Nigeria happens to be one of the countries in Africa, blessed with numerous natural resources which have never translated to the well-being of its citizenry.
Or how else does one explain a situation where the byproduct of your natural resources sells cheaper in your neighboring countries?
Such has been the case of cement, a construction material that is a powder made of a mixture of calcined limestone and clay, used with water and sand or gravel to make concrete and mortar types.
Limestone and other components that combine with the making of cement, according to experts, are sourced at different places within the shores of this country, Nigeria.
With that in mind, common sense should have dictated that cement be cheap, at least, for local consumption. Unfortunately, the reverse is the case.
Cement is used both in structural and civil engineering works. It is used to prepare cement mortar; used for cement concrete; to build fireproof and thermal proof structures, hydrographic and frost resistant structures, and chemical proof structures; to construct cement concrete roads; for aesthetic structures, the ones we call fancy blocks, and several others. Even in our little corners at home, we use it for some small parchment works. It is a binding material that is used in different forms of construction.
From the above, it would not be wrong to say it is an indispensable part of our lives, especially in this part of the world where blocks constitute the bulk of construction.
Being an indispensable part of our lives implies that what affects it, directly or indirectly affects us. Hence, this write-up.
In the past few years, the price of cement has been on the increase, forcing some pundits to question the rationale behind it. However, no tenable or satisfactory response has ever been given, except for the regular dollar rise and cost of infrastructure. Currently, the price of a 50kg bag of cement stands at between N5,200 and N5,400, depending on the make and location of purchase.
However, when the CEO of BUA Conglomerate, Abdulsamad Rabiu, recently announced a reduction in the cost of cement to N3,500 (ex-factory price), effective 2nd October 2023, many Nigerians felt relieved.
However, while admitting that it was a good development, most professionals received the news with mixed feelings. The reasons will be explained in detail below as PropertyPrice sought the expert opinion of a renowned building technologist, former HOD, Department of Building Technology, Director of Research, Yaba College of Technology and founder, Nigerian Institution of Builders in Facility Management (NIoBFM), Builder Olufemi Emmanuel Akinola, on the implications of the price reduction by BUA and what Nigerians should expect.
Akinola explained that it is not yet Uhuru and his reasons do make a whole lot of sense. Excerpts:
The first thing to look at is the impact of the price reduction we now have. BUA Conglomerate produces 11 billion metric tons of cement per year and they are hoping to start a new production line of about six billion metric tons annually by December 2023, making a total of 17 million metric tons.
The total cement requirement in the country is between 37 to 38 billion metric tons per year. Dangote alone produces more than that. The total production of Dangote is 51 billion metric tons annually both within and outside the country.
In Nigeria alone, Dangote produces 35 billion metric tons. Then you have Lafarge with six billion metric tons. You also have Ibeto Cement. If you add all the productions together, it is more than what we need.
But surprisingly, when materials are more than available in the country, we are supposed to have a glut and experience low prices, but that never happens.
It gives the impression that more than half of the materials being produced are shipped outside the country. They are not sold within the country. That is why we are still experiencing a scarcity of cement.
BUA now is reducing from N4,450 to N3,500. When he initially reduced it to N4,450, the price of cement then was about N5,400. Now that he’s reduced to N3,500 (ex-factory price), it would be selling for between N4,450 to N4,500 in the retail market. Even if you look at Dangote, they will tell you that their ex-factory price is N3,500 or N4,000. It is other costs that made it to get to N5,400.
The BUA Conglomerate would have reduced about N500 from the cost of cement. But the issue is, will they be able to meet the needs of the Nigerian populace? The total annual production of BUA is about 11 billion metric tons and the total requirement of Nigeria today is about 38 billion metric tons per annum. So, it is just less than half of what we need that they are producing. And we are not even sure that from that same quantity, they are not exporting outside the country.
