Naira value, inflation: Construction experts groan

Construction experts are groaning under the volatile naira devaluation and general inflation in the economy.

They are extremely worried about the depreciation of Naira value, going by the current exchange rate of Dollar to Naira.

The volatile Naira devaluation, they lamented has led to the astronomical increase in the costs of construction projects, building materials and labour.

As of February 3, 2024, United States Dollar equals N1,194.50 Nigerian Naira

Speaking with the Nigerian Tribune, Chairman of the Nigerian Institute of Quantity Surveyors, Lagos Chapter, Olanrewaju Farotimi, said that Naira fluctuations, inflation and corruption have become challenges to sustainable management of construction projects in the country.

According to him, these challenges have significant impacts on construction’s cost management in the country.

He explained that continued naira devaluation and inflationary trend have created uncertainty in the economy, making it difficult to accurately estimate construction costs.

Besides, he said the general inflation has led to increase in the prices of materials and labour, adding that suppliers of building materials have become reluctant to enter into long term contracts due to rising prices of goods .

When there is inflation, he said: “Construction projects, contractors and subcontractors may be forced to wait for prices to stabilize before committing to a project.

“Overall, inflation has led to increased costs and uncertainty, making it difficult to manage construction projects effectively.”

Farotimi noted that the value of  Naira has been highly volatile, impacting negatively on the costs of materials and labour.

Going by the current fluctuation of the naira, he said it has also become more expensive to import materials and equipment from overseas.

He added that the currency fluctuations have created uncertainties for contractors, making it difficult to budget for construction projects, while increasing the risk of financial losses.

A building contractor, Mr Sunday Irewole, narrated how he won a contract to supply aluminum windows.

According to him, after submitting the quotation and mobilised by the contractor to commence work, he said he was surprised to find out that  prices of the materials he priced previously day had increased.

He said he incured N95,000 debt at the end of the day since he couldn’t go to the client to raise the claims.

Past President, Nigerian Institute of Building (NIOB), Mr Kunle Awobodu, said it was worrisome that Dollar determined everything in Nigeria.

According to him, there is uncertainty in the construction sector presently, saying both the clients and contractors have become agitated by the happenings going by the risks associated with construction projects.

Awobodu said: ”The cost of building materials has gone up. Labour is agitating for increment of wages. How does dollar determines the value of everything in Nigeria?  Does that mean we don’t export at all?

“There is uncertainty in the industry. The risk is being shared by the clients and contractors. The liabilities of failure will be difficult to determine. Contractors are afraid to buy materials and engage labour. It’s a complex situation we have found ourselves.”

Going by the naira devaluation, he advised that clients and contractors must take extra- ordinary measure to navigate this period.

However, Farotimi bemoaned corruption in Nigeria, describing it as a major issue that could lead to mismanagement of construction projects and increased costs.

According to him, corruption could have a major negative impact on sustainable management of construction costs, since it can lead to misappropriation of funds and embezzlement of resources.

When funds are being diverted from the intended purposes, the NIQS boss said could result in delays and cost overruns for construction projects.

“Additionally, corruption can lead to lack of transparency in the procurement process, which can result in higher prices for materials and equipment.

“Overall, corruption can make it difficult to maintain a sustainable cost management system, since it can result in significant financial losses,” he said.