Bridging cement supply deficit amid hope for price reduction
The rise in the retail price of cement has raised some concerns among stakeholders and consumers due to affordability and inflationary pressure on home ownership and construction costs. While producers claim supply gaps exist, ramping up production and addressing structural economic challenges, alongside healthy competition, appear to be a viable solution to resolving the perennial spike in cement prices. With the new three million metric tonnes Sokoto Line 4 cement plant by BUA, Nigerians hope to see corresponding drop in prices as volume improves. FEMI ADEKOYA writes.
Despite frustrations expressed by many consumers, the retail price of cement remains high, having risen more than 177 per cent from N1,800 to N5,000 as currently witnessed in parts of the country.
In the wake of an outcry last year, the Federal Government and operators attributed the upward price movement to production challenges, adding that it was engaging stakeholders in the industry to address the issue.
Findings by The Guardian had shown that regulatory lapses in checking price gouging in the value chain, costly logistics driven by inflation and cyclic demand for real estate, fuelled by currency weakness and low yields from financial instruments are factors aggravating cement prices nationwide.
While the costs of other building materials have also skyrocketed due to currency devaluation that has made importation costs rise, concerns about cement border on the fact that it accounts for at least 45 per cent of building materials’ input.
The Nigerian cement industry as at the end of 2020 has three major players dominating the market, with Dangote Cement Plc being the leader wielding 60.6 per cent of the market share with a local installed capacity of 29.3 million MT, Lafarge Africa Plc having 21.8 per cent share with a production capacity of 10.5million MT, and BUA Group accounts for 17.6 per cent share and 8.0mtpa.
With BUA’s plans to complete the construction of three new cement plants of three million tonnes each in Edo, Sokoto and Adamawa by 2023, its volume is expected to be near 20mtpa.
To address the concerns, the founder and Chairman of BUA Group, Alhaji Abdul Samad Rabiu, said his company was targeting to ramp up its total production capacity to 17 million metric tonnes of cement per annum next year in order to help lower the price of the product.
In his welcome address during the unveiling of the new plant and groundbreaking of the line five, the industrialist pointed out that in the past six years, BUA Cement has completed four plants – two in Obu, Edo State and two in Sokoto (of which the Sokoto line 4 is the fourth) with BUA’s total production capacity now standing at 11 million tonnes with the completion of this plant.
He disclosed that next year, BUA Group intends to complete the construction of two new plants of three million metric tonnes each, saying construction is already ongoing – one in Edo and the other in Sokoto.
“We expect these plants to be completed next year, which will bring our total production capacity to 17million metric tonnes,” he said.
“We look forward to Your Excellency coming to commission them by the first quarter of 2023,” he added.
Rabiu pledged that BUA would continue to invest in the cement industry until Nigeria became self-sufficient and cement was made available, accessible, and affordable for all Nigerians.
He stated, “Mr. President, there are many reasons one can attribute to the important nature of this plant. The attendant effect of these investments in new factories goes beyond the community and the state. It extends to the region and the entire country. “From a job creation and economic standpoint, the Sokoto plant continues to be the largest private sector employer of labour in the Northwestern part of Nigeria.
“Also, by adding value to resources mined in Nigeria, Nigeria is being saved billions of US dollars in foreign exchange that would have been spent on importation, whilst also ensuring product availability.
“In fact, 95 per cent of all the raw materials used in our cement manufacturing process are sourced locally. In addition to this, and our investment in social impact and CSR programmes for the community and Sokoto State at all levels, we are also committed to environmental sustainability.
“We have diversified our energy sources by introducing greener alternatives – in this case, LNG – to power the kiln and 48 megawatts power plant. Our power plants are now running on 100 per cent LNG, leading to reduced carbon emissions. This is the first of its kind at any cement factory in Nigeria.”
Rabiu said this meant also that as soon as the AKK gas project came on stream, BUA would be ready to be one of the first off-takers.
This would also encourage further industrialisation within the region, open new industries and ensure greater development and prosperity for this region and the country in general.
