encourage local investments in cement production in Nigeria.
Besides, in February this year, the Chairman, BUA Cement, Abdulsamad Rabiu, called for the liberalisation of the country’s cement market to boost production. Rabiu was quoted as saying that the cement policy in Nigeria was favouring the big players and had contributed to a hike in prices.
He attributed the high cost of cement in Nigeria to low production capacity, adding that the few producers were unable to meet the country’s huge demand because if there was any problem in any of their plants, the impact would immediately reflect in the price of cement.
Rabiu stated, “Even though this cement policy is a good one, it must be done in such a way that a lot of players must come in and participate. There is no point in making a policy that only benefits a few people. That does not make sense. I am benefiting from this policy, but I know it is a bad policy. So, whilst the policy is good, the way it is being administered is not good. You can’t have a policy that restricts many people from participating; at the end of the day, you are just creating a monopoly.”
Building materials sellers lament
The President, Agric-coker Building and Plumbing Materials Association, Dennis Igboanugo, said most building materials used in the country were imported, adding that with the erratic foreign exchange, the price of building materials were also affected.
He stated that the price of building materials had increased rapidly over the years, adding that anyone planning to build a house nowadays must be prepared to spend a lot of money.
Igboanugo, “A pack of China tiles used to cost about N3,000, but they now go for as high as N6,000. A pack of Spanish tiles which used to cost about N3,000 now go for between N7,000 and N8,000 and some are even costlier than this. The locally-made tiles which used to cost about a thousand naira now go for as high as N3,000 or more. Most homeowners after purchasing these building materials at expensive rates most definitely will have to add it to the rents.
“To solve this problem, the government must work on the naira-dollar rate. Housing being one of the essential things in life, the government must look at ways to subsidise the cost of importation of building materials.’’
A tiles importer and seller at the Orile market, Ken Umeh, said that most of the imported tiles sold in Nigeria were brought in from Spain and Italy. He said the cost of importing tiles used to be about N900, 000 to N1m.
He added that now, it cost between N1.9m to N2m to bring in the same quantity of tiles.
“Also, between 2015 and 2016, the cost of transporting tiles from the port to Orile market where
I sell used to cost about N50, 000. But now, it costs between N450, 000 and N700, 000. This has greatly contributed to the increase in the price of tiles by almost 200 per cent,’’ he said.
Umeh stated that foreign tiles cost more than locally manufactured tiles, stating that manufacturers still required certain materials to be imported to carry out production.
“Most people would prefer to buy standard imported materials. But due to the high cost, they buy the locally made ones. Even the quality Nigerian-made tiles still cost a lot of money. The difference in price between the Nigerian-made tiles and the imported ones is not much,” he said.
He said that a few years ago, the price of 60x 60 Spanish Spotted floor tiles was between N3, 000 and N4, 000, but now cost between N6, 800 and N7, 000.
“Before this instability in the prices of building materials, it would cost about N1.5 to N2m to tile a 3 or 4 bedroom onestorey duplex using imported tiles. But now, it is as high as N7m. The disparity in the price change is huge,” he stated.
Umeh said that the tiles business was no longer lucrative as it used to be, adding that price fluctuation was ruining building projects and making life difficult for average potential homeowners.
He said, “Before now, when prospective homeowners came to the market to ask for the price of tiles, I could quote a price for them and if they returned a month after to make purchases, the price would still be the same. But that is no longer the case as prices of building materials change every day. Every other week, the price of tiles changes and this has drastically affected the purchasing power of the average Nigerian.”
He further stated that the problems affecting the price of building materials in Nigeria were many.
“Fluctuation in the rate of forex as well as the congested port contributes to the increasing cost of building materials. The cost of clearing the goods from the ports cost a lot more now than it used to. It also costs a lot higher to transport the goods from the ports to the markets where they are sold as the state of the roads between the Apapa port and the various building materials markets are in a deplorable state. The sellers have to factor in all these costs before selling the materials to people who want to build houses. But most of the people who come to purchase building materials do not understand these factors,” he added.
In May 2020, the NBS stated that in Nigeria 40.1 per cent of the total population were poor. In other words, on average, of every 10 individuals in Nigeria, four of them have real per capita expenditures below N137,430 per year.
