Beyond the claims of manufacturers that a 50kg bag of cement would not sell below N5,000 for now and the allegation of monopolistic manipulation of price of cement, Dike Onwuamaeze writes that a fierce price war is brewing in the cement industry
The price of cement has been a matter of concern to the federal government, cement manufacturers and consumers. This concern stemmed from the perception that Nigeria has enough domestic resources and manufacturing capacity to produce and deliver cement at much lower prices to its citizens than it is presently doing. The concern is also fostered by the notion that Nigerian cement market is susceptible to price fixing because of its oligopolistic nature with three major actors: the Dangote Cement Plc, the BUA Group and the Lafarge Africa Plc.
This concern became a matter of debate in 2021 in the Senate of the Federal Republic of Nigeria. The debate followed a motion that was moved by Senator Ashiru Oyelola Yisa and others on the, “Need for Liberalisation of Cement Policy in Nigeria.” The crux of Yisa’s argument was that as at 2018, the installed capacity of cement producers was about 47.8 million metric tonnes annually (mmta), which according to him, is far above the estimated (2018) domestic consumption of about 20.7 mmta.
“Yet, the price of cement in Nigeria is about 240 per cent higher than the global average,” he observed, being cognisant that cement takes a large share of domestic expenditure and the price of each commodity significantly impacts the government’s ability to provide much-needed infrastructural works required for the growth of our economy.
He, therefore, said: “Mindful that the Nigerian cement market is oligopolistic in nature with three players (Dangote Cement (60.6 per cent); Lafarge Africa Plc (21.8 per cent) and BUA Group (17.6 per cent), largely dominating the scene therefore making it susceptible to price fixing practices. I am convinced that if the status quo persists, the negative consequences of high prices on the economy will outweigh the benefits of producing cement locally.
“It’s strongly believed that there is an urgent need to encourage more local production of cement to satisfy the demands of Nigeria with a steady growth rate of approximately three per cent per annum; a housing deficit of 30 million units and less engagement of over 10.5 million workforce of the building and construction industry.”
As recently as August 27, an allegation went viral in the social media that the Dangote Cement is selling cement at a much lower price in Cotonou, Republic of Benin, than it does in Nigeria.
The citymirrornews.com published an online story on August 27, 2023, with the headline: “Netizens Call Out Dangote for Selling Cement N5,200 in Nigeria, N1,500 in Benin Republic. The publication stated that “a Twitter user identified as @drpenking called out Dangote for selling his bag of cement for N5,200 in Nigeria despite the fact that the raw material is sourced locally in Nigeria.
“He (@drpenking) tweeted: ‘Dangote cement is produced in Nigeria. The raw material is sourced locally in Nigeria at almost zero cost. Nothing is imported. Almost zero taxes yet the price of cement is N5,200 in Nigeria and same is sold in Seme, Benin Republic at N1,500 . Sit & Explain to me (sic).’”
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However, this allegation was not true. THISDAY’s investigation showed that Dangote’s cement is not on sale throughout the length and breadth of the Republic of Benin. The investigation also revealed that the quality of cement Dangote put on sale in Nigeria is of higher grade (42.5N) than the grade of cement on sale in Cotonou, which is 32.5R. Furthermore, the average price of 50kg (32.5r) bag cement in Republic of Benin is N6,216, which is about 4,200 Cefa). The parallel market’s foreign exchange rate in Cotonou was N1.48 to 1.00 Cefa.
According to THISDAY’s investigation in Akpakpa, Ghandi and Etoile Rouse (Red Star) sections in Cotonou, the price of 50kg bag of cement goes for 4,000 Cefa, 4,100 Cefa and 4,200 Cefa at different cement depots. THISDAY was also told that the same quantity of cement goes for 4,500 Cefa (about N6,660) in Parakou, the largest city in northern part of the Republic of Benin because of transport and logistics costs.
