With high inflation affecting the cost of goods and services, the facility management sector is reeling under the pains of increased spending on energy and other essential services in estates and commercial facilities. Operators are adopting cost saving measures including alternative energy sources to cut down expenses, rationing of key offerings to stay afloat and maximise profit, writes VICTOR GBONEGUN.

Following the poor state of the economy, property owners and managers in residential and commercial facilities have begun to increase service charges in line with current economic realities.

The Guardian gathered that between December 2023 and February this year, there has been about a 40 per cent rise in service charge as operators capitalise on high volatility in the foreign exchange market, increased labour cost and persistent inflationary trends to jerk up charges.

Nigeria’s inflation figure released by the National Bureau of Statistics (NBS) shows that the inflation as of January 2024 stood at approximately 30 per cent, while the exchange rate of dollar rose to N1, 600 as at last week.

The development meant that facility managers reviewed charges taking into cognisance the state of components and current replacement value of items that must have been subjected to wear and tear. Some of the imported components must have been affected by price volatility and inflation.

In residential areas in Lagos, Abuja, Kaduna, Port Harcourt, and other urban areas, homeowners and tenants in gated estates pay for management and maintenance of services. It includes repairs of common facilities, beyond those being personally used by individual residents in their apartments.

The services rendered include but are not limited to security, cleaning, repairs, replacements, property management, heating and lighting in common spaces, insurance, utilities, garbage collection, lawn maintenance and other services agreed to be provided by the landlord, but subject to reimbursement by the tenant.

It was learnt that increase in price of diesel, which presently sells at N1,350 to N1,450 per litre has sparked feelings of frustration among many property managers and tenants. In some estates the absence of proper agreement/sit-at-the-table to resolve contending problems between estate management and the tenants tend to result in fisticuffs as there have been cases of such bickering between estate management and tenants over inflated service charges in Lagos areas.

The charges differ from one estate to another depending on the services provided. In specific locations such as ‘1004 estate’, Banana Island, Ikoyi and Haven Home estate, the charge ranges from N500, 000 to N1.5 million.

The Guardian gathered that in some of the estates and commercial facilities where tenants pay N500, 000 before, they now pay an upward rate of N1.5 million yearly in service charge. Those who can’t afford the fees demand for a scale down of services, while those who can pay are offered full services based on their budget.

Confirming the development, the President, International Facility Management Association, Nigeria (IFMA) Mr Lekan Akinwunmi, said before now, when a projection of N2 million yearly is made for facility management, the entire money may not be expended. However, he said with the inflationary trend, when N6 million is projected, there is no certainty that the amount will run through the year without any cost variation.

Akinwunmi, an estate Surveyor and Valuer, emphasised that the high cost of diesel alone has taken a negative toll on the facility management sector.

“The diesel aspect of it can only be reduced. For instance, if you are consuming eight hours on diesel before, it can be reduced to six hours. But in some commercial areas, nothing can be done as all systems have to be on power. That means you can’t cut down expenses on diesel/power and it also means you will be spending more on diesel.

Akinwunmi cited an instance of a facility, where they spend N250, 000 weekly on diesel and can’t cope with that. The managers had to look for alternative energy like an inverter that can be used to power smaller equipment, while the generator was dedicated to major work. If an essential item is N200 now don’t be surprised that in the next two months, it might have increased to N500.

On the way forward, he said managers now must be more strategic in thinking by deploying cost-saving measures, particularly reducing the number of hours to put on power.

“For instance, there are no ways you can do without water in facilities like powering pumping water or water treatment plants. That means, you have to look for more storage in some areas where it is needed to store more water that will last for more days. If there is no public light, use a generator to pump and store water and eliminate the automatic system. When you reduce the hours to run a generator, the challenge should be open to everyone,” he said.

He also advised managers to educate tenants and occupants that the light they don’t use in their apartments must be turned off to reduce consumption level, adding that everyone has to be conservative with available resources.

He admitted that the service charge has created a lot of problems between tenants and managers. The inflation is about four times of what was projected for. “Yearly, there is a projection, when you project that you are going to spend N5 million and by February you have already finished the whole amount projected for the year. Then, it is a crisis at hand.

“That means your budget for the year can’t work. The way out is to have a transparent accounting system, where everyone sees what you are buying and what is consumed. Look for alternatives like solar and inverters to augment short periods when diesel powered generators will not be operating. Currently, nobody can guarantee 100 per cent success on service and that also means if occupants want 100 per cent service, they have to pay more.”

Former Chairman, Nigerian Institution of Estate Surveyors and Valuers, Lagos Branch, Mr Rogba Orimalade, noted that all sectors are going through hard times, especially the services industry, where security guards, cleaners, and refuse disposal trucks operate.

He argued that within one-year cost of service charges escalated by 40 to 50 per cent for maintenance of generators, new wages for service providers, artisans, and cut in salaries of security workers.

To him, any property owner that has not tinkered with their service charge delivery, the property must be suffering. He said the rationale for the increase includes poor power supply, high price of petrol/diesel, cost of operating waste disposal vehicles, devaluation of the naira, which impacts machines imported or its components, adding that once there is escalation of the dollar rate, the cost of importation of lifts will change and will affect budget projections.

“If those amounts are changing every week and month, what does the facility manager do? ” he queried. Generator price has increased by 50 to 100 per cent in the past one year. There has been an astronomical increase across the board, which has impacted service charge. Most service charge in estates and even commercial development is usually on yearly or bi-yearly basis.

Then only a few places pay monthly, but now the situation is changing as facility managers are reaching out to occupants of property to be paying monthly or quarterly because prices of things are escalating by minutes,” he said.

He lamented that facility managers are taking a lot of unpleasant measures now. For instance, he said many tenants have accepted the fact that they can no longer have power from 9a.m. to 5p.m., warning that the development may affect productivity in the long run.

Senior Consultant, West Norwood Realty, Osagie Alfred, argued that whatever happens in the economy goes a long way in impacting service charge in estates. He explained that since the sector is a part of the society, it is not immune to economic instabilities and price variations.

According to him, a major trigger of the hike in service charges is the cost of diesel, and labour, which is increasing daily. “The more prices of goods keep increasing, the more it affects labourers, cleaners, artisans and others, who work in the facility management industry.

“This set of people will in turn demand higher wages to take care of themselves and families. When this happens, the amount charged tenants in estates would also increase to meet their demand and maximise profit,” he said.