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Monday, August 8, 2022

Effects Of Russia-Ukraine War On Construction Cost

The Russian invasion of Ukraine has had far-reaching economic effects on nations all over the world, with the construction industry in Nigeria bearing the brunt of the war’s negative effects.

Experts in the business recently met in Abuja for a roundtable to discuss the 2022 Appropriation Act and how it affects the industry. They agreed that logistics costs have risen dramatically since the war began.

As a result, they encouraged the government to revise the appropriation legislation and provide the construction industry with a fiscal policy that would not postpone or derail large 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.

“Prices of important basic materials jumped several points over their original prices between January and March this year,” he said.

“Now, the current rise in the cost of cement in the last two years, as well as the recent doubled cost of diesel; the cost of explosive materials, which has nearly tripled due to a shortage of logistics to import from Ukraine and other areas of the world, have had a detrimental influence on the industry. In a standard contract, this value (variation cost) is set at 5%. However, the current state of the sector dictates that up to 25% is required for some active initiatives.”

AIHS 2022

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.

“How do we push government to offer us economic policies that will make our effort easier?” Mr Shonubi asked.

“Nobody anticipated Russia’s invasion of Ukraine, and we all know how damaging it has been to our sector.

It has had such a negative influence on the global logistics system that shipping and haulage costs have both increased. When contractors submit a claim for variance, how would our clients interpret it?”, he stated further.

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