The prices of cement in most Niger Delta states have risen by almost 200% according to an investigation conducted by marketing experts on behalf of Nigerdelstars.com. The product is said to be selling at the rate of N5000 and beyond.
The unreasonable increase in the prices of cement is said to have negatively impacted the cost of construction by prospective homeowners.
The increase has already triggered the ripple effect in the open market, where prices have gone up by as much as 60 percent in recent weeks. The rising prices have also worsened construction costs in a sector, reeling under pressure from disruptive policies and ineffective housing supply.
The Guardian investigation revealed that theexport of the product to neigbouring countries, despite huge domestic demand,may be responsible for the shortage.
The Federal Government recently granted Dangote Cement and BUA permission to transport products across the border, despite the closure. Cement and by-products in neigbouring countries command higher prices.
Distributors hinted that there was an increase in ex-factory prices due to economic realities, which prompted many dealers to change prices. For instance, Dangote Cement increased its ex-factory price to N3, 050 due to logistics and production costs.
However, other sources also attributed the scarcity to machine breakdown in one of the major player’s plants, which had been fixed, and an industrial strike by cement truck drivers for improved welfare.
But the Executive Secretary, Cement Manufacturing Association (CMAN), Mr. James Salako, disagreed. He said no manufacturer had increased the price of cement.
Further investigation by other newspapers in Nigeria especially the Guardian further shows that prices of cement and associated products, such as blocks, in many states, including Abuja, have continued to rise.
For instance, the price of a 50-kilogramme bagnow goes for N3, 600 in Lagos and Cross River states; N4,000 in Enugu and Imostates; Rivers state N4,300; Abuja N3,200; Kano and Oyo states N3,500.
Until the last quarter of the year, cement wassold for between N2400 and N2500 in many of the states.
WHILE a nine-inch block in Enugu is sold at N200, and a six-inch block goes for N160 per block, in Kano, nine inches block sells for N170 and six inches for N160 as against the previous N150 and N140 respectively.
A cement dealer at the Kenyetta market, Enugu,Chief Donatus Eneh, told The Guardian two weeks ago that he paid for a fulltruck of Dangote Cement over four months ago but had not received theconsignment.
“They have continued to promise on daily basisthe product will be supplied to no avail. I don’t even have stock to sell atthe moment.
“Last week, I had to buy from one of the dealers to enable me to supply to one of the building sites. In some locations, developers have stopped building because cement is scarce,” he said.
Asked why the commodity suddenly became scarce,he said that Dangote, a major manufacturer had not been manufacturing andsupplying optimally. Other manufacturers, he said, had not been able tomeet market demand.
Also, Mrs. Uju Onah, who operates a block industry along One Day Road, Enugu, said the high price of cement had seriously affected her business.
“Everything is on the increase. We cannot find cement to buy. We buy N4,000 per bag and mold. 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 a 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. EdetEdet, at Garden Street, a popular building materials market, said: “Cost ofdelivery by transporters has gone up though the cost from the factory in UnitedCement Company of Nigeria Limited (UNICEM), a subsidiary of Lafarge remains thesame.
“So because of this, we have to transfer the cost to consumers. In addition, many people build in the dry season and there is high demand.”
Cement dealers and consumers in Rivers Stateblamed 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 a dealer and allowed only a 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 stoppedusing his trucks to ship cement from its plants in Kogi and Benue to RiversState. So, the distributors here now travel to those areas to load cement.
“Hence, all the logistics they incurred fromhiring trucks, paying drivers, settling of security agencies are transferred toconsumers, that’s why we the dealers get it at N4,000 and sell at N4,300.”
HOWEVER, the Marketing Director of Dangote, Funmi Sanni, who spoke in Port Harcourt recently during an award presentation to winners of Dangote Cement Bag of goodies, said, there was no plan to increase the price of cement, saying the management might reduce the price if the economy improved.
The Federal Capital Territory and its environs also experience the high cost of cement prices. One of the dealers of Dangote cement, Chibuzo Favour, said they bought at N3, 050 per bag and sold at N3, 200 to customers.
Favour identified a hike in electricity tariff, the pump price of fuel, and the closure of borders as reasons for the high cost of the product.
Chairman, Association of Cement Traders in Kano,Alhaji Aminu Dan-Maraya, told The Guardian that the sudden price increase wasdue to low productivity by manufacturers.
Dan-Maraya explained that, despite the high demand for cement in Kano, production capacity had drastically dropped, leading to a price increase.
