The slowdown in construction activities this season in Nigeria can be attributed to several economic and structural challenges. Inflation in Nigeria, currently at a high rate, has significantly increased the cost of construction materials such as cement and steel. Transportation costs have also risen due to the removal of fuel subsidies, making projects more expensive to execute.
Increased borrowing costs, following recent hikes in the Monetary Policy Rate, have made it more difficult for developers and investors to finance construction projects.
Fluctuating exchange rates and inconsistent fiscal policies have created uncertainty, discouraging both local and foreign investment in construction.
Delays and increased costs in importing raw materials have hampered progress on many projects. Even locally sourced materials are affected by foreign exchange fluctuations.
The high inflation rate has reduced disposable income, making it harder for individuals and businesses to invest in property and infrastructure.
Lastly, the ongoing security challenges in some regions have made construction projects riskier, further deterring investments in affected areas.
The slow pace of ongoing construction projects in Nigeria, especially those that were expected to be completed by now, is influenced by several interrelated factors, beyond harsh weather. These include Inflation and material costs: The high cost of construction materials, driven by inflation and currency depreciation, has increased the financial burden on contractors. Many projects face delays as contractors struggle to manage escalating budgets.
Government projects, often reliant on timely budget releases, are experiencing delays due to funding gaps. Private developers are also facing difficulties accessing loans because of high interest rates.
Supply chain disruptions have caused delays in delivering critical building materials. This problem is compounded by higher transportation costs due to fuel price increases.
Many projects are experiencing workforce shortages or reduced productivity, partly due to harsh economic conditions that affect workers’ availability and performance. Inconsistent government policies and a lack of enforcement of contractual obligations have hindered project timelines. This is especially relevant for public projects tied to capital budgets. In some regions, insecurity has disrupted work, as contractors and workers may face risks that slow down or completely halt activities
While government efforts to increase infrastructure spending in the 2024 budget could stimulate the sector in the future, the current challenges require targeted economic and structural reforms to restore momentum in construction activities.
The combined effects of these challenges create delays, affecting not only new projects but also those nearing completion. Addressing these issues requires targeted interventions, including economic stabilisation measures, better project funding mechanisms, and infrastructure policy reforms.
