Road Projects Drag As Forex Hike Raises Bitumen Price By 150%

Most road construction projects across the country are lagging behind while some are currently suspended as foreign exchange (forex) volatility has triggered a hike in the price of bitumen, a critical component in road construction, LEADERSHIP learnt.

This development has led to adjustments in the funding of road construction projects, with some projects having their delivery dates postponed as a result. Bitumen, a major component used in the production of asphalt, has increased by 150 per cent within a period of seven months, specifically between August 2023 and March 2024, and the price hike continues.

Checks from LEADERSHIP showed that 20 tonnes of bitumen, which sold for N854,375 in August 2023, now costs over N2 million in August 2024.

Road contractors are also concerned about foreign exchange differentials, rising prices of cement, diesel, granite, and crushed stones.

While some contractors have abandoned construction sites, others are engaged in tough discussions with their clients about the need to renegotiate contracts and reconcile the variations in material costs.

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An impeccable source at Lagos Public Works disclosed that the cost per tonne of asphalt as of August 2023 was N70,000, but it escalated to N155,000 in March 2024.

Given the inflation rate in the price of bitumen between August 2023 and March 2024, the source said, 20 tonnes of the product cost N854,375 in August; N1,121,175 in September; N1,082,775 in October; N1,301,000 in November; N1,351,000 in December 2023; N1,366,000 in January 2024; N1,770,280 in February, and N2,008,330 in March, respectively.

Various factors such as inflation, volatile foreign exchange, fuel subsidy removal, government budget deficits, and reliance on imported materials have been identified as reasons for the rising cost of bitumen and other construction materials.

Meanwhile, the Minister of Works, David Umahi, warned contractors engaged by the ministry for federal road projects that the government would not pay for variations on any project delayed by the contractors.

Speaking on the road construction sector, Umahi reiterated his stance on the use of either asphalt or concrete in the construction of federal roads across the nation, stressing that there remains no controversy over the issue. He stated that each technology has conditions attached to its deployment on Nigerian roads. He reinforced his stance on the six main policies of the Ministry of Works to guide the road construction sector in the country.

According to Umahi, clarification became necessary as several factors have been raised regarding the alternative of concrete technology, though “all things are not equal and can only be understood by professionals and not by people who have no knowledge about them.”

The national chairman of the Nigerian Institution of Highway and Transportation Engineers (NIHTE), Saidu Hassan, maintained that the rising cost of bitumen would impact the cost of road construction.

Hassan said that, to date, the price of bitumen has witnessed about a 150 per cent increase, having risen from N1.4 million per metric tonne in December 2023 to N1.77 million in the current month. He stated that the government, as a major stakeholder in the use of bitumen, should intervene to boost its supply to deliver road projects across the country.

FOCI president Vincent Barrah emphasised the appeal, noting the relentless inflation of construction materials and the rising price of diesel, which has plunged the industry into unprecedented hardship, jeopardising the viability of countless projects and threatening the livelihoods of millions of workers.

Barrah highlighted that the costly construction materials, including cement, steel, gravel, and asphalt, have significantly escalated project costs, rendering industry players insolvent.

The skyrocketing price of diesel, a critical fuel source for construction machinery and vehicles, has further compounded the financial burden on companies, exacerbating their already precarious financial situation.