- ‘CBN’s Forex Policy Killing Construction’
Except urgent measures are taken to encourage the use of local building materials, the construction industry will remain in doldrums, stakeholders have said.
They spoke at the ninth Annual Distinguished Lecture of the Nigerian Institute of Quantity Surveyors (NIQS), Lagos Chapter.
At the lecture themed: “Foreign exchange problems, prospects and solutions in Nigeria: Construction industry perspective,” participants called for the use of local building materials.
The guest lecturer, Henry Boyo, in his presentation, titled: “For the successful resolution of oppressive contradictions in Nigeria’s economy”, said: “It is appalling that the country has become so poor, despite her abundant human and material resources.”
He said the distress in the economy, based on available evidence, is a function of “too much money supply,” of the naira, and foreign currencies.
Boyo said the Central Bank of Nigeria’s (CBN’s) failure to manage an “irrepressibly” surplus naira supply has continued to stimulate a higher inflation rate for several years. This, he explained, has serious consequences on the purchasing power of the persons whose incomes are in naira.
He emphasised that the naira and the economy would remain stagnant as long as the CBN persistently auctions the dollar against the naira in a market that is suffocated by excess naira supply, created by the apex bank’s unilateral substitution of naira allocations for distributable dollar-denominated revenue.
“Thus, CBN’s forex interventions are, in fact, deliberate and a suicidal approach to gradually kill the naira, since the CBN would consciously sell its dollar stock for higher naira bids in such auctions. In this situation, the banks flourish, while the rest of the economy wrestles with deepening poverty,” Boyo said.
The Lagos NIQS Chairman, Mr. Bamidele Mafimidiwo, agrees with Boyo on the effect of foreign exchange (forex) on the industry.
He explained that the lingering forex problems had caused a huge disruption to businesses in the sector, a situation that has been compounded by the recession. This has grounded new construction projects, leaving builders and suppliers in difficult financial positions, he added.
To transform the economy and boost industrial activity, Mafimidiwo said there was the need to restructure the monetary framework.
“Construction, housing, infrastructure, manufacturing, mortgage and other business activities of tangible output represent the construction industry and today’s forum is to provide a platform to x-ray the industry vis-a-vis the meltdown effects and chart a way forward for the sector,” he said.
Yet, other stakeholders are convinced that the use of local materials for construction projects is the easiest way out of the scathing effect of forex on the sector. This position was shared by a former President of NIQS, Mr. Oluwasegun Ajanlekoko. He said with the use of local materials, importation would be reduced to the barest minimum.
“It is about time we stopped using blocks when it comes to affordable housing. We have large reservoir of clay and that is far cheaper, durable and more environment friendly. To solve the problems of exchange rate, we are appealing to CBN to give discretionary interest rates to those in the construction industry,’’ he said.
Similarly, Executive Director, UACN Property Development Company Plc (UPDC), Yemi Ejidiran, said the forex challenge affected Grade A and B residential projects. “The government should encourage production of most of our finishing materials locally. We also need to come up with efficient designs, as it is clear that banks are not ready to finance any real estate project,” he said.
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