How Russia-Ukraine war impacts construction cost

…Experts appraise 2022 budget, want fiscal policy review

The invasion of Ukraine by Russia has so far had far-reaching economic consequences on nations across the globe, and for Nigeria, it is the construction industry that is feeling the negative impact of the war more.

Experts in the industry, who recently had a roundtable in Abuja to review the 2022 Appropriation Act and see how it affects the industry, agreed that costs of logistics have increased significantly since the war broke out.

They, therefore, urged the government to review the appropriation act and grant the industry a fiscal policy that would not delay and derail major construction projects.

The president of the Federation of Construction Industry (FOCI), Engr Nasiru Dantata, said the recent hyper-inflationary trend on the basic cost of key construction prices had become a cause for concern to all his members.

He said, “Within the space of January to March this year, the prices of key basic materials have increased several points over their original prices.

“Now, the current inflation in the cost of cement in the last two years, and of recent the cost of diesel that has doubled; the cost of explosive materials that have almost tripled because of the lack of logistics to buy from Ukraine and other parts of the world, have impacted the industry negatively. So in a normal contract this figure (variation cost) is put at five per cent. But now what we are experiencing in the industry is such that up to 25 per cent is needed for some ongoing projects.”

He further said the five per cent variation cost was no more enough, urging Ministries, Departments and Agencies (MDAs) that do long-term major contracts to factor in the variation cost in the contracts to save contractors’ time of going to the Bureau of Public Procurement (BPP) and the Federal Executive Council (FEC) for approval.

Also, the president of the Nigerian Institute of Quantity Surveyors (NIQS), Mr Olayemi Shonubi, said the Appropriation Act 2022 needed to be reviewed to reflect the current fiscal realities.

Mr Shonubi said, “How do we influence government to grant us fiscal policies that will make our effort easier. Nobody thought of the invasion of Ukraine by Russia, and we all know how it has impacted on our industry negatively.

“In terms of logistics chain globally, it has impacted so badly that shipping cost has gone up, haulage cost has also gone up. How would our clients understand when contractors submit a claim for fluctuation?”