Making cement affordable, within reach of Nigerians

The galloping increase in the price of cement in the country is understandably raising concerns for stakeholders in the building industry. This does not come as a surprise, considering the country’s dearth of critical infrastructure, including housing and passable roads. The current situation certainly aggravates the massive deficit in decent and affordable housing in many parts of the country, especially the urban areas.

Reports across the country indicate that a 50kg bag of cement has lately climbed above the N10,000 mark. It is disheartening to prospective house owners. It is equally regressive to governments’ plans to build houses and roads using cement instead of bitumen. Indeed, the place of cement in these endeavours is significant.

Before now, cement producers have achieved outstanding financial performance driven by price. Domestic cement prices have remained high, ranging between N9,500 and N9,700 per 50 kg bag, up from an average of about N5,500 a year ago. The current increase is causing significant strain on budgets, disrupting project timelines, and raising serious safety concerns. This instability has forced many projects to a standstill and left contractors under pressure to find ways to cut costs, which could compromise building quality.

Built environment professionals are blaming the current situation in the housing industry for the growing preference for concrete in road construction and the transition from asphalt to concrete by the Federal Ministry of Works, which is near monopoly by manufacturers of building materials. There are also fears that the high cost of cement will encourage substandard blocks and a reduction in the quality of concrete by some developers and contractors.

Nigeria has been at the forefront of ensuring self-sufficiency regarding local cement production since 1954, establishing the Nigerian Cement Company Plc (NigerCem), owned by the Federal Government and five South-Eastern states. However, other plants emerged after independence, such as Ashaka Cement Limited, Benue Cement Company Plc, and the Cement Company of Northern Nigeria Plc.

Nigeria possesses the largest cement industry in West Africa, and most of the old plants have been transformed and given a new lease of life.  Three major players have piloted the cement market – Dangote Cement Plc, BUA Cement Plc, and Lafarge Africa Plc. The industry contributes directly and indirectly towards the growth of the nation’s economy, driving modern civilisation by providing one of the critical resources used in construction.

According to the National Bureau of Statistics (NBS), Dangote Cement, BUA Cement, and Lafarge Africa control over 95 per cent of Nigeria’s cement production capacity.  For instance, Dangote Cement integrated plants located in Obajana, Ibese and Gboko have installed capacity of 32.3 million tonnes per annum (mtpa), while BUA has capacity of 11mtpa (Obu plant, 6mtpa and Kalambaina plant, 5 mtpa) and Lafarge Africa has the most expansive footprint in Nigeria with cement operations in the South West (Ewekoro and Sagamu in Ogun State), North East (Ashaka, in Gombe State), and South East (Mfamosing, Cross Rivers State) with production capacity of 10.5mtpa.

The industry also acts as an enabler for other sectors, such as real estate, construction and solid minerals. Furthermore, by building, renovating, and rehabilitating roads, bridges, and other public infrastructure, local cement manufacturers play a significant role in the nation’s economic development and enhancing social welfare, leading to favourable government policies and support.

The industry majors had a combined production capacity of 62.8 MMTPA spread across five of the nation’s six geopolitical zones: the North Central, the South-South, the South West, the North West, and the North East regions. According to Augusto and Company, in 2023, the supply of cement in the industry, represented by sales of the industry majors, declined by 5.2 per cent year-on-year to 28 MMT due to the slowdown in demand during the review period. Dangote Cement Plc accounted for the bulk (58.5 per cent) of total supply in 2023, driven by its considerable installed production capacity to its peers and the strong consumer preference.

BUA Cement Plc (23.6 per cent) and Lafarge Africa Plc (17.9 per cent) also accounted for significant shares of the Industry’s supply. In 2023, the industry’s supply represented 49.3 per cent of the installed cement production capacity, lower than 51.9 per cent recorded in the prior year.

The three manufacturers reported a combined N3.623 trillion in their sales revenue in the third quarter (Q3) ended September 30, 2024. The amount represents a 69.3 per cent increase from N2.140 trillion combined revenue reported by the companies in the same period of 2023. The three top cement producers recorded an increase in sales revenue despite the economic headwinds in the country, which disrupted the business environment, ranging from the foreign exchange crisis, rising energy prices, and wilted disposable income of citizens, amongst others.

The financial impact of these disruptions extends beyond developers and contractors. The construction industry contributes significantly to Nigeria’s economy, employing millions and accounting for 3.5 per cent of the country’s Gross Domestic Product (GDP) as of 2023. As projects are delayed or abandoned, the loss of economic activity affects the job market and the broader economy, amplifying the effects of price instability in the cement market.

With the lingering high prices of cement, there is a need for the government to support locally sourced materials that could become viable, affordable alternatives to cement, which will provide relief to the market and create jobs in material production. The government should also attract more local and foreign participation in the building materials industry, provide incentives, and enable the private sector to encourage a rapid flow of funds into building materials manufacturing through tax relief, accelerated depreciation, and generous capital allowances.

Also, the government, through the various ministries, departments and agencies, should hasten the development of appropriate capacities to achieve sufficiency in the production of basic building materials and components of acceptable quality from local resources with a view to stimulating effective economic growth and development; as well as provide matching grants for investments into research in the use of local materials for building materials manufacturers.

The Building Materials Producers Association of Nigeria (BUMPAN), which is expected to lay a solid foundation for the development of robust, effective and economically viable small and medium-scale industries for the production of building materials, should be resuscitated, while the Nigerian Building and Road Research Institute (NBRRI) should be restructured and adequately funded.