Though inflation is said to have recorded quantitative easing in the first quarter of this year, the housing market in Nigeria continues to reel under the dual burden of high construction costs and tight monetary policies. These conditions are deepening the housing crisis in the country, raising serious concerns about supply and affordability.
As of February, the Central Bank of Nigeria (CBN) raised its interest rate to a record 27.50 percent, a move aimed at curbing inflation but one that has severely impacted housing and construction finance.
Despite a projected drop in inflation to 17 percent in 2025 — down from 34 percent in December 2024— the cost of building remains high due to currency depreciation and persistent forex scarcity, with the naira potentially weakening to ₦1,800 per dollar on the parallel market.
Construction budgets are now facing cost overruns of up to 25 percent year-on-year. Developers and homeowners are navigating significant uncertainty, with price projections showing continued hikes in core materials.
For instance, the price of steel bars, heavily reliant on imports, is expected to jump from ₦480,000–₦550,000 per ton in 2023 to between ₦620,000 and ₦720,000 by 2025.
Sharp sand and granite are also projected to increase due to fuel costs and quarry licensing delays, with sharp sand potentially reaching ₦50,000 per ton and granite as high as ₦60,000 per ton.
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Nigeria’s $2.7 trillion National Development Plan (2021–2025), which prioritizes infrastructure, is driving up demand for building materials. While this may spur growth, it also risks inflating costs unless carefully managed. Potential import duty waivers for local manufacturers could offer relief, but global pressures may continue to inflate the price of imported materials by as much as 20 percent.
Cement remains central to Nigeria’s construction sector, with demand projected to hit 60 million metric tons by 2025. New production capacity from industry giants like Dangote and BUA could ease supply pressures, yet high diesel prices at ₦1,200 per litre continue to push production costs upward. Government intervention through price caps may be required to prevent speculative spikes.
Labour costs are rising rapidly due to a shortage of skilled workers, worsened by brain drain and insufficient vocational training.
Construction Cost Index revealed that by 2025, the sector will require an estimated 15 million skilled workers. Daily wages are climbing, with bricklayers in Abuja expected to earn between ₦10,000 and ₦12,000, up from ₦8,000 in 2023.
Electricians and crane operators are also demanding higher pay, with similar upward trends observed in Niger and Kaduna.
In the housing material segment, reports show that imported items like aluminum roofing sheets and ceramic tiles are seeing significant price increases as much as 46 percent driven by forex challenges. Aluminum sheets could rise from ₦4,200 to nearly ₦6,000 per sheet, while ceramic tiles may reach ₦9,500 per square metre.
To survive the coming squeeze, developers are being advised to pre-purchase materials, adopt modular construction methods, source labour regionally, use alternative materials like recycled plastic bricks, and explore government auctions for seized goods at official exchange rates.
Nigeria’s housing sector is already under strain, with an estimated 20 million-unit deficit.
According to analysts, the affordability crisis is worsening as costs soar and access to construction finance remains restricted.
They argue that monetary policy is partly to blame as “Tight interest rate regimes make borrowing expensive, especially for developers and mortgage seekers. This directly affects how much housing is produced and who can afford it”, Tunji Igbalaye, a real estate expert said.
Globally, the United States housing market offers a cautionary example. Despite the Federal Reserve’s rate cuts, housing costs remain stubbornly high. The shelter index, which contributes significantly to US core inflation, rose 4.0 percent year-on-year in March. This suggests that without addressing supply constraints, rate cuts alone may not reduce housing costs.
In Nigeria, the situation is compounded by high borrowing costs due to interest rates and inflated material prices from forex volatility.
Igbalaye mentioned that this is a two-sided choke. “High interest rates mean expensive loans, and at the same time, imported materials are costing more. It’s killing supply,” he said
Analysts argue that inflation targeting must go beyond rate hikes.
“If the government is serious about tackling inflation, then the cost of housing must be addressed. You can’t separate inflation targeting from housing supply and affordability”, Edward Iyangete, a real estate analyst in Abuja, said.
With developers slowing or halting projects and mortgage uptake falling, the crisis threatens to worsen, especially for young urban Nigerians.
Experts recommend a range of interventions ranging from tax incentives for developers to subsidies for affordable housing and policies that localize building material production.
There are also growing calls for the CBN to consider more flexible interest rate policies that support real sector growth, particularly in housing.
“Housing is not just a social good; it’s a macroeconomic stabilizer. We cannot keep treating it as a luxury,” Iyangete stressed.
