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Cement everywhere, but scary prices

With Nigeria’s giant strides in cement manufacturing, it is believed that the commodity won’t be costly. But it has remained out of reach for many because of its soaring price, BUKOLA AROLOYE 
writes.

What the Nigerian cement industry has witnessed a monumental turnaround is not an exaggeration. It is presently valued at over $2 billion, a testimony to the country’s position as a leading manufacturer of the product. This has been accentuated by the activities in Africa the country’s leading cement manufacturer, Dangote Cement Plc. Dangote Cement, across its plants scattered on the continent, accounts for 46 million metric tonnes of the product across its African operations, to place it as the leader on the continent. Locally, of the 33 MMT required, it accounts for 29. 25 MMT.

A breakdown of its operation shows that the Ibese plant produces 12 MMT/A, while its Obajana plant in Kogi State, which is the largest in Africa, produces 13.25MMT/A of capacity across four lines. Its plant in Gboko Benue state has four MMT/A, while there are moves to build new factories in Ogun State with a capacity of six million metric tonnes, and another one in Edo State with capacity of six million metric tonnes.

Closely followed is LafargeAfrica Plc, manufacturers of Elephant Cement. Lafrage’s combined production from its three plants in Ogun State, one in Gombe, Cross Rivers and Rivers states equals 12million metric tonnes per annum. While its three plants in Ogun produces 4.5million metric tonnes per annum, one million metric tonnes and 2.5MMT are produced in Gombe, Cross River and Rivers State.

BUA cement also adds to the production capacity in the country, producing eight million metric tonnes, a feat attained with its recent opening of the plant in Edo State.

The combined efforts of the three producers has since led to the 33million metric tonnes capacity in the country, surpassing the local requirement by an excess of almost four MMT/A.

Given the above, and going by simple economic theory, it presupposes that cement should be a readily affordable commodity by all locally. But such assumptions have been dashed as the price of cement, rather than coming down, has continued to rise steadily, hitting an all time high of N2, 700 per 50kg bag.

Even more appalling is that during rainy season, cement prices, which traditionally crashes, has remained high this year. Consequently, as a result, prices of other building materials such as concrete blocks, plumbing materials and others have increased drastically. The high cost has made it impossible for many Nigerians who had hoped to become house owners.

A concrete block maker, Mr. Michael Oladeji, said it is more difficult for Nigerians to now build their own houses due to high cost of cement. “I have been in the business of block making since 1981 up till now.  I witnessed gradual increase of cement. At a time, we were buying it N25 per bag and blocks were sold between N26 and N32 for six and nine inches respectively. The situation was better then but now cement is sold between N2, 300 and N2, 700. Blocks are now sold for N180 to N200. How do you expect people to build house? He asked rhetorically.

Another operator of a block making industry, Mr Quadri Lawal, explained that the fluctuating price of cement is taking a toll on sales. This, he further explained, is why the price of blocks keeps fluctuating. “We had expected that now that we have many companies producing cement and in large quantity, there would be competition which would force down the price. The opposite is the case. I do not understand why cement cannot be sold for N800 per bag. Dangote is producing in large quantity, likewise Lafarge, so why can’t they bring down the price?” he queried, adding that whenever cement price increases, it affects the price of other building materials which now makes it difficult for average Nigerians to have a roof on their heads.

Various reasons have been adduced for the high cost of cement, with cement manufactures arguing that the harsh operating environment such as lack of constant electricity, high cost of fuel, bad road network, amongst others, are hindrances to their operation.

With the price of fuel and diesel now sold for N145 and N200 as against when it was N11 and N30 per litre, transporting cement from the factory to the city and distributing to wholesalers have become a herculean task. Also, the devaluation of the naira, scarcity of foreign exchange, multiple tax, and inconsistent government policies are additional reasons which are affecting the cost of cement.

Dangote cement, reacting to the increase in cement price, had said in a statement that “we have previously indicated that we would increase the price of cement to offset increase in costs caused by devaluation and other cost factors. The present situation has regrettably forced us to increase the price of cement by N600, bringing the price back to levels only marginally above what they were before we announced a price decrease in September last year.”

Some stakeholders are of the opinion that local manufacturers are taking advantage of the ban on importation of the commodity, and making a kill in the process. The Vice-Chairman, Cement Sellers Association (CSA), Mrs. Falo’omo Arike, said though government’s decision to ban importation of cement was done in good faith, especially to grow the local cement industry, it has been exploited by local manufacturers, to willfully increase price at the slightest market adjustment to their production. Falo’omo, in buttressing her position on this, had explained that within the first quarter of the year, prices were increased about five times.

“A bag now is N2, 600; in some other areas they sell for N2, 700, as wholesale price. I wonder how much they expect us to sell per bag. The people working on sites have stopped working since the increase in price. Our sales have dropped because all our customers, mostly property developers, are running away from price variations and incessant increment,” she lamented.

Similarly, a cement dealer in the Olodi  Apapa area of Lagos State, Mr Idris Saliu, accused  local manufacturers of adding more pains to the ones Nigerians are currently going through. He said in spite of the challenges facing businesses in the country, the price of cement should not have been as high as it is.

For him, since the product is produced locally, money saved from payment on duty and other importation expenses would have helped to reduce the cost of the product. He wondered why goods produced locally and in large quantity is now costlier than when such goods were being imported.

“We had thought that now that we have more cement factories, the price would have come down but reverse is the case. What we were made to believe is that when a product is produced locally, it is cheaper than when such product is imported. So, how come cement’s price is on the high side? Now, it’s difficult for people to build house, which is affecting our sales too. I believe the manufacturers are only interested in making money rather than the interest of the people and that of the economy,” he said.

Manufacturers of the product, however, said they are making efforts to bring down the price. For instance, during a visit to the Vice President, Prof. Yemi Osinbajo, the Chairman of BUA cement, Alhaji Rabiu Abdulsamad, gave assurance that the price of cement will soon come down.

He nonetheless explained that cement production requires quite a lot of energy, which takes quite a significant part of the cost of cement production. This, he said, may have been attached to the price of diesel, but price of low pour fuel oil (LPFO), also needs to be factored in.

Abdulsamad explained that the other cement plants scattered all over the country like may be the southern part of the country are using gas which is actually cheaper than diesel. He, however, said in a place like Sokoto, for example, LPFO, which is more expensive than gas, is what is used in powering their plant as the product has to be transported either from Lagos or from Kaduna refinery, subject to its availability.

“But I can assure you that the three major companies producing cement in Nigeria are working very hard to see that the price of cement comes down in the very near future. Of course, the foreign exchange aspect also affected costs of production dramatically. That, as we all know, was a big issue. Now, that has improved considerably. So, I think we will see quite a reduction in the very near future,” Abdulsamad had assured.

How this will be achieved is yet to be seen, given that more than two months after this assurance, the price of cement has still remained high.

 

The post Cement everywhere, but scary prices appeared first on The Nation Nigeria.

This post was syndicated from The Nation Nigeria. Click here to read the full text on the original website.

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