You have not even factored in the middlemen saga, a situation whereby somebody will mop up all the products on the ground and try to create artificial scarcity. Later, he will release it and begin to sell it at an exorbitant rate. It is something that can happen in Nigeria, so it is not yet eureka until other conglomerates key in into that price reduction initiative.
If all of them come together and say okay, we are doing this, that way, should such a thing as artificial scarcity arise, they would know whom to hold responsible.
The major problem is that the government is not playing the oversight role they are supposed to be playing. Ordinarily, if a company is being established in the country, you will give them a tax holiday because you expect some benefits from them outrightly. You will give them some form of rebate and when they start producing, probably five years after, you now start taxing them.
The essence, however, is that when they give you a tax holiday when you produce, you produce for the needs of the country. Not for external use or exportation. What they are producing in this country is not even used in the country, so what are we talking about?
BUA has a good mindset, but there is this insinuation that okay, he is trying to create a market for his new line of production which will kick off in December, so that there won’t be a situation where there will not be a market for the product when they push it out.
Now, everybody is looking for BUA, even professional platforms for BUA distribution have increased, putting pressure on the demand for BUA products so that when they start the new product line, it will not be left unattended to.
Here is where it gets interesting. The Dangote that I know, a monopolistic person by nature, will frustrate BUA’s plan. He will frustrate the efforts of BUA. What if he decides to remove what he is putting into the market temporarily for one or two months, BUA’s product cannot service the country. Especially now that the Federal Government has decided that they want to start using cement to construct roads, which has not been the practice before now; the implication will be more demand for cement. This will lead to more scarcity as the case may be.
The other manufacturers like Ibeto, Lafarge, and the rest, should be encouraged to toe the path of BUA. One thing we have been shouting about for a long time is that the prices of cement are artificial. It is not the actual market price because all the materials used in the production of cement are sourced here within the country. No imported content. So, there is no need for dollar content in what they are selling to Nigerians.
The excuses they are crying about are the cost of fueling, the cost of infrastructure, and other things. That is why they claim to be increasing the price. However, some of these companies provide their sources of energy. When they are constructing their factories, they build alongside a plant where they generate electricity and energy for their production. They are not even getting it from the government’s national grid. They just go about telling us lies about infrastructural facilities. After all, if you are the owner of the energy plant, within some time, you will recoup the cost of the energy.
So, they can reduce it if they want to reduce it, ab initio the prices are way beyond market price.
The Builder also spoke about the much-talked-about low price of Dangote Cement in Benin, Kenya and Ghana:
Yes, it has been insinuated that in the Republic of Benin, the cost of a bag of Dangote cement is about N2,800 but Dangote himself has come out to renounce it as a lie. But of course, you also know that people will not just say something like that without an iota of truth therein.
I know that sometimes people in the border villages of Benin Republic buy their cement from the Republic of Benin. If you go to Owode-Idi Iroko, you will find Republic of Benin cement there, far cheaper than what we are buying here. And Dangote will go to Ghana and Kenya to produce cement, sell it cheaper to them. But because he had access to the president in Nigeria during the Buhari regime, it is what he wants them to do for him.
It is just like what DSTv is doing when they will unilaterally increase their charges, when the public shouts, they will go to the National Assembly, bribe them with one thing or the other and that will be the end of the matter. That is what Dangote is doing, I have been a victim of it.
When Dangote wanted to open his cement factory at Ibeshe, he packed all the professionals together for a site visit. He gave us food and when each of us was going, he gave us brown envelopes of N100,000. For what? And people collected it. So, how would they have the mouth to talk against it? He bribes his way all through and nobody can raise his mouth against it. Even if you try raising your voice, you will be the only one in the entire marketplace shouting and nobody will listen to you.
The Yabatech Director of Research also echoed the views of some Nigerians that should Dangote crash the price of his cement, every other manufacturer will be left with no choice but to follow suit.
“Dangote is the problem here. If Dangote alone crashes the price of cement, all other manufacturers will follow suit. The BUA initiative is good, but he can’t influence the market.”