Cement makers in Nigeria are adding more burden to prospective homeowners in the country amid high inflation by increasing cement prices in response to overwhelming demand.
BUA Cement, which at N2.421 trillion is Nigeria’s fourth-biggest company by market value, is the latest in the fray having chosen to up the factory price of the product by about N200 per bag, reneging on earlier promises not to raise prices.
The product now sells anywhere between N3000 and N4000, marketers have told PREMIUM TIMES.
BUA Cement reported a profit after tax of N72.3 billion last year. The firm assured Nigerians in April that it would not scale up the factory price of its product.
“BUA Cement Plc, in the past two days, has been inundated with calls seeking clarification as to whether it is part of a purported price increase of N300 per bag,” its management said in a Twitter statement.
“BUA Cement wishes to inform the public, its distributors, and stakeholders that it has not and does not intend to increase its price of cement now or in the near future, barring any material unforeseen circumstances.
“Whilst we are aware that demand for cement is high with current supply levels not sufficient to meet this increased demand, we do not believe the solution lies in an increase in ex-factory price of cement, especially not at this period.”
In June, the cement maker in a statement to distributors reassured Nigerians of its fidelity to easing the economic meltdown by giving its due in the form of retaining cement price at its pre-July level as the country rebalances from its second recession in four years.
“BUA is also of the firm belief that the current retail prices of cement are higher than normal, hence our earlier communication not to increase ex-factory prices in the foreseeable future,” the document said.
“As a responsible corporate entity, we refuse and reject associations with any actions that are deemed capable of projecting any industry we operate as a cartel…
“The timing is not right for any increase on BUA’s part, and we do not have any justifiable business reason to increase our prices (ex-factory) anytime soon. We, therefore, urge our distributors not to panic as well as not engage in any arbitrary hike in the retail price of BUA Cement.”
But a market survey by PREMIUM TIMES shows BUA cement prices have risen in the retail market, and marketers blame the increase on their depot price.
A dealer of the product at Lugbe Airport Road, Abuja, who identified himself as Mr Great said, “the fact is that they are not telling the public the truth. They increase the price literally from time to time.”
“Previously we have been getting at the rate of N3,000 and later N3,300 from the depot. That is the situation now.
“We sold at the rate of N3,200, later N3,300 and presently it is N3,400. So, anyone that is telling you that the price of cement is stable, that person is not telling the truth.”
Two other dealers in Abuja confirmed to PREMIUM TIMES the current price at N3,400, while another put the price at N3,500.
When contacted for clarification, Ortega Ogra, the spokesperson for BUA Cement, ended the call and did not respond to a text message seeking comment.
The chairman of BUA Cement Company, Abdul-Samad Rabiu, said in Abuja on Thursday that cement prices will crash if Nigeria has more producers to meet local demand, according to the News Agency of Nigeria.
“The high price of cement is of great concern for me; the price is actually high. We are 210 million or 220 million people, 30 million tonnes of cement per annum is actually low for us,” Mr Rabiu said at the annual general meeting of his company.
“No one can really control the price because it depends on demand and supply. We are trying hard to ensure the price is not as high as it is now. Nigeria is growing with a huge economy; we need more plants on stream to cater to the rising demand of cement in the country. Egypt produces 85 tonnes of cement per annum and the demand of cement in that country is just 50 million tonnes per annum. And that is why prices of cement in Egypt are the lowest on the African continent,’’ Mr Rabiu said.
Nigeria’s Cement Pricing trends in Recent Years
Cement firms, like many other producers in Africa’s biggest economy, have the habit of raising prices during economic recession to cushion the impact of contracting sales. That often comes at a cost to end-users, with dire implications for disposable income and cost of living in a country that has some of the world’s worst unemployment and poverty levels.
Cement prices rose in the midst of the 2016 recession and, as Nigeria slid into another recession in November 2020, the cost of a 50kg cement bag spiralled by one-third from N2,500 to N3,600 within a month.
Cement costs in South Eastern states including Abia, Anambra, Ebonyi, Enugu and Imo quickened by 67 per cent, compared with the prices in 2020, a News Agency of Nigeria market survey showed in April.
“The prices change on daily basis, so as we are talking now, I cannot guarantee the prices it will be sold tomorrow,” Ifeanyi Amadi, a cement trader told NAN, noting a trailer load of Dangote Cement containing 600 bags cost N1.5 million last year but was going for N2.3 million in April.
“The prices change on daily basis, so as we are talking now, I cannot guarantee the prices it will be sold tomorrow,” he said.
“It (the last recession) has a large effect on what the price of building development will be,” Olawale Ayilara, CEO of LandWey Investments, a real estate firm based in Lagos said in a Reuters report in May. “There is nothing the developers can do.”
According to a 2016 World Bank report, final cement prices on the continent are almost twice the global average.
Joachim MacEbong, analyst at consultancy SBM Intelligence, said Nigeria’s prices are high when set beside those of other African nations.
Seeking Legislation to Curb Superpowers’ Dominance
Legislators in April demanded an end to the control of the market by three firms: Dangote Cement, (which owns 60.6% market share), Lafarge (which owns 21.8%) and BUA Cement (which owns 17.6%), noting price increase at the whims and caprices of the three could handicap construction needed to spur economic recovery.
Nigeria’s combined cement production capacity is in the neighbourhood of 48 million tonnes and annual demand roughly 21 million tonnes. Yet, the product’s prices now tower above global average of 240 per cent, senators said.
That makes the market “susceptible to price-fixing practices,” they said.
The Senate in a motion requested the loosening of rules on cement manufacturing permits to open up the market to new players in hopes that the policy shift will engender the competition required to lower prices.
Nigeria’s emergence from coronavirus-induced lockdowns has spurred a construction boom, fed by government housing construction, large-scale road and railway construction, real estate development, and the building of private homes.
That is leading Dangote Cement to ramp up capacity by one-third. Its current production capacity is 48.6 metric tonnes per annum (mtpa). Rival BUA Cement expects to add three million mtpa to its current six million mtpa come year-end.
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