How Construction Professionals can Navigate the Current Inflationary Trends

In recent times, the inflation rate in Nigeria has seen a significant increase, impacting construction companies as essential materials have become overpriced and supply chains hugely impacted making it challenging to source necessary construction materials. 

Prices for materials like Rebars, Cement, and Aggregates have risen by up to 80% in the last 6 months. With ongoing supply chain issues from accumulated materials delivery from Covid-19 pandemic, new challenges from the floating of the Naira, fuel subsidy removal, as well as the surge in government-led infrastructure projects, the construction industry is facing unprecedented pressures.

What does this mean for the construction industry?

The intermittent price increases is having a major impact on construction projects, making it difficult for contractors to cover costs, especially on on-going projects under fixed-price contracts, but also complicating the bidding process due to uncertain future price increases. This leads to more abandoned projects, funding difficulties for new projects, and little or no profit margins for contractors.

Ways to address inflation

To manage these challenges, construction companies can take these immediate steps:

Exploring risk-sharing arrangements with clients:

Building contractors should leverage this moment to engage in transparent discussions with clients regarding the possible challenges and suggest risk-sharing within contracts - this is applicable to both ongoing and upcoming projects.

Adjusting materials procurement processes:

While ordering materials directly to the project sites may seem more convenient, it is no longer the most practical approach. Building contractors should consider paying ahead for materials and budgeting for storage as needed. This proactive measure might result in cost savings compared to likely changes in future material cost.

Being flexible with project timelines:

Due to logistical challenges and occasional delays in material deliveries, the current reality may necessitate making room for adjustments to project timelines for both existing and upcoming projects.

Factoring inflation into the bidding process:

It is crucial at this time to accurately assess the potential increase in costs and incorporate this into your bidding process. Rather than succumbing to the pressure of losing a bid, prioritize what it will take to successfully complete the project and maintain a decent margin.

Building strong relationships with suppliers:

The rising costs and scarcity of construction materials pose challenges in securing necessary supplies. Engaging suppliers as stakeholders in your bidding process can ensure their commitment to support you throughout the project phase.

MaterialsPro is a platform that offers on-demand eProcurement and supply chain solutions for construction companies, facilitating the seamless procurement of bulk building materials. Contact us today to learn more about how we can support your construction projects during these challenging times.