This implied that the average prices of 50kg bag of cement in Cotonuo and Parakou were N6,068, and N6,660 respectively, at the parallel market exchange rate of 1.00 Cefa to N1.48. Currently, the retail price of cement in Nigeria as slightly above N5,000.
However, those lamenting that the price of cement is very high in Nigeria have not considered the impact of the current steep depreciation in the value of Naira in the foreign exchange market and the difference the cost of logistics make on the retail prices of the product in Nigeria. Pronouncements from both Dangote Cement and BUA Group showed that their factory prices are much lower than N5,000 per 50 kg bag of cement.
Moreover, some of the cement manufacturers are bracing up for a fierce price war that would lead to a crash in the price of cement in Nigeria According to the management of Dangote Cement Plc, the price of a bag of cement from its factories across Nigeria as at August 28, 2023, was N4,010 (about 2,730 Cefa) in Okpella and N4,640 (about 3,135 Cefa) in Ibese, Objana, and Gboko.
It added that transportation costs and the location of delivery, might cause the prices to hover between N5,000 and N5,300 per bag 50kg.
The Group Managing Director of Dangote Cement Plc, Mr. Arvind Pathak, advised that it is important to distinguish Dangote Cement’s ex-factory prices from prices at which retailers sell cement in the market.
Pathak said that Dangote Cement is focused on delivering quality cement at the best price possible, despite the current inflationary environment. “We continue to innovate new ways to deliver quality products to millions of our customers across Africa, while providing top-notch customer services. At Dangote Cement, we are committed to building an inclusive and sustainable business for all stakeholders across the value chain.”
Commenting recently on the controversy trailing the alleged high prices of cement in Nigeria, the Chairman of the BUA Group, Mr. Abdul Samad Rabi, said that it is not possible for cement to sell below N5,000 per 50kg for the time being even if the government would resort to importing the commodity. Rabi, however, hinted that Nigeria might experience a significant drop in the price of cement in the short term.
Rabi said: “I appreciate where the government coming from that the price of cement in Nigeria is high at almost N5,000 per bag. Again, the price of cement at N5,000 per bag in Nigeria is not really very high if you look at the rate of the dollar today. To import cement into Nigeria today will be almost N5,000 per bag at $100 per tonne. So at $100 per tonne, if you take N800 per dollar it will be N4,000 per bag. Then of course you have the port charges and transportation cost from the port to wherever you are taking the cement to.
“What do I intended to do? What I told my shareholders is that we will engage with the government because we know that the price of cement cannot be cheaper if we are to import cement today. We have two lines that are coming on stream by the end of the year: The Line 3 and Sokoto Line 5, which will give us the combined capacity of 6 million metric tonnes (mmts). And by the time we have those two lines, we will be having about 17 million metric tonnes per year.”
He said: “So, what we want to do is to support the government by sitting down with the minister to see how we can bring down the price of cement once we have these two lines up and running by the end of the year.
“I am happy to support the government and we are going to reduce the cost of cement once these two lines are up and running. It is true that the price of cement is high now but that may simply be because of the devaluation and all the issues that we having now in the country.”
He added, “We are going to bring down the price of cement. This is a promise. Our ex-factory price of cement currently is about N4,000 or N4,300 per bag. The target is to reduce that substantially. We will do that. And we are not doing this because we are worried or concerned that government will allow importation of cement because we know that import is not going to be any cheaper.
“The reason we have to wait until the two lines come on stream by the end of the year is simply to have additional volumes so that we can reduce the price, and even if others have not agreed to reduce the price, the market will compel them to come down because if you do not have enough volumes and you reduce the price the market may not take it.”
“But if you have the volume and you reduce your price with the huge volume that you have price must come down. Even if others are not ready to support the government they will be compelled because if they do not reduce they won’t be able to sell. That is why we want to wait till the end of the year when these two new lines are on stream. I will discuss with the minister and see how we can do this, ”he stated.