According to the data released by the NBS, the population of unemployed persons in Nigeria during the last quarter of 2020 was 33.3 per cent. The data showed an increase of 6.2 per cent compared with the 27.1 per cent of Quarter 2, 2020.
Also, according to data from the World Poverty Clock, an organisation that monitors progress against ending extreme poverty globally, the number of people living in extreme poverty in Nigeria rose from 86.9 million in 2018 to 93.7 million in 2019. Thus, Nigeria stands as the nation with the highest number of people living in extreme poverty in the world. This trend of unemployment and poverty is projected to worsen, as the World Data Lab noted that the outlook for poverty alleviation in Nigeria is weak and that an estimated 120 million Nigerians would likely slip into extreme poverty by 2030.
Besides, the House of Representatives asked the Central Bank of Nigeria to urgently initiate a policy to check further devaluation of the naira to the United States dollar and other international legal tenders. The House lamented that while the Nigerian currency was losing value, others in Africa were gaining.
Commenting on the situation, President, Nigerian Institution of Estate Surveyors and Valuers, Emmanuel Wike, said to address the housing deficit in the country, the government had to review the current housing policy and adopt a more realistic one. He said the present policy favours middle-income earners and not low-income earners.
Wike said, “The government should address the unreasonable cost of construction and also foster an enabling environment for private investors to invest in the housing sector. Like in the telecoms industry, after NITEL was unbundled and the private sector took over, many Nigerians now have access to mobile communication and at an affordable cost too. The housing sector needs such a policy that gives private investors the chance to invest.’’ He further stated that the land use act which invested lands in the hands of state governors also impeded housing growth in the country.
He added, “What this means is that without a certificate of occupancy, you cannot do anything on a land. This is even worse because many of the lands in the country are unregistered, so they cannot be used for anything. They just lie fallow and are useless capital. The government must see how this land use act can be reviewed constitutionally. The NIESV has sent a memo to the government concerning this so that people can have access to lands, thereby reducing the housing deficit the country is facing.’’
Wike said that as most building materials used in Nigeria were imported; the cost of importation would shore up prices, thus making it overly expensive to construct houses in the country. He added, “Also, seeing as the exchange rate fluctuates every time, the prices of these materials fluctuate as well. If it costs N2m to buy certain materials today, you might go to the market the next day and the same materials would cost N4m. This causes the owner of the property to spend a lot more than was initially budgeted and in turn, cause an increase in the rent they would charge renters or buyers.
“The government needs to invest in building materials research and development so we can manufacture most of the materials locally. This will help drive down the cost of housing.’’
Speaking further, he noted that finance was another critical issue for housing, explaining that since housing was capital intensive, it would not be easy for low-income earners to save enough money to build their own houses. “The government can set up a robust mortgage system to solve this problem where a person can own a house and spread payment for as long as 10-15 years. If the government can set up a working mortgage system, there will be more homeowners in the country as low and middle-income earners can comfortably spread their house payment loans over some time,” he said.
On his part, National President, Nigerian Institute of Building, Kunle Awobodu, stated that with the rising cost of building materials, it was a simple economic logic that when there was an abnormal increase in the price of building materials, the purchasing power of intending homeowners would be affected.
This, he said, would in turn cause a marked reduction in the number of built houses.
He also warned that increase in prices of building materials could lead to an increase in the use of substandard building materials.
Awobodu stated, “As the prices of the materials increase, there might be a tendency for intending homeowners to use substandard building materials. Some others, when they realise the funds they have available cannot complete their building projects. They may abandon it for a while until they can afford to continue.’’
He further said that some of the building materials used in the country, such as cement, was manufactured locally, yet still expensive.
Awobodu said, “Some of the manufacturers of the products claim that the cost of production is what affects the price of the building materials. Many of the local manufacturers of building materials say the increase in the price of gas which they buy in dollars affects the final price of materials they manufacture, so the final prices of the products have to reflect the additional costs.
“To checkmate this problem, the government must first organise a meeting with local manufacturers of building materials. It must find out what areas they can help to alleviate the challenges of these local manufacturers of building materials. They can help by subsidising the cost of the materials the manufacturers import for the production of building materials. They can also help through the improvement of the country’s infrastructure, particularly road networks, as this will assist not just building materials manufacturers but also the distributors in the transportation of materials.’’