- Dealers blame transportation, export scarcity,
- Manufacturers says the price of gas, the cost of transportation
The expectations of lower building costs for prospective homeowners may have been reduced,
leading to a new rise in the price of cement and related products.
In the open market, where prices have risen by as much as
60% in recent weeks, the increase has already triggered a ripple effect.
The rising prices have also worsened the cost of construction in the
sector, reeling under pressure from disruptive policies and an inefficient supply of housing.
The Guardian investigation revealed that, despite huge domestic demand, the export
of the product to neighbouring countries may be responsible for the shortage.
In spite of the closure, the Federal Government has recently given
permission to Dangote Cement and BUA to move goods across the border.
In neighbouring nations, cement
and by-products command higher prices.
Distributors reported that, due to economic realities, there was a
rise in ex-factory costs, which caused many dealers to change prices.
Due to logistics and production costs, for instance,
Dangote Cement increased its ex-factory price to N3, 050.
Other reports, however, also attributed the shortage to machine breakdown in one of the plants of
the major player, which had been fixed, and industrial strike for enhanced welfare by cement truck drivers.
But Mr. James Salako, the Cement
Manufacturing Association (CMAN) Executive Secretary, disagreed.
He claimed that no
manufacturer had raised cement prices.
In addition, the Guardian investigation shows that prices of cement and related
goods, such as blocks, have continued to rise in many states, including Abuja,
For example, the cost of a 50-kilogram bag is now N3, 600 in the states of Lagos and Cross River; N4,000 in
the states of Enugu and Imo; N4,300 in the state of Rivers; N3,200 in Abuja; N3,500 in the states of Kano and Oyo.
Until the last quarter of the year, in many
states, cement was sold for between N2400 and N2500.
Although the nine-inch block in Enugu is sold at N200, and the six-inch block goes for N160 per block, the nine-inch
block in Kano sells for N170 and the six-inch block for N160 as opposed to the previous N150 and N140 respectively.
Two weeks ago, a cement dealer in the Kenyetta market, Enugu, Chief Donatus Eneh, told The Guardian that
he had paid for Dangote Cement’s complete truck more than four months ago but had not received the consignment.
“They have continued to promise on daily basis the product will be supplied to no avail. I don’t even have stock to sell at the moment.
“Last week, I had to buy from one of the dealers to enable me supply to one of the building sites. In some locations, developers have stopped building because cement is scarce,” he said
Asked why the product suddenly became scarce, he said that
Dangote, a major producer, did not produce and supply optimally.
Other suppliers, he said, were
unable to meet market demand.
Mrs. Uju Onah, who operates a block industry along One Day Lane, Enugu,
also said that her company had been seriously affected by high cement prices.
“Everything is on the increase. We cannot find cement to buy. We buy N4,000 per bag and mould. Initially, we were buying N2,400 but that is not possible any longer.
“They said, people are burning trucks belonging to the cement companies and that is affecting distribution,” she said.
Similarly, in Imo State, a major dealer, John Igwe, said: “We bought cement from the accredited dealers and are not making profit of more than N150 per bag. If we calculate the cost of transportation and labour, you find out that we are making little or no profit.”
In Cross River State, a cement dealer, Mr. Edet Edet, at Garden Street, a popular building materials market, said: “Cost of delivery by transporters has gone up though the cost from the factory in United Cement Company of Nigeria Limited (UNICEM), a subsidiary of Lafarge remains the same.
“So because of this, we have to transfer the cost to consumers. In addition, many people build in dry season and there is high demand.”
Cement dealers and consumers in Rivers State blamed the hike in price on monopoly in the industry.
A dealer, Mr. Ordu Godspel, told The Guardian government closed Eagle and Ibeto Cement from which he was making fortune as dealer and allowed only few to produce locally. “We were hopeful, thinking that the price of cement would come down from what it was at N1,500, but sadly, the manufacturers increased their prices to N2,400 in 2016 and since then, the price kept rising.”
“The current price is because Dangote stopped using his trucks to ship cement from its plants in Kogi and Benue to Rivers State. So, the distributors here now travel to those areas to load cement.
“Hence, all the logistics they incurred from hiring trucks, paying drivers, settling of security agencies are transferred to consumers, that’s why we the dealers get it at N4,000 and sell at N4,300.”
HOWEVER, Dangote Marketing Director Funmi Sanni, who recently spoke in Port Harcourt during an award presentation for Dangote Cement Bag winners of
goodies, said there was no intention to increase the price of cement, saying that if the economy improved, management might reduce prices.
Strong cement prices are also expensive for
the Federal Capital Territory and its surroundings.
One of the Dangote cement dealers, Chibuzo Favour, said they bought
050 N3 per bag and sold 200 N3 per bag to customers.
Increases in electricity tariffs, fuel pump prices and border closures were listed
by Favour as the reasons for the high cost of the commodity.
Alhaji Aminu Dan-Maraya, Chairman of the Association of Cement Traders in Kano, told
The Guardian that the sudden price rise was due to low productivity by manufacturers.