He equally attributed the situation to the 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 themanufacturers for neighbouring countries. Despite the high demand in Nigeria,especially Northern Nigeria, manufacturers will prefer moving products toNiger, Cameron, Chad republic,” Dan-Maraya said.
He appealed to the Federal Government to ease the challenges.
The President, Nigerian Institute of Building(NIOB), Kunle Awobodu, said price increase in the inputs to constructionwithout corresponding increase in citizen’s purchasing power would reduceconstruction activities meant to rejuvenate the economy.
“Construction contracts in a regime ofskyrocketing and unstable prices will witness many fluctuation claims with thepotential for disputes and project abandonment. A cycle of project failures maystart 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 a need to maintain and repair, it is our view that this, however, is not enough justification for the astronomical increase in cement prices.”
Meanwhile, chances of consumers paying cheaper prices for 50kg bag of cement may not come soon, except issues bordering on foreign exchange rates, pricing of gas, and haulage are addressed.
According to the Manufacturers Association of Nigeria (MAN), the cost of gas and haulage fees is being passed on to consumers, despite the huge deposit of limestone in the country.
Before the lockdown at the end of March, a 50kgbag of cement sold for between N2,600 and N2,700, with the dollar exchangingfor N360 at the parallel market. With the naira depreciating in value after thelockdown, the cost of many products has maintained a high inflation rate, witha bag of cement now selling for at least N3,600 in many stores in Lagos.
Unlike in many other African countries, wherelocal cement producers are connected to the grid, thus reducing their productioncosts, Nigerian manufacturers depend mostly on alternative and independentlygenerated power, one of which is gas.
Of all the sub-sectors surveyed in December by the Central Bank of Nigeria (CBN) under its PMI report, the cement sector reported a contraction in terms of production.
Corporate Affairs Manager of MAN, Chuma Oruche,told The Guardian that bad roads had also increased haulage costs, even asproducers grapple with rising gas prices. Natural gas traded yesterday at$2.67.
In the new gas regulation, pricing is based onexport parity of oil, which is the price paid to the upstream producers by theNigeria Liquefied Natural Gas Company (NLNG) in line with the market dynamics.
To the downstream, the pricing reflected theupstream prices alongside transportation and marketing costs. Considering anupstream price of $1.25/scm, the cost of transportation and marketing will notexceed 80cents; thereby making gas available to the downstream at about $2.30.
With an increase in the global price of natural gas, local producers have also had to pay more for power generation.
Analysts at Cordros Securities explained thatthe imposition of lockdown measures dampened activities in Q2-20 asconstruction companies, and unskilled workers had to comply with shelter-in-placeorders.
According to them, the suspension of activities on major construction sites and increased government focus on the healthcare sector left a negative imprint on the construction industry and by extension, demand for cement.
They noted that price increment was inevitable,going by higher input costs associated with dollar-linked cost items, addingthat further devaluation will exert downward pressure on margins as industryplayers may be unable to pass on the full cost to consumers in the form of higherprices.
“Aside pandemic-induced slowdown, we believesubdued demand for residential properties, partly due to shrinking realincomes, the higher cost of building materials due to devaluation of the localcurrency, and the reduced availability of building materials due to supplychain disruptions also contributed to the weakness in the real estate sector.
“Nigeria’s cement sector volume growth in 2021will be modest due to the lingering impact of the pandemic on governmentfinances and household income. Although the stiff competitive landscape coupledwith soft industry conditions will deter industry players from raising pricessubstantially, we still see scope for marginal increases in prices”, theanalysts projected.
The Nigerian cement industry has three major players dominating the market, with Dangote Cement Plc being the leader, wielding 60.6 percent of the market share with a local installed capacity of 29.3 million MT, Lafarge Africa Plc having 21.8% share with a production capacity of 10.5million MT and BUA Group accounts for 17.6% share and 8.0mtpa.
There are also small players in the market, like PureChem Industries based in Ogun State with 900.000MT. Local cement production capacity is expected to hit 53.8 million tonnes per annum (mtpa) next year, with a new additional plant from BUA.
While the entry barrier remains high, manufacturers have a strong influence over the prices they pay to their suppliers, reflecting the oligopolistic nature of the market.
According to a World Bank report, the price of cement in Africa was on average 183 percent higher than the global average in 2016.
Vice President Yemi Osinbajo had in 2018 re-echoed concerns about high prices of the commodity, stating, however, that cement price could be cheaper if per capita consumption increases through the adoption of concrete roads and collaboration, among local producers.