Guardian

SOMETIME last year, President Goodluck Jonathan, unhappy with the high cement price, directed cement manufacturers to bring down the prices within 30 days. This was not met. The intervention by government, giving a standing order to local manufacturers in the industry to increase their production capacity to crash the price, brought about a slight decline in the price from about N2, 200 to a little below N2, 000 last year.

However, in the past few weeks, the cement industry has had its fair share of politicking, especially as regards some key issues revolving around the commodity’s production, supply and pricing. The brewing ‘war’ on the quantity of cement available in the country both through local production and importation, have further raised concerns on the real state of the ‘glut’ in the market, what government is doing to salvage the situation and why, if possible, is the price of cement has not dropped in the market as against the initial objective of the federal government.

In a country challenged by housing crisis, the subsisting high cost of cement is a cause for grave concern, especially as cement accounts for over 40 per cent of the budget of housing construction.

It could be recalled that before the cement import licences granted by the federal government expired on October 1, 2007, cement prices had stabilised at about N1, 250 per bag of 50kg. Since then, however, prices have oscillated between N1,350 and N2,100, depending on location and the cement brand.

It was estimated that Nigeria needed 8 million tonnes of cement in 2001. This figure jumped to 11 million tonnes in 2006. Currently, the country requires some 18 million metric tonnes every year. Significantly, going by the production capacity of all the five companies manufacturing cement locally, there is an argument on whether they have been able to produce up to 80 per cent of this requirement consistently.

For instance, the President of Dangote Group and Chairman of Dangote Cement Plc, Alhaji Aliko Dangote maintained that the cement glut is real because of the expansion projects embarked upon by manufacturers in recent years.

Pointing to the South-west market as one example, he said: “Our group brought on stream 6.5 million metric tonnes per annum at Ibese in 2012. Also, in the same year, Lafarge brought on stream another 2 million metric tonnes per annum at its new plant in Ogun State. That is 8.5 million tonnes of new capacity. This is 8.5 million metric tonnes per annum in a market (South-west) that actually needs 3.5 million metric tonnes per annum.”

He said that in an ideal situation, Dangote Cement and Lafarge should be able to export excess capacity to Benin Republic and other neighbouring West African countries, but those countries have imposed all sorts of restrictions on cement imports from Nigeria, making it uncompetitive.

Citing the continued importation by Ibeto Cement Company of Nigeria as the cause of the glut, Dangote recently closed its Gboko plant in Benue State as a result, adding that more cement plants are threatened by this development.

In the words of the group head, corporate communication of Dangote Group, Anthony Chiejina, “With the dumping of subsidised imported cement in the south-eastern market, there is no way our Gboko cement plant can survive. In fact, members of staff have been put on forced leave pending when the situation improves.”

Dangote added saying: “Cement export is like a dumping process. Imported clinker is actually cement without 3.5 per cent gypsum, so it is much cheaper than cement manufactured locally. This means that by the time an importer is dumping cheap clinkers in the country, he makes it impossible for local producers who have invested heavily in Nigeria to compete,” he added.

On its part, the management of Ibeto Cement Company debunked Dangote’s position through a public statement signed by its Executive Director, Strategy and Public Affairs, Dr. Ben Aghazu, saying: “Dangote Group wants Ibeto Cement Company out of the market so they can dominate the south-east zone also and thus complete their monopolistic stranglehold on the entire cement market in Nigeria.”

For Lafarge Cement WAPCO Nigeria Plc, its Managing Director and Chief Executive Officer, Joe Hudson, in a statement made available to The Guardian on Monday, to clarify recent reports, said “although we temporarily reduced our production recently to manage inventory levels, we have no intention of closing our plants and expect to be fully operational soon. Indeed, it is true that the last quarter of 2012 saw an unusually dull market evidenced by an industry-wide situation where current stock levels of cement and clinker are high”.

To some industry watchers, accusations of cement glut being bandied flies in the face of basic economics. A glut results when a market is excessively supplied with a particular product. The first evidence of such a situation is the drastic reduction in the price of the product, but this has not been the case of cement.

This however, Chiejina said, may be impossible, saying: “There is a cost push and a demand pull inflation. The first is a higher price resulting from a high cost of production while the second is a higher price resulting from a sharp increase in demand. Therefore, the Dangote Goroup cannot afford to reduce its price in a market flooded with imported cement because it will not recover its cost of production. Even if you open the doors for imported cement, it won’t bring down the price of cement.

“You need to understand that the unsavoury development is threatening over 46,000 jobs in the industry, as high stock inventory and low capacity utilisation level have become the order of the day. Already, the Gboko, Benue State plant of Dangote Cement Plc has shut-down, with over 2,500 workers temporarily laid off, as the company awaits improved business environment to re-commence operations.”

On his part, President of Cement Manufacturers Association of Nigeria (CMAN), Joseph Makoju, affirmed that the prevailing business environment in the country has been sounding the death knell of the industry.

The CMAN boss, said the association had already petitioned the Federal Government over the “dying” industry, with a proposal for “quick” intervention measures, to save the situation.

In a new twist, the Federal Government on Monday in Abuja said that a new cement policy for the country would soon be unveiled, indicating an end to the current operating policy of Backward Integration in the cement industry, which was adopted in 2002 by the administration of former President Olusegun Obasanjo.

The Minister of Trade and Investment, Mr. Olusegun Aganga, who disclosed this, however, said the government would review the Backward Integration Policy, with a view to consolidating on the success so far recorded.

According to Aganga, at the end of the entire review, the Federal Government would come up with a fresh strategic direction for the industry, which would have three major thrusts that include the enunciation of policies to help bring down the price of cement and make the commodity more affordable to Nigerians.

He said the second aspect is that he and his team are working on policies that will enhance the consumption of cement and lastly he pointed out that he is also working on policies that will open up the export market for cement produced in the country.

In attendance at the meeting were the Managing Director/Chief Executive Officer, Lafarge Cement Wapco Nigeria Plc, Mr. Joseph Hudson; Chairman, BUA Group, Alhaji Abdulsamad Rabiu; Group Managing Director, Flour Mills of Nigeria Plc, Chief Emmanuel Ukpabi; Chairman, Ibeto Group, Chief Cletus Ibeto; and Group Representative, Dangote Industries Limited, Mr. Isa Tata Yusuf.

The development however created a new dimension to the usual subtle but long-standing war between manufacturers and importers of the commodity in the industry, as the minister said the government would soon constitute a group of people who would look at the cement policy in details and come up with the policy response that needed to be put in place to take to make Nigeria a major exporter and user of cement in terms of consumption.

Hitherto, the Ministry of Trade and Investment had noted that Nigeria is producing more than it needs and with the unveiling of plans that the country may begin the exportation of cement in 2013, especially at a time when the productive capacity and local demand had just been matched, as announced by local manufacturers, there are posers on why the importation of cement should still be a desirable option for the government?

Aganga said, “In 2002, the major priority of the country’s Backward Integration Policy was about cement production from limestone. I am delighted to say that after 10 years of implementation of the BIP, the good news is that we started with two million metric tonnes capacity, but today, we have about 28 million metric tonnes capacity of cement or investment of about $6bn; which provides direct and indirect employment for about two million people. And because of what we have done together, we have been able to save the country foreign exchange of about N210bn per year.

“This means that we need to look at the overall structure, including the current pricing, availability and