“Mr. President, all of this will not have been possible without your support and commitment to the development of the Nigerian economy,” Rabiu told Buhari.
The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, urged manufacturers in the country to urgently control the rising prices of cement and other building materials.
Emefiele noted that manufacturers must first strive to satisfy the local market to help make cement affordable before exporting the product to external markets.
“Indeed, there has recently been calls by construction companies urging our steel and cement manufacturers to do something about the sky-rocketing of these two essential items in the construction industry,” he said.
Emefiele said the cement industry remained key to solving the country’s unemployment challenges as well as boosting growth.
He added, “We are aware that some of our cement manufacturers are producing for both the domestic and export markets, but we urge them to pay more attention to satisfying the domestic needs so as to bring down prices.”
Emefiele reiterated the central bank’s commitment to providing needed support for importation of spares, plants and equipment needed to increase the production capacities of cement plants in the country.
While calling on prospective investors to take advantage of the current incentives provided by the government to boost the sector, he said the CBN was ready to provide the needed financing for both current and new investors in the industrial sector for the importation of requisite machinery.
He pointed out that as part of the efforts by the current administration to drive productivity in the industrial sector and conserve foreign exchange, a decision was taken by the government in 2015 to restrict access to foreign exchange for imports of 43 items, which could be produced in Nigeria, but for which billions of US Dollars were being expended yearly on imports.
He said, “Our nation has been able to conserve billions of dollars, as no dollar from our external reserves has been spent on imports of cement into the country in the last seven years.”
He said the investments had saved and created several thousands of jobs across multiple sectors.
Emefiele pointed out that the achievements so far recorded in the cement sector were not a coincidence but a reflection of the success of the backward integration policy of the Buhari administration.
The CBN governor said with significant opportunities in housing, construction and related industries, there was still sufficient room for additional investments in the sector. He urged potential investors to take advantage of these opportunities.
He also assured current and prospective investors in the industrial sector that the apex bank was ready to collaborate with stakeholders to facilitate the development of a viable manufacturing sector in Nigeria.
Emefiele stated further, “The BUA Group’s investment in Sokoto and in other parts of Nigeria reflects their belief in the country, and in the immense opportunities available in the industrial sector, given the abundance of human and natural resources in Nigeria.
“I am aware that this facility, which cost millions of US Dollars, was fully funded by equity contributions of the BUA Group without resorting to any source of external finance.
“Following implementation of this new directive, I am pleased to note that the production capacity of the cement industry in Nigeria has doubled from 30 million tonnes in 2014 to about 60m tonnes in 2021.”
Also, President Buhari thanked Rabiu and the entire team for the great work they were doing in supporting the government’s economic diversification and job creation agenda.
He noted that the company, which had completed four new cement plants of similar capacity in the last five years in different parts of the country and was set to complete two more plants soon, had shown through these investments that they believed in Nigeria and its potential.
Commending BUA and other entrepreneurs for making Nigeria self-sufficient in cement and a net exporter of the strategic product, the president said, “I am pleased that through these investments, BUA Cement has created employment opportunities for our citizens. Today, BUA is the largest employer of labour in the North-west region.
“I always remind Nigerians that every region, indeed, every state, in Nigeria sits on huge reserves of resources. For example, in this area, Kebbi, Sokoto and Zamfara can boast of rice production, gold and other precious metals development and, of course, heavy industries like cement manufacturing.
“We remain prepared to support serious investors to set up businesses that will take advantage of these opportunities through value addition so as to take advantage of the huge market here, as well as in the greater African region and the world at large.”
The Managing Director/Chief Executive Officer, BUA Cement, Yusuf Haliru Binji also thanked the federal government for the support given to the company over the years as well as for creating an enabling environment for businesses to thrive.
He stressed that the plant is environmentally friendly and does not pose any threat to society.
The President, Cement Manufacturers Association of Nigeria, Alhaji Mohammed Lawal Bello, described the cement industry as one of the fastest growing sectors in the country.
According to him, from a production capacity of five million metric tonnes in 1989, to about 150 million presently, “one can say that the growth is exponential.”