Prolonged cash crunch grounds real estate operations

dce babatunde fashola
dce babatunde fashola

Ismail Adetola is struggling to make ends meet with his wage as a construction site worker.  He could only afford a room apartment in Egbeda, a suburb of Lagos, where he lives with his wife and two children.

In his late 30s, Adetola struggles to afford the comforts he dreamed of growing up since he works on construction sites and earns barely enough to support himself and his family.

His financial struggles have become more severe due to the naira scarcity.

“This naira scarcity has really affected us. The naira is not in circulation and this has hindered us from being able to buy building materials. Those we are buying from are refusing transfers because of the network issues,” Adetola told our correspondent during a visit to the site he was working.

He disclosed that he cannot afford three square meals a day. According to him, most times they survive on cassava flakes, as there was no money to buy foodstuff.

“How can I be paid daily and use almost all the money earned to pay the point-of-sale charge? My children were kicked out of school last week because of this scarcity, and they are writing their tests.

“I have never experienced this kind of suffering in my life. I and my colleagues have approached the Bet9ja people for cash severally but to no avail, because they do not have as well. I really want to leave this country because I am tired.”

Adetola’s condition signposts what many construction workers are currently going through due to the naira scarcity, which has almost crippled the real estate sector.

When the Central Bank of Nigeria Governor, Godwin Emefiele, announced plans to redesign N200, N500 and N1,000 on October 26 last year, he claimed the policy would help to tackle inflation by withdrawing excess liquidity outside the financial system and curb vote buying during the general elections.

However, the policy has led to an acute shortage of naira notes in the country, making it difficult for Nigerians to transact their businesses. Many have been able to withdraw cash from their bank accounts as banks claimed they were cash-starved, rationing the little they have among customers.

The situation got worse when people took to the street in protest and even attacked banks and their staffs in different parts of the country.

The President, Maj. Gen. Muhammadu Buhari (retd), had to on February 16 ordered the central bank to reintroduce the old N200 note into circulation till April 10. But this has not eased the naira crisis.

Some state governments had to drag the Federal Government to the Supreme Court to challenge the naira redesign policy of the government.

 Supreme Court in its verdict on Friday said the old N200, N500 and N1,000 would remain legal lenders till December 31.

Examining the situation, the Director/Chief Executive Officer of the Centre for the Promotion of Private Enterprises, Dr Muda Yusuf, said construction workers and artisans were the worst hit by the policy as they collect their income in cash and were not used to cash transfers being promoted by the naira redesign policy.

He said, “This class of people is the biggest victim of the cash redesign policy. Many have no bank accounts. Therefore, sourcing cash to pay them is an issue. Even where they have accounts, redeeming the electronic payments into cash is a nightmare. Very little cash is available at the Automated Teller Machines channels and the PoS charges are atrocious, yet most of their needs, especially food and transportation are cash-based.”

The Chief Executive Officer of Pelican Valley Nigeria, Dr Babatunde Adeyemo, told The Punch “When there is limited liquidity in circulation, it puts a lot of pressure on land banking. Most of these banks are not prepared to accommodate the pressure of sudden online banking and transactions. Sometimes you send money via transfer and it does not reflect for weeks. This has led to some investors suspending their investments pending the issue being resolved.

“Also, most developers are trying to use their discretion to slow down production or construction until circulation commences, because even payment to those working on site, one would need to spend an additional amount because of the charge. Most of these construction workers live from hand to mouth, and they would want to withdraw cash on a daily basis. Hence, getting the cash out for them to eat is a tug of war because they would not want to use N3,000 to withdraw N10,000.

He maintained that the naira scarcity has increased the cost of production and payment of workers.

The President of the Nigerian Institution of Builders in Facilities Management, Dr Olufemi Akinsola, said that most of the estates under development had closed down because there was no cash.

He said, “Some of them (constructions) have closed down. Some are partially closed because nobody would want to work without getting money, and most of these construction workers are not from the official market but temporary labour.

“If you want to buy building materials, the PoS agents put charges because they believe that they are using naira to buy naira, and that cost of buying has added to the rise in costs of these materials.”

In the same vein, a former National Secretary of Nigeria Institution of Estate Surveyors and Valuers, Offiong Sam Ukpong, said the effects of the naira redesign were enormous.

He said, “How can you buy naira with naira? Sometimes, the cost is up to 30 per cent. What is the propensity to save? It is zero. The little income and savings people have been putting together over the years are spent on consumption and inflation has whipped out any left over.

“The middle class is whipped out and transferred to the poverty class. So, payment of rent is difficult and the default in payment is high. Developers are suspending their housing production until further notice because the cost of building materials is prohibitive and affordability is low.”

He expressed concern that redesigned naira notes were not available.

“The CBN has made the new naira scarce such that for an ordinary person to get it, you will need to buy it. What the citizenry is going through is hellish and that can only happen in Nigeria.”

The Chief Executive Officer of Riel Homes, Kolade Adepoju, asserted that artisans have been hit by the scarcity of local currency.

He said, “It is affecting our workers and our staff. We have had times when our members of staff cannot come to work because of the paucity of funds and in the long run, it is affecting the productivity of the people working in the industry. It will, in turn, affect the cost of production and buildings.

 “Some building artisans in the construction industry are still alien to online money transfer or cashless policy. They prefer to collect cash on site to enable them to pay bus conductors and hawkers.”

 The cash crunch and fuel scarcity in the country have hindered the operations of building materials suppliers. Many of the suppliers were owed as a result of the liquidity challenges, slowing down construction activities.

“Income from building properties is dwindling as tenants whose payments are due are taking refuge in the economic hardship to postpone their obligations.

“However, the current situation has yielded some positive outcomes. Construction workers have jettisoned their nonchalant attitude toward the cashless policy. They have been forced to learn methods of online transactions, gaining protection against pickpockets. “

The Chief Executive Officer, Seven30 Real Estate Limited, Oluwole Fapounda, disclosed that “We pay our builders N50 per block because they construct per block. So, if at the end of the day, they finish working and PoS agents take almost half of the money. It is not worth it. It has put a lot of construction work on hold because of the inability to commute to the site.

“However, it has increased the value of the naira and has enforced stability in the real estate market because land appreciates.”

Speaking on the way forward, Fapounda advised that innovation was the way.

He said, “Many people now do bulk withdrawals by partnering with people they trust. Hence, instead of them withdrawing in bits, they share the burden of the charge of each withdrawal among themselves.”

Also, the Co-founder of Estek Cosmopolitan, Bernard Okonji, argued that the naira redesign has had an adverse impact on the construction industry.

He said, “This scarcity has skyrocketed the price of construction, coupled with the logistics aspect of it because the naira redesign is also affecting payment of fuel because most insist on cash payment.

“I was talking to my furniture guy who needed to buy some materials recently. Upon getting to the market, the sellers refused cash transfers.  He insisted on cash and this comes with additional cost. I had no choice but to bulge.”