Building Materials Price Surge: Impact of Inflation, Foreign Exchange Uncertainty, and Supply Chain Challenges
From N200,000 per ton in 2021 to N470,000 per ton in 2023, giving N270,000 price differential, which is well over 100 percent increase, access to iron rods, also called reinforcement, has become a major source of concern in the building materials market in Nigeria.
The story is not any different for cement, another major building and construction component, whose price has risen from N2,600 in 2021 to N4,600 in 2023, giving a price difference of N2,000 in 24 months.
These are symptoms of an ailing economy where growth, in most cases, is in negative trajectory. Presently, of all the factors that drive increase in commodity prices in Nigeria, galloping inflation, volatile foreign exchange rate and cost of moving goods from one point to another are the major suspects in the building materials markets across the country.
Inflation figures in the country as released by the state funded National Bureau of Statistics (NBS) show a worrying increase in the first four month of the years that peaked at 22.22 percent in April, up from 22.04 percent in March; 21.91 percent in February and 21.82 percent in January 2023.
Exchange rate in the country has been oscillating between N730 and N755 to one US dollar in the last six months. Before now, it went as high as N800+ to one dollar which is a huge source of worry because this is a country where over 70 percent of building materials are imported.
Logistics cost has had significant impact on the cost of building materials. This has been made worse by the recent removal of petrol subsidy by President Bola Tinubu, leading to over 200 percent increase in petrol price. In some locations, the increase is over 300 percent, from N200/litre to N550 or N600/litre. A recent survey on the prices of building materials conducted by BuyletLive, an online property research platform, shows how badly the combined impact of the above factors has also affected other building materials, though not as bad as cement and iron rods.
The price of granite moved from N180,000 per trip to N350,000 per trip, giving an increase of N170,000 in 24 months; sharp sand now sells for N120,000 per trip, up from N80,000 per trip, giving an increase of N40,000 per trip in two years, while 9” block which sold for N220.00 per unit in 2021 now sells for N400.00, showing an increase of N180.00 per unit.
The price of Aluminium roofing sheet has gone up from N2,200 in 2021 to N5,500 in 2023, leaving buyers with N3,300 price increase in two years. From N4,000 per carton in 2021, the price of 60×60 tiles has gone up to N11,000, giving an increase of N7,000 per carton.
The price of 20 litres paint drum (bucket) has gone up from N10, 500 in 2021 to N25,000 in 2023, giving a price difference of N14,000 in just 24 months. One length of 2”x 9” hardwood timber now sells for N1,600, up from N900.00 in 2021, giving a price increase of N700.00.
Expectation is high that the oil subsidy removal, which has pushed up petrol price and transport fare, will lead to further rise in the cost of building materials which means that housing delivery will decline.
This is why housing industry operators urge the government to find ways of lessening the impact on the citizens.”For us in this sector, unless there is a special fund that will enable us deliver housing at lower cost, it will be too hard on us and home buyers,” Gibson Soremi, a real estate investor, told BusinessDay.
Soremi lamented that the price increase came at a time when the combined impact of galloping inflation and high exchange rate regime have put the sector in a dire situation with building material prices rising to a point where many developers have been compelled to adopt a watch and see attitude.