Nigeria’s “Renewed Hope” budget has faced a stark reality with soaring inflation and a plummeting naira igniting a construction crisis.
While the government aimed for N8.50 trillion in capital expenditure, a 75 per cent surge in building material prices has threatened to cripple projects.
This perfect storm of economic challenges has left federal and state Ministries, Departments and Agencies (MDAs) grappling with budget revisions and potential project delays, casting a shadow over the nation’s infrastructure ambitions.
A sharp rise in the budgeted costs for capital projects by over 35 per cent has also exacerbated the crisis in the construction sector.
According to the National Bureau of Statistics (NBS), the headline inflation rate eased to 33.88 per cent in October 2024, compared to 32.70 per cent in September 2024, representing a spike of 1.18 percentage points.
On a year-on-year basis, the headline inflation rate in October 2024 was 6.55 per cent higher than the rate recorded in October 2023 at 27.33 per cent.
The exchange rate crisis has compounded the woes of the construction sector. Imported materials, such as windows, doors, ceramics, tiles, plumbing appliances, and sanitary wares—accounting for 23 per cent of the market—have been significantly affected. Local materials, which make up 37 per cent of the market, have also seen price hikes due to increased production and transportation costs.
Naira depreciation continues to escalate material costs, which constitute about 60 per cent of overall building expenses. Prices of essential materials, including cement, blocks, reinforcement rods, timber, roofing sheets, and tiles, have surged by over 75 per cent in the last ten months.
This has raised concerns among built environment professionals about the impact on supply, affordability, and accessibility, particularly for low- and middle-income earners.
A survey by The Guardian revealed that a 50-kilogramme bag of cement, which sold for N3,500 in May 2023, now costs around N9,500. Similarly, a nine-inch cement block that cost N380 is now N700, while a six-inch block has risen from N370 to N650.
Iron rod prices have also skyrocketed. An 8mm rod, previously priced at N255,000 per tonne, now costs N750,000. The 10mm rod, which sold for N442,000, is now N950,000, while the 12mm and 16mm rods, formerly N446,000, also sell for N950,000. Larger rods, like the 20mm and 25mm, have jumped from N442,000 to N1,000,000 per tonne, depending on location.
In the 2024 budget tagged “Renewed Hope,” President Bola Ahmed Tinubu proposed a total expenditure of N27.5 trillion ($36.7 billion) against a projected revenue of N18.32 trillion ($24.4 billion), leaving a deficit of N9.18 trillion ($12.2 billion).
The budget allocates N8.50 trillion for capital expenditure, including research and development, road construction, infrastructure provision, donor-funded projects, electricity projects, road rehabilitation, and housing.
The Guardian learnt that several MDAs have begun reviewing their bills of quantities to align with the soaring prices of building materials.
Sources further disclosed that some MDAs have yet to receive funds to execute projects appropriated in the capital budgets.
Experts in the built environment have attributed the rising cost of construction to foreign exchange fluctuations, high interest rates, elevated labour costs, and fuel expenses, all of which threaten to disrupt capital budgets at both federal and state levels.
A former president of the Nigerian Institute of Quantity Surveyors (NIQS), Segun Ajanlekoko, stated that while there will likely be a reduction in the scope of some projects, complete abandonment is not anticipated. “All that is needed is scaling down and rearranging capital projects,” he said.
Ajanlekoko, who is also President of the Commonwealth Association of Surveyors and Land Economy (CASLE), noted that the current cost distortions have significant implications, making it increasingly challenging to complete capital projects within budget due to unforeseen cost increases.
“Cost variations of 5 to 10 per cent are common in unstable economies,” he explained. “However, if costs exceed this threshold, the likelihood of project abandonment increases significantly, slowing down economic growth and stalling critical infrastructure development.”
NIQS President, Kene Nzekwe, highlighted the dire situation in the construction industry, describing it as being at a crossroads .
“Rising inflation is crippling the sector and the general economy. Swift government intervention is essential to stabilise construction costs and safeguard the nation’s infrastructure development,” he said.
Nzekwe further argued that the government must prioritise the construction sector, as it serves as a critical indicator of economic growth.
“The current trend is making it increasingly difficult for clients to afford construction projects, leading to stalled projects and financial distress for contractors. This affects crucial infrastructure, such as roads, hospitals, and schools, while discouraging private sector investment and creating a vicious cycle of economic stagnation and job losses in the construction industry,” he added.
He urged the government to engage with local manufacturers to mitigate inflationary impacts, cautioning that punitive measures against manufacturers might be counterproductive.
The Nigerian Institute of Architects President (NIA), Mobolaji Adeniyi, pointed out that the 70 per cent devaluation of the naira, coupled with rising material costs, has hampered the ability of federal and state governments to meet their capital budget goals.
“The federal government has already sent additional appropriation bills to the National Assembly for approval,” she noted.
Adeniyi revealed that many capital projects have stalled, with contractors demanding contract reviews to reflect current realities.
“The traditional 5 to 10 per cent cost variation allowance is unsustainable in an economy with inflation above 30 per cent. If nothing is done, projects will be abandoned as contractors cannot operate at a loss,” she warned.
The immediate past president of the Nigerian Institute of Quantity Surveyors (NITP), Nathaniel Atebije, described budgets in Nigeria as largely symbolic, meant to fulfil statutory obligations. “Achieving capital budgets at all levels this year will be extremely challenging,” he remarked.
Atebije also criticised the reluctance of contractors to engage in government projects, noting that some are only willing to collect mobilisation fees without executing projects, often abandoning them without repercussions.
He further explained that inflation and price instability often lead to requests for contract variations, particularly for long-term projects or those lasting over three months.
“Such reviews are necessary to address new cost realities and ensure fairness and financial viability. However, these variations can also become avenues for corrupt practices by unscrupulous contractors and their collaborators,” Atebije warned.
