Cement, iron rod prices skyrockets in building markets
Again, the hope of better days ahead for would-be homeowners and developers in the construction sector, may have been dashed following another rounds of increase in prices of cement and iron rods in the country.
The latest increase in prices of the products has sent shivers on the shoulders of buyers, leading to low patronage in the open market and confusion among contractors who had scheduled prices of the materials in dissonance to current market realities.
Cement and iron rods are considered as critical materials to building construction due to the fact that shortfalls in quantity or quality of the products could shorten longevity of buildings as well as trigger the menace of building collapse, which recently resurfaced in some states.
Before the rap off of the 2019 elections, major market leader in the cement industry cut down prices as the Dangote brand was sold at N2, 300.00 from N2, 600, retail price. It was learnt that other producers, like Lafarge, also followed suit. Depending on locations, buyers paid between N2, 350, N2, 550 and N2, 600 per bag of the brands.
Following recent development, the product now sales for N2, 700 and N2, 750 in many locations visited in Lagos areas. Confirming the increase to The Guardian, a dealer of the product in Lagos, Mr. Sunday Ilesanmi disclosed that it was a market shock to him, because the change took effect shortly after the 2019 elections.
Ilesanmi, a distributor of the Dangote brand lamented that the recent increase has impacted badly on sales with many buyers who are unaware of the development, complaining of low purchasing power.
“It is true that there has been an increase in price of cement. We sale it at the rate of N2, 700, we just woke up to that reality and nobody explained us the rationale for the sudden increase. Those who are aware of the development are the ones who are still buying but those were uninformed of the increase decline buying at the current market price. I believed that its only government that could really regulate the sector, to ensure stability in the market because existing producers just dictates price for the market at their discretion. They don’t consider the purchasing power of the buyers in fixing price of the product”, he said.
A visit to popular cement depot at Berger also shows that the product sells for N2, 700 at the outlet. Speaking on the situation, the manager of the company, Mr. Olayiwola stated that following recent increase from the factory; they have to sell to customers at the rate. He stated that as a means to augment low sales, he sometimes sell the product at N2, 600.
A source from one of the producers told The Guardian that there has been an increase of N150.00 from the factory. He revealed that the frequent fluctuations in cement prices in Nigeria are not unconnected with the unpredictable and difficult operating conditions.
Specifically, the disruptions in the supply of gas as well as the high cost of Automotive Gas Oil (diesel), which most cement factories depend on for energy, pose a key challenge. Also, issues of increasing electricity tariffs, inability to access foreign exchange, and ever-changing government policies also contribute to the increase in production cost of cement.
In addition, due to the slow down in the economy, consumers are finding it more difficult to buy cement at current prices, leading to reduced sales but profits for the manufacturers. Regrettably, prices of cement in Nigeria keep going up despite the fact that the commodity is being massively produced amid restriction on its importation.
Worst hit with the recent increase, is the iron rods. For instance, a 8mmm size rod, which was sold for 200, 000 three weeks ago, now sell for N240, 000. The 16mm and 12mm move from 190,000 to 225, 000 and 230,000 respectively.
Also affected is the 20mm and 25mm which now sale for 225,000 and 230,000 from previous rate, N200, 000.
Reacting, a dealer in iron rods products situated in Lagos, Mr. Sola Olawuyi explained that the sudden upsurge in demand as against supply of the product, could be attributed as major rationale for increase in prices. He observed that all the iron rods factories, about ten, which are situated in Ikorodu, are majorly producing just one particular size of the item.
“Instead of the industries producing a little of 10mm, 16mm and other sizes, they don’t do that. They would focus on producing a particular size for complete two-days. People expect that they should produce a little of 10mm and a little of 16mm but they don’t follow that procedure. This has compounded the situation. For example, at the moment, the cheapest price you would get 16mm anywhere is 225,000. That size was sold at 190,000 about three weeks ago”.
According to Olawuyi, the sky rocketed price has made many of the buyers to stop buying the product even as sales plummeted. He observed that if government could demonstrate enough ‘ strong political will’ to revive the Ajaokuta mill and other factories, then, developers, prospective homeowners and contractors might have cause to smile.
For Mr. Kunle Adeniyi, a dealer in iron rods and other building materials, he alleged that the ugly trend could be blamed on the manufacturers who have decided to create artificial scarcity by in
“The manufacturers decided to create artificial scarcity so that the could make more money. They have association and they told them to stop production for certain numbers of days to create more demand than supply. That is the strategy they are using to create scarcity in the market so that when people are looking for available product, they can buy at any price when demand is more than the supply”.
Adeniyi noted that a government that is concerned about its people wouldn’t allow foreigners to come in and dictate price and take advantage of the people and let them get away with it. He asked the government to put in place a kind of control that will regulate activities of the manufacturers as people are left without any option than to pay exorbitantly for the product.
“The purchasing power of the people has been affected following the increase because the number of tonnage per trailer that will sale monthly, has reduced drastically. When people are supposed to buy like two or three trailers, the money, which they have budgeted, can’t even buy one trailer. People are now buying irons that are considered no useable, iron has become rot, are now back into the market. We believe that this will in turn reduce the quality of construction which people are doing and this could cause collapse”.
He added, “I think the government should look into the reason why prices are going up everyday. Prices rose from N165, 000, 170,000, and 190,000 and even beyond N220, 000.00”.