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The President, Nigeria Institute of Quantity Surveyors, Mr. Kene Nzekwe, has bemoaned the raging hyperinflation in the country, saying the development has terribly vandalised the economy.
Speaking during a press conference on impact of hyperinflation on the Nigeria construction industry recently in Abuja, Mr. Nzekwe pushed for the expedient diagnosing the root cause of the hyperinflation that is almost crippling the quantity surveying sector in particular and the economy in general.
According to him, “the current cul-de-sac that we are in is a result of various factors, including government budget deficits, fuel subsidy removal, currency float, and insecurity, affecting productivity and leading to moribund industries.
“As professionals in the construction industry, we propose the following 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 per cent 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.
“As we witness this economic storm, it is imperative that we rally together to navigate these turbulent times and secure the stability of the construction industry, a critical engine of our nation’s growth. The Construction industry in the Nigerian economy plays a vital role in the provision of commercial, industrial, and infrastructural projects. It attracts many investments and thereby contributes substantially to the GDP. The Construction Industry was reported to have contributed up to 11.79 per cent to the nominal GDP in the first quarter of 2023. This shows how important the construction industry is to the Nigerian economy and the need for all stakeholders to protect this important industry.
“A growing construction industry brings about positive multiplier effects, gross fixed capital formation and growth in the gross domestic product (GDP) of the economy. The government should therefore be interested in what is happening in the construction industry of the economy because the sector is an effective barometer which can be used to measure the direction of economic growth within the economy”, he explained.
“Inflation is a part of economic cycles, but what we are currently facing in Nigeria is hyperinflation, an uncontrollable surge in general price levels. The repercussions are dire, disrupting economic projections and compelling government planners into uncharted territory. The construction industry, a cornerstone of our economy, is bearing the brunt of this hyperinflationary crisis. Isolating the inflation of construction materials, however, gives a better context for discussion,” he said.
The President noted that the price of cement, using a 50kg bag as an indicator, between January 2024 and February 2024 a period of about six weeks, has increased from N4,500 to between N12,000-N13,000.
This, he said amount to an increase between 100 per cent to 150 per cent. “Reinforcement steel rods, another major material for construction moved from around N590,000 – N650,000 per ton as of January 2024 to N1,200,000 -N1,400,000 as of February 2024 an increase of over 100 per cent in a short run of less than six weeks.
“This ugly trend is making it more difficult for prospective clients to afford construction projects and has forced many projects to stall, pushing contractors into financial distress. The repercussions extend beyond stalled projects; it impedes the development of crucial infrastructure such as roads, hospitals, and educational facilities.
Private sector investors are also reluctant, creating an adverse cycle that hampers economic growth and job losses in the construction Industry,” he stated.
He commended the resilience and professionalism of Quantity Surveyors in Nigeria who have continued to navigate these challenging times, providing accurate cost estimates and value-engineering solutions to
mitigate the impact of hyperinflation. “However, their efforts alone cannot suffice in these challenging times of hyperinflation of prices of construction materials. The Nigerian government must step in with strategic interventions to ensure the stability of the construction industry and safeguard the interests of all stakeholders, “he observed.
While addressing the challenges faced by the local manufacturers, Mr. Nzekwe noted the importance of government to look at the structure of the building material manufacturing industries, especially cement
manufacturing.
He noted that, “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.
“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. 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 neutralize any attempt by local manufacturers to manipulate the prices,” he stressed.
According to him, “In a press briefing in October 2023, the Minister of Work, 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.