Dan-Maraya clarified that production capacity had fallen significantly, despite the
high demand for cement in Kano, leading to price increases.
He equally attributed the situation to supply of the commodity to neighbouring countries despite high demand in Nigeria. “The major challenge is short supply. We hardly get the quantity required from the manufacturers and the demand keeps going high. So the price will naturally go up.
“ Another challenge is the new preference of the manufacturers for neighbouring countries. Despite the high demand in Nigeria, especially Northern Nigeria, manufacturers will prefer moving products to Niger, Cameron, Chad republic,” Dan-Maraya said.
He called on the federal
government to ease the difficulties.
The President of the Nigerian Institute of Building (NIOB), Kunle Awobodu, said price rises in construction inputs
would reduce construction activities to rejuvenate the economy without a corresponding increase in the buying power of people.
“Construction contracts in a regime of skyrocketing and unstable prices will witness many fluctuation claims with the potential for disputes and project abandonment. A cycle of project failures may start when prices are beyond the reach of clients and developers.
“All the cement manufacturing plant have been existing in Nigeria before the lockdown. We acknowledge that there may be need to maintain and repair, it is our view that this, however, is not enough justification for the astronomical increase in cement prices.”
MEANWHILE Consumers’ chances of paying cheaper prices for a 50 kg bag of cement might not
come fast, except where issues related to foreign exchange rates, gas pricing and transport are addressed.
According to the Manufacturers Association of Nigeria (MAN), despite the country’s enormous deposit of
limestone, the cost of gas and transportation fees is being passed on to consumers.
A 50kg bag of cement sold for between N2,600 and N2,700 before the lockout
at the end of March, with a dollar traded for N360 on the parallel market.
The cost of many goods has sustained a high rate of inflation with the naira depreciating in value
since the lockdown, with a bag of cement now selling in many stores in Lagos for at least N3,600
Unlike many other African countries, where local cement producers are linked to the grid, thereby reducing their
cost of production, Nigerian producers rely primarily on alternative and independently produced electricity, one of which is coal.
Of all the sub-sectors surveyed in December by the Central Bank of Nigeria
(CBN) in its PMI report, production contractions were recorded in the cement sector.
MAN’s Corporate Affairs Manager, Chuma Oruche, told The Guardian that even as
manufacturers grapple with increasing gas prices, bad roads have also raised transportation costs.
Natural gas traded
at 2.67 dollars yesterday.
Pricing is based on the export parity of oil in the new gas regulation, which is the price
paid by the Nigeria Liquefied Natural Gas Company (NLNG) to the upstream producers in line with market dynamics.
The pricing represented the upstream prices along
with transportation and marketing costs to the downstream.
The cost of transportation and marketing would not exceed 80 cents, taking into account
an upstream price of $1.25/scm, thus making gas available to the downstream at around $2,30
Local producers have also had to pay more for power production
due to a rise in the global price of natural gas.
Cordros Securities analysts clarified that the imposition of lockdown steps dampened construction
company operations in Q2-20, and unskilled employees had to comply with shelter-in-place orders.
According to them, the suspension of operations on major construction sites and increased government attention on
the healthcare sector left a negative impact on the construction industry and demand for cement by extension.
They noted that higher input costs associated with dollar-linked cost products were unavoidable, adding that further devaluation would exert downward pressure on
margins as players in the industry could not be able to pass on maximum costs to customers in the form of higher prices.
“Aside pandemic-induced slowdown, we believe subdued demand for residential properties, partly due to shrinking real incomes, the higher cost of building materials due to devaluation of the local currency, and the reduced availability of building materials due to supply chain disruptions also contributed to the weakness in the real estate sector
“Nigeria’s cement sector volume growth in 2021 will be modest due to the lingering impact of the pandemic on government finances and household income. Although the stiff competitive landscape coupled with soft industry conditions will deter industry players from raising prices substantially, we still see scope for marginal increases in prices”, the analysts projected
Three major players dominate the market in the Nigerian cement industry, with Dangote Cement Plc being the leader, holding 60.6 percent of the market share with a local installed capacity of
29.3 million MT, Lafarge Africa Plc with a 21.8 percent share with a production capacity of 10.5 million MT, and BUA Group with a 17.6 percent share and 8.0 million MTP.
There are also small players on the market, such
as the 900,000 MT PureChem Industries in Ogun State.
Local cement production capacity is projected to reach 53.8 million tonnes
per annum (mtpa) next year, with new additional plant from BUA.
Although the entry barrier remains high, producers, reflecting the oligopolistic nature of
the industry, have a strong control over the prices they pay their suppliers.
The price of cement in Africa was on average 183 per cent
higher than the global average in 2016, according to a World Bank survey.
In 2018, Vice President Yemi Osinbajo re-echoed concerns about high commodity prices, noting, however, that cement prices may
be cheaper if per capita consumption rises among local producers through the adoption of concrete roads and collaboration.
SOURCE: THE GUARDIAN
