In Nigeria, the price of cement has skyrocketed to a record high of N7,000, doubling from around N3,300 to N3,500 just three years ago. This sharp increase is mainly due to the country’s rising inflation.
Back in 2021, Devakumar Edwin from Dangote Cement explained that the global demand for cement, boosted by the COVID-19 crisis, was causing prices to rise.
Nigeria felt this impact as increased construction activity and changes in monetary policy pushed up demand. To meet local needs, exports were halted, leading to a loss in dollar earnings.
The situation worsened in 2022 when the Block and Concrete Producers Association in Enugu State expressed concerns over the continuous hike in cement and other construction material prices.
Igwe Ukaegbu, the association’s president, highlighted how the increasing costs were hurting sales and income. He urged the government to step in by allowing more cement production licenses.
By 2023, the Cement Producers Association of Nigeria warned that the government’s plan to introduce concrete roads would push cement prices even higher, possibly reaching N9,000 per bag.
They called for government action to control the price hike and increase participation in the cement industry.
This price rise is severely impacting the real estate sector, particularly in the first quarter of 2024.
With the foreign exchange rate soaring to N1450/$, supply chains are disrupted, and the cost of building materials like rods and paint has also jumped significantly.
This is causing a substantial slowdown in construction activities and is heavily impacting renters, especially in city suburbs, where rent has increased by over 50% in the past year.
The rising costs of cement and other materials are forcing landlords to hike rents. For instance, a tenant in Lagos saw his rent increase from N1 million to N1.2 million in less than a year due to the higher costs of maintaining buildings.
Economic consultant Dr. Muda Yusuf suggests that the Central Bank of Nigeria needs to address price inflation and bring more regulation to the sector.
He advises reforming the foreign exchange market to reduce volatility, boosting domestic firms’ productivity, and cutting down on transportation and logistics costs.
Reducing import duty on raw materials could also help lower production costs, considering the sharp depreciation in the exchange rate.