High Borrowing Costs Hinder Construction Financing in Nigeria
Nigeria: Nigeria's construction sector is facing significant challenges due to high inflation, soaring material costs, and increased borrowing rates driven by recent monetary policy hikes. Rising cement prices, fuelled by high energy costs and a weak naira, have severely impacted construction costs, delaying or halting projects. Transportation costs have also surged following fuel subsidy removal, while supply chain disruptions and foreign exchange fluctuations have further strained material availability. Additionally, inconsistent fiscal policies, security concerns, and workforce shortages are discouraging investments and affecting project timelines. The high inflation rate has reduced disposable income, limited property and infrastructure investments, and escalating the housing deficit.
To address these issues, boosting local production of materials like cement, encouraging competition, and adopting energy-efficient manufacturing technologies are critical. Policymakers are urged to stabilize costs through subsidies, regulate pricing, and promote alternative building materials to reduce reliance on cement. Streamlining land approvals, ensuring policy stability, and enhancing urban planning can restore investor confidence in the real estate sector. While the government’s increased infrastructure spending in the 2024 budget offers hope, targeted reforms and collaboration between public and private sectors are essential to revive construction activities and ensure sustainable growth.
Source: ZAWYA