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Ibeto Cement: Claims of Cement Glut Misleading

28 Dec 2012

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Ibeto Cement

THISDAY SPECIAL RELEASE


Crusoe Osagie

Contrary to the recent claims by the Dangote Group that the nation’s cement market has been flooded with imported products, resulting in a glut, the Ibeto Group, the owners of Ibeto Cement Company Limited, has stated that there is no way the volume of cement which is imported by their company can induce any form of surplus as alleged.

In a statement issued by Ibeto Cement, the company clarified that a glut is an economic phenomenon that results when a market is excessively supplied with a particular product and the first evidence of such a situation is the drastic reduction in the price of the product and this has not been the case with cement which is still more expensive in Nigeria than in any other nation in the world.

The group, in a statement signed by its Executive Director of Strategy and Public Affairs, Dr. Ben Aghazu, noted that through a consent judgment entered by the Federal High Court to settle the dispute between the Federal Government and Ibeto Cement Company in suits number FHC/ABJ/CS/400/2006 and FHC/ABJ/CS/496/2010, Ibeto Cement Company Limited is currently the only authorised importer of bulk cement in the country.

Explaining how the consent judgment came about, Aghazu said the Federal Government had issued a guarantee to Ibeto Cement Company Limited that the company’s proposed cement bagging plant in Bundu Ama, near Port Harcourt, shall operate for a minimum period of ten years from commissioning so as to meet the strict funding requirements of the lending institutions.
The Federal Government had also encouraged the company with appropriate incentives such as reduced duty on imported equipment and a waiver on value added tax (VAT).

“However, in September 2005, a mere three months after our gleaming new plant began operation, Dangote Cement used its reach in the Federal Government to unjustifiably and unexplainably close down the operations of the Ibeto bagging plant,” he alleged.
He said after various efforts to appeal to the Federal Government failed, the company went to court in 2006 to seek justice and the dispute was finally settled out of court after extensive negotiations involving all relevant federal ministries and departments and agencies of government.

“In the judgment order, the Federal Government acknowledged that the Ibeto Cement Company Bagging Plant was unjustifiably closed down. The government also acknowledged the enormous losses suffered by Ibeto Cement Company from the unjustified closure from 2005 to October 2007,” Aghazu said.

Referring to the judgment, he added that part of the order stated that Ibeto Cement Company Limited shall be allowed to import 1.5 million tonnes of bulk cement per annum for the period October 1, 2007 through September 30, 2017 in line with the Federal Government’s guarantee conveyed in the Ministry of Industry’s letters, reference HMSI/EXT/CORR/VOL.X/350 of June 5, 2002 and HMSI/EXT.CORR/VOL.XII/127 of November 29, 2002.

With this judgment making Ibeto Cement the sole importer of cement into the country for the specified period, the company argued that 1.5 million tonnes, which is less than 5 percent of the annual cement supply to the Nigerian market, cannot create a glut.
Aghazu accused the Dangote Group of trying to influence the Federal Government to, in effect, invalidate the essence of the court order that authorised Ibeto Cement to “import this small amount of cement until September 30, 2017, by raising the duty and other taxes on imported cement so as to make imported cement more expensive than Dangote Cement.

“We do not believe that the Federal Government should be misled into doing this, because doing so will go against the spirit of the out-of-court settlement agreement between the Federal Government and Ibeto Cement, especially since Ibeto Cement, as stated, is currently the sole importer of cement”

In order to position their proposed cement plant to be built in the South-south zone to operate monopolistically, Dangote Group, Aghazu said, is also trying to get the “Federal Government to ban the importation of clinker or in the alternative, drastically increase the duties and taxes on clinker imports so as to rattle and destabilise a cement manufacturer in that area and thus complete its strategic monopolistic domination of the Nigerian cement market.”
Aghazu also flayed the announcement of the closure of Benue Cement Company (BCC) on account of the “phantom” glut, describing it as dishonest and false.

“Time and unfolding events will show that Dangote Group is being economical with the truth in this assertion. We have it on good authority that the Dangote plant in Gboko (BCC) was programmed to shut down for turnaround maintenance only and will resume production when the maintenance has been completed,” he said.
He noted that the bulk cement imported, bagged and sold by Ibeto Cement Company Limited is different and superior to the cement made by Dangote Cement Company Plc.

“Ours is rapid hardening ordinary Portland cement preferred by first class construction companies. On the other hand, Dangote makes Portland limestone cement, which is used primarily in residential buildings.
“These facts are well known to and acknowledged by Dangote Group. Thus, strictly speaking, Ibeto Cement and Dangote Cement, being different in quality and also made for different purposes, should not really be competing,” he said.
He urged Dangote Group to accept reduced profits by lowering the price of their cement, a move that will be applauded by the consumers.

He also urged them to explore the export option, which it has so eloquently campaigned to have the capacity to carry out.
“The Dangote Group has been crowing about its plan to export cement from Nigeria. We urge them to start their export business forthwith. If there is a problem with the competitiveness of their made-in-Nigeria cement in foreign markets, we urge them to please take a close look at their components of the costs of goods sold,” Aghazu said.

Aghazu stated that it was imperative to alert the nation on the strategic risk posed by the situation. “We venture to assert that based on Dangote Group’s actions as it pertains to Ibeto Cement Company Ltd, the primary strategy of the Dangote Group in business is to use all available forces in the environment to make sure that they do not have any competition.
“In other words, they must operate as monopolists. Consequently, their roads to success are littered with the remains of would-be or attempted competitors,” he alleged.

He added: “In order to reduce the adverse effect of monopolies, for safety reasons, and in the interest of the common good, some countries have and enforce antitrust laws that control how much of any strategic market an individual or corporation is allowed to control.
“Unfortunately, in our country, the antitrust laws probably don’t exist or aren’t enforced when it pertains to the Dangote Group which holds a monopolistic stranglehold on several significant and strategic sectors of the economy,” he stated.

According to Aghazu, the assertion by Ibeto Cement regarding the dangerous effect of monopolies deserves serious study by the country’s economic planners and a healthy debate on the issue.

Tags: cement, Featured, Ibeto Cement, News, Nigeria

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