Taming escalating cost of construction in Nigeria
By AMSON ECHENIM and EMEKA EZEKIEL
Monday, 28 Jun 2010

Niger Bridge at Onitsha

The Federal Executive Council, three weeks ago, put the cost of construction and procurement of contracts in Nigeria at between 20 to 30 per cent higher than what is obtainable in other parts of the world. SAMSON ECHENIM and EMEKA EZEKIEL write on some of the issues the government may have to consider in its bid to reduce the cost of construction in the country.

The way billions of naira are mentioned in construction project values in Nigeria has become so banal that very soon, experts believe, they are likely to escalate to trillions of naira, even though the values do not appear realistic vis-a-vis the contracts in question.

The Minister of State for Communication, Mr. Laran Maku, while addressing journalists after a Federal Executive Council meeting recently, had said, ”The FEC has noted that in spite of all the processes that we have gone through so far, including the Due Process and reforms, the cost of construction in Nigeria is relatively higher than in most other countries, even within the sub-region and other parts of the world.”

In an interview with our correspondent on Friday in Abuja, the National President, Nigerian Society of Engineers, Mr. Olumuyiwa Ajibola, blamed the rising cost of construction projects in the country on the manipulation of the nation‘s procurement laws by government officials.

Ajibola said, ”You cannot rule out the possibility of manipulation of the nation‘s procurement laws by government officials. The truth is that the mindset of those in government is tilted towards using foreign companies in handling major construction projects. These foreign companies are usually over-stretched with construction work such that they tend to quote higher amount for most of the projects they handle.”

Also speaking with our correspondent in Lagos, the Project Manager, Nasarawa State Massive Programme on Road Construction, Mr. Ali Rabiu, said high overheads, inadequate power and energy supply and what he referred to as the ”Nigerian factor” (obviously implying corruption), were also responsible for high cost of contracts. He also cited non-patronage of indigenous contractors by the different tiers of government as an undeniable cause of escalating cost of construction.

Rabiu, who is also the Kano Branch Chairman of the Nigerian Society of Engineers, said, ”Fortunately, the committee set up to look into the issue of high cost of construction is working and the NSE as a concerned body has given a position paper to that committee, and I do not want to pre-empt what is in that paper.”

To the Managing Director, Ahmak Engineering Limited, Ibadan, Mr. Abiodun Ahmadu, the problem is well beyond the industry but rooted in multifaceted factors. He particularly cited the absence of policies and non-compliance with them, where they were available, as key factors. According to him, the oil boom and the fact that there is ”cheap money in the country syndrome are other reasons.”

However, in order to tackle the problem, Ajibola said the World Bank and other relevant international organisations had recommended that independent consultants should be allowed to handle tender analysis and then make recommendations for the award of contracts to ward off extraneous influence. He added that during implementation, an independent consultant should also carry out an evaluation to ascertain that there was no disparity in the cost and quality of project delivered.

”Ideally, there should be separate periods for planning, designing, tendering and award of contracts. But because the government is always in a hurry, it tends to shorten the time for all these, which automatically leads to high cost,” Ajibola said.

World Bank Country Director for Nigeria, Mr. Onno Ruhl, said Nigeria could effectively tackle the rising cost of construction by engaging qualified engineers in the conception and implementation of contracts.

He said, ”It is only an engineer that can supervise a project effectively and make sure that it is implemented as intended without playing hanky-panky. If you want to know whether a contract has been awarded at the right price or not, what you need to do is check the unit cost, compared to international standards.

”But to know the unit cost, you have to know the units and their costs. It is only the engineers that can tell you what the unit is. It is only the engineer that can tell you whether or not you have enough concrete on the bridge, or enough asphalt on the road, or if the project is standard. If the unit cost is up to international standards, then you know that the contract is right. If it is three times the cost, you know that two-third of the fund, supposedly meant for the contract, has been eaten by somebody else.”

If the FG must be seen to be serious about taming the cost of construction contracts, Ahmadu, who runs four companies in the construction sector, believes that it must begin a comprehensive and long-term plan that will ensure a more permanent remedy, rather than cutting corners.

He said, ”If the (committee) does not get the indices well, there is no miracle. They must tackle material cost and dearth of manpower, because if they do not tackle them wholesomely, they may not get there. I want to believe that will be part of what the committee will look into. Of course, they can remove duties, give tax breaks and all that, but they are temporary solutions.

”We need to go the long-term way in order to get a permanent solution. There should be no justifiable reason why the cost of building and construction should be higher than what is obtainable in other countries. It is unbelievable and outrageous. And I even wonder how an average Nigerian will be able to build a house. The need to own a house of your own is, in itself, a potential source of corruption because everybody wants to own a house. Most people are ready to do anything to own one. So, corruption continues. We just need to get ourselves together and be serious and apply ourselves, that‘s all.”

He added, ”Government controls the economy and it should, therefore ,evolve a precise policy over the cost of building materials. It is not just enunciating the policies, it must be well thought out and it must be able to make all contracts follow strictly, a laid down procedure.

”It must also ensure that relevant construction materials, which the country is heavily blessed with, are appropriately harnessed for the country‘s use. For example, we have four basic materials in the construction industry, such as cement; reinforcements; aggregates-granites, sharp sand; and timber. Nigeria is blessed with all of these. Lime stone is the basic raw material for cement. If you have that to produce cement, it serves an input of more than 70 per cent.

”Now, I would expect the government to have had a definite policy over the last 10 years to say, within the next 10 years, these will be our requirements. We would make sure that we have manufactured enough that will take care of our requirements.

”Basic raw materials for construction are all here. We are shooting ourselves in the foot if we continue to live this way. Even if any of the public office holders have interest, they will make more money by setting up these factories than encouraging importation. Our people cannot see beyond their noses. If you are a government official, your responsibility should be either to push through for good policies or formulate them.

”If you invest in a cement factory, you will make more money than what you can get from corruption. It is clean money, you have peace of mind, and you are not cheating anybody. No country can grow without power and steel, and we have the raw materials to produce them. You need steel for any industrial take off.”

While also advocating for reforestation as regards timber, Ahmadu said, ”Nobody cares, they just go cut it down and no well laid down policy on reforestation. So, you find out that in about 10 to 20 years time, we probably will be importing again.”