The on-going cash crunch inflicted on Nigerians by the Naira redesign policy of the Federal Government is gradually slowing down activities in the nation’s construction sector. DAYO AYEYEMI reports.
This is not the best time for practitioners in the construction industry as the on-going cash crunch inflicted on the majority of Nigerians by the Central Bank of Nigeria (CBN)’s Naira redesign policy has slowed down activities in the sector.
Apart from this, possible outcomes of the general elections, volatile foreign exchange market, scarcity and queue for petrol, absence of credits, high inflation and interest rates are also hurting the sector.
Due to result of these, many people, especially investors, have either suspended their projects or slowed down construction activities.
As the cash crunch bites harder, many artisans are presently finding it difficult to have access to cash to transport themselves to construction sites.
Speaking with the Nigerian Tribune, Managing Director, Reo-Habilis Construction Limited, Mr Kunle Awobodu, said the ongoing cash crunch in the economy has impacted the construction sector negatively.
According to him, mobilising workers to sites and back home has become difficult due to the scarcity of Naira and rejection of money transfer by commercial bus drivers, food vendors and hawkers of sachet water.
“Most of our workers need physical cash to transport themselves to sites and back home. They need cash to pay food sellers and other hawkers in the construction sites. That has become a big problem. Even when you transfered money to them, they would have to spend N3,000 to collect N10,000 sent to them.
“Scarcity of Naira has slowed down activities in the construction sector. If you have an account in the bank that is not connected with an app that means you will have to go to the bank, which is already congested, with your cheque to queue. So there is cash crunch everywhere.
“The fact that you have to go to the bank physically in most cases slowed down construction activities,” he said.
Beside this, Awobodu, a former President of the Nigerian Institute of Building (NIOB), said the current cash crunch also affected the supply of building materials to the construction sites, pointing out that no traders would want to supply materials to sites without payment.
Talking about the effect on the market, he said “If you have supplies, except you have suppliers that can supply goods/building materials without payment, you may not get buildings materials for construction workers on sites.
“This is a difficult time for us in the construction industry, no thanks to petrol scarcity, Naira scarcity and election.”
“When you look at your contract sum, you would notice that the budget has already failed due to inflation of building materials’ prices.
“This has affected suppliers of other materials like aluminum window and doors, among others.
“In fact, sub-contractors are complaining.
Prices of all the construction materials are inflated,”Awobodu said.
He pointed out that many ongoing projects have been slowed down due to lack of credits as people are waiting for elections to subside.
Awobodu added that many homebuilders and contractors have been waiting for credit facilities to complete their projects.
He explained that due to the capital-intensive nature of construction projects, people usually rely on loans.
“They are not getting the required facilities at this time. Clients that rely on facilities are being delayed.
“In fact, this is a difficult time for facilities to be dispensed. We are currently having galloping or unstable economy with high rate of inflation.
“This is self-imposed punishment,” Awobodu said.
He also pointed out that most politicians have not been able to expense money on their projects as they concentrated on elections and election›s tribunals.
“Their projects have become secondary,” he added.
Another construction professional, Tunji Alade, an architect, corroborated Awobodu, saying the ongoing cash crunch has halted activities in the construction sector as workers are finding it difficult to access Naira to transport themselves to sites.
Real estate sector
Concerning the real estate sector, experts are of the opinion that the real estate remains a better hedge against inflation when compared to other asset classes
They pointed out that poor performance of other investment outlets has been driving transactions in the real estate, despite the ongoing general elections.
According to one of the experts, a former President of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Mr Emeka Eleh, who spoke at a forum on a theme “Impact of Elections on Real Estate Values” the investment outlets, included shares, bonds and fixed deposits that have not been doing well presently.
Besides, the experts said the fact that exportation of money or taking out money had become more difficult is helping transactions in real estate.
Some of the internal issues affecting the economy he highlighted included high level insecurity, high inflation at about 21 per cent, high unemployment of about 33 per cent, high interest rate of about 25 per cent, depreciation of the Naira/Dollar, and high multi-dimensional poverty (133 million people out of a population of about 200 million).
Others internal issues are fuel scarcity, naira redesign/scarcity, low GDP growth of about three per cent last year, high debt profile, very high trust deficit on the government and economy, and general uncertainty surrounding the election.
Looking at the real estate market in this ‘Election Cycle’, he said that by mid-2022, the market was generally cooling down and responding to some internal issues.
As a result of this, he said that people were taking the usual “wait & see” attitude for the election to come and go.
With strong head winds against the economy, he said he expected a substantial slowdown of the market in terms of people selling to take money out due to naira devaluation; high vacancy rate especially for office and luxury residential properties.
“There are more properties in the market for sale and politicians selling to raise money for elections” he said.
Despite the ongoing election, Eleh noted that the real estate sector is still strong owing to resilient private sector, huge informal market, strong local market of over 200 million people, growth in online payments, good showing in the SME’s sector and promising democracy.
He added that despite the controversy surrounding the election, no one is clamouring for military intervention.
“On the whole, market didn’t quite slow down as much as expected especially in big cities like Lagos and Abuja
“Market remains quite active buoyed by the strong and resilient private sector and the huge informal market. Even on the eve of the elections, huge transactions are still taking place,” Eleh said.
Looking at the manufacturing industry, he pointed out that the sector was not doing well with capacity utilization of about 50 per cent.
Due to this, he noted that many industrial properties are up for sale.
Other views
Other experts noted that the real estate market slowed down this election cycle but not as much as in previous cycles.
“People are driven by hope that despite forecasts in some quarters, the election will come and go and also believe that the expected or forecasted crises will not happen or will not be too serious,’ they said.
They also noted that, as usual, foreign money had taken flight a while ago, pointing out that the current market was driven by local money.
Expectations
Experts are of the opinion that «whoever wins will be more business friendly and handle the economic and security challenges better.
«Winner is likely to take immediate steps to address key structural problems with the economy,» they said, urging investors to expect immediate action on the issue of fuel subsidy and exchange rate and low hanging fruits.
«Hope and local money will continue to drive the market. Having sustained the market at active or near stable level all through the election cycle will even be more impactful after the elections,» they said.
After the announcement of the result, they expect market to respond positively immediately.
«Values will likely in chup, foreign money—FDI and diaspora remittances will respond more slowly. It won’t start coming in till after the handover on May 29 when the new government policy thrust will be officially out
“Market is likely expected to rebound by the second half of the year,” they said.
YOU SHOULD NOT MISS THESE HEADLINES FROM NIGERIAN TRIBUNE
Governorship poll: Lagos, Oyo, Nasarawa, Rivers, Delta, Kaduna, five others are key battle states
2023 elections: Tinubu’s victory not God’s plan for Nigeria, Peter Obi replies Aisha Buhari, others
I never intended to toy with any lady’s emotions —Yemi Cregx
2023 presidential poll: We’ll hit streets if courts don’t work – LP
Super Eagles legend Vincent Enyeama ranked greatest African goalkeeper
