Nigeria’s infrastructure development drive has the potential to transform the local construction industry and contribute to wider economic growth. One area that stands to benefit from a strong pipeline of large-scale building projects and demand for public housing is the local building materials industry. Due to the underutilisation of raw materials, Nigeria is a net importer of such inputs. Indeed, 90% of the resources and supplies used to construct roads and buildings in Nigeria are imported, according to an October 2022 report from the Nigerian Building and Road Research Institute. The report also found that 70% of the country’s largest construction projects go to foreign companies, which can exacerbate the issue.
The sector has faced several challenges related to government support and regulation, both of which are necessary to encourage local production, as well as the utilisation of locally produced materials. These dynamics have resulted in underdeveloped local value chains, prompting domestic construction firms to import building supplies. Due to the scarcity of foreign exchange and continuing depreciation of the naira, the cost of US dollar-priced imported materials is high. Elevated costs and inadequate regulation result in mismanagement and counterproductive processes, where raw materials are exported – in many cases illegally – then re-imported as finished products at a premium.
Materials
In Nigeria materials account for 60% of a construction project’s cost, with labour comprising the remaining 40%. In September 2022 local media reported that the prices for reinforcement, roofing sheets, tiles, cement and granite had risen by 100% over the course of a year. That, in turn, translated to higher rental and property purchase prices, creating an unsustainable cycle for investors and developers.
However, raw materials such as clay, laterite, stone, lime, timber, granite and natural sands are essential to the manufacture of many traditional building materials, and are abundant in Nigeria. “There has been a steady rise in local production capacity amid importation constraints. The relative affordability of basic building materials must be exploited and private stakeholders in the industry must collaborate to meet the demand for local production,” Ibukun Sonola, CEO of local construction company Formwork, told OBG.
Cement
The country’s leading manufacturing product, cement, has proven resilient in the face of currency-related challenges and macroeconomic headwinds brought on by the Covid-19 pandemic. In 2020 and 2021 cement contributed 0.88% and .9% to GDP, respectively. As of the third quarter of 2022, the contribution was 1% to GDP. As a segment, cement grew 3.9% from 2019 to 2020. It rose again by 6.6% in 2021 and continued its expansion into 2022 registering 9.6% growth in the first quarter before moderating to 4.1% in the third quarter.
The segment is dominated by three companies, with Dangote Cement holding a 60% market share and an annual production capacity of 32.2m tonnes as of September 2022. BUA Group accounted for around 20.4% of the market and had an annual capacity of 11m tonnes, while Lafarge Africa had a market share of 19.5% and an annual production capacity of 10.5m tonnes in that same period. The companies’ combined capacity of over 55m tonnes per year is sufficient to cater to local consumption, which in 2021 stood at approximately 30m tonnes.
Yet, availability has not translated to increased affordability for local operators, since producers are able to set prices due to their collective market dominance. In 2021 cement prices in Nigeria were reported to be 240% above the global average and doubled again in the year preceding September 2022. With Dangote’s current expansion works expected to raise its total annual capacity to 41.3m tonnes, and BUA Group’s various upgrades set to take the company’s capacity to 17m tonnes per year, the companies could further augment their market standing. This has led to calls for the government to incentivise market entry by lowering licensing requirements in a bid to boost competition and drive down prices for local construction companies. New market operators such as Madugu Cement, Chicason Group, Mangal Industries and Southport Cement will add a combined total of 11.2m tonnes to annual capacity once the construction of their new plants is complete. These entrants are expected to increase supply and make the market more competitive.
Alternative Materials
The use of alternative building materials is rising across the globe since they tend to be more cost effective and environmentally sustainable than their traditional counterparts. Some of those products are created using industrial and agricultural solid waste materials. For example, research on replacements for cement has been prioritised due to its high carbon footprint. Fly ash – a by-product of coal combustion – and rice husk can be used to partially replace cement as binding agents, or pozzolans, in concrete production. Extensive testing has shown that replacing one tonne of cement with natural alternative materials can offset one tonne of carbon emissions.
In addition to the 160m tonnes of rice husk Nigeria produces annually, there are notable supplies of other inputs highlighted as viable components in building materials. Indeed, sugar cane ash, palm kernel shells and bamboo have been subjected to rigorous research and analysis, and shown not only to match but, in some areas, exceed the quality and durability of the materials they are aiming to replace. Indeed, a report published in August 2022 by research body Science Nigeria detailed how concrete containing rice husk ash as a partial substitute for cement showed improved performance over conventionally produced cement across several dimensions, with improved strength and durability, and reduced shrinkage cited among other advantages. Bamboo too has been proven effective as a reinforcement material, with compressive strength twice that of concrete and tensile strength similar to steel.
Although alternative materials have significant potential, the uptake of their use has been slow in the local market. Tests have been carried out on alternative building materials, but most are produced and used in small volumes in the Nigerian construction industry.
Research & Production
This reality has led to calls for increased research and investment in alternative building materials and local value chains as stakeholders attempt to identify viable methods through which quality, affordable housing can be constructed. The use of substandard materials, lack of foundational testing and insufficient regulation are thought to be contributing factors to unstable construction.
China’s rapid infrastructure development in recent decades has seen it develop strong local industries, and it is now integral to global construction supply chains. Nigeria’s Raw Materials Research and Development Council (RMRDC), which operates under the aegis of the Federal Ministry of Science and Technology, has partnered with the New Material Nigeria Company, a subsidiary of Chinese government-owned China National Building Materials Group, formed in 2020. The company was created in Abuja to produce fibre cement board, a product widely used in China as a replacement for gypsum board. The material is a composite of cement and cellulose fibres such as paper pulp, along with quartz and sand, and has proven to be safe, durable and lower in cost than traditional materials of their type. Nigeria’s annual importation of gypsum is valued at around $132m, and the new factory is set to save Nigeria $100m per year once fully operational.
Further RMRDC initiatives include collaboration with local, sustainable solutions company Infrique Eco for the production and distribution of tiles and bricks made from single-use plastics such as bags and bottles. These innovations could save the Nigerian construction industry an estimated N2trn ($4.8bn) in foreign exchange per year, generate over 50,000 jobs for the local population and potentially support the government’s drive to supply 700,000 affordable housing units per year. As is the case across the economy, suitable government interventions that enable greater levels of public-private cohesion could indeed ease the most salient socioeconomic challenges facing the country.
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