Onome Amuge

Nigeria’s construction sector is among the fastest-growing in Africa, yet new data indicates the boom may rest on unstable foundations, driven less by productivity and more by imported inflation, volatile exchange rates and a policy climate that has struggled to ignite large-scale local manufacturing.

The warning comes from the newly released State of Lagos Housing Market Report (Volume 3),published by the Roland Igbinoba Real Foundation for Housing and Urban Development. which argues that the country’s heavy reliance on imported iron, steel, roofing sheets, finishing materials and fittings (estimated at 70 per cent of total inputs), is pushing the sector towards a breaking point. While cranes dot the Lagos skyline and government infrastructure spending accelerates, the report concludes that construction growth has become increasingly detached from economic fundamentals.

The risk is not merely higher building costs. Analysts involved in the study say Nigeria is edging closer to a scenario in which the cost of constructing homes rises so high that demand collapses, credit risks spike, and projects stall midway, a pattern seen in parts of Egypt, Turkey and Ghana after severe currency adjustments.

“The sector’s expansion looks impressive on paper. But when 70 per cent of what you build with is imported, you’re not growing on the back of productivity ; you’re growing on the back of global price cycles you cannot control,” the report stated. 

Construction boom inflated by prices, not output

Between 2020 and 2024, Nigeria’s construction sector recorded a compound annual growth rate of 12.1 per cent. Projections show the industry could reach N25.72 trillion by 2025 and rise further to N35.38 trillion by 2029. Yet the report warns that the jump in market value is increasingly a reflection of soaring prices rather than an increase in the number of homes built, roads paved or commercial spaces delivered.

“The market’s expansion in value is heavily influenced by price increases, not by volume-driven growth,” the report states, noting that affordability is deteriorating even as total spending rises. Nowhere is this distortion more pronounced than in Lagos, which accounts for the bulk of national construction activity and absorbs inflationary shocks faster than the rest of the country.

Material inflation has been extreme. In 2015, a tonne of reinforcement steel in Lagos traded under N120,000 depending on size and origin. By 2023, it had climbed to N800,000. Within a year, the price doubled again to about N1.6 million, with 2025 showing further upward pressure. The increases are so high that builders now revise quotations monthly rather than quarterly, while estate developers have introduced clauses allowing for renegotiation before foundations are even laid.

For many real estate investors, what used to be a straightforward calculation (acquire land, build, sell) has devolved into a hedge against currency risk. 

Manufacturing shortfall meets policy drift

According to the report, Nigeria’s problem is not a lack of raw materials. The country has iron ore, silica, limestone, clay and bitumen deposits in abundance. But decades of underinvestment in processing infrastructure mean most of these inputs leave the country unrefined, while finished materials return at high cost.

Attempts to revive local steel production have been repeatedly derailed. The Ajaokuta Steel complex, once envisioned as the industrial backbone of West Africa, remains largely moribund after more than four decades, multiple administrations and billions of dollars committed. Import-dependent supply chains have since hardened around it.

The report argues that without a coordinated policy shift, including manufacturing hubs, incentives for local producers, stable regulatory frameworks, and support for sustainable building technologies, Nigeria will continue exporting raw potential while importing its own housing affordability crisis.

According to the report, Lagos adds an estimated 600,000 residents annually and remains the country’s economic centre, making it the bellwether of national housing conditions. The city, it stated, needs tens of thousands of new homes each year just to keep pace with demographic growth. Government-backed infrastructure projects, particularly the Lagos Rail Mass Transit system and major road expansions, have further boosted construction demand, pushing up land values and accelerating speculative activity.

But this demand increase is meeting a supply system riddled with inefficiencies. Import logistics remain vulnerable to global shocks; freight costs and shipment delays persist; and financing for developers has become increasingly expensive amid high interest rates.

The outcome is a bifurcated market where luxury developments remain attractive to dollar-earning buyers, while affordable housing supply shrinks as cost pressures push developers upward into higher-margin segments. For a country with a housing deficit of more than 20 million units, the imbalance represents a mounting social and economic risk.

Some of Lagos’s largest developers say they are rapidly approaching a “cost ceiling”, a point at which the price of delivering a unit exceeds what the market can absorb, particularly in the middle-income segment.

“You can’t sell a two-bedroom apartment for N70 million to N90 million and call it affordable. But if your materials are imported and the currency keeps sliding, you have no choice,” said one developer whose firm focuses on mid-tier residential estates. 

Builders are increasingly substituting materials where possible, switching from steel to timber in some instances or using more local alternatives in finishing. But the report cautions that without quality control and industry standards, such improvisation could lead to long-term structural problems.

To stabilise the sector, the report proposes a sweeping reform agenda including  boosting local manufacturing capacity, improving supply-chain logistics, encouraging investment through incentives, embedding sustainable construction standards and strengthening regulatory consistency. It further calls for focused government intervention to lower financing costs for developers and material producers

Lagos, it argues, could function as the reform laboratory. Because the city amplifies both the strengths and weaknesses of Nigeria’s construction landscape, meaningful changes there would ripple nationwide.

What remains uncertain, however, is whether Nigeria is willing to commit to the long-term investments needed to wean the sector off imports. For now, the construction industry is still expanding,but on a footing that economists warn is becoming increasingly unstable.

“If we do not address the structural vulnerabilities now, Nigeria may find itself building faster  and becoming less affordable than at any point in its history,” the report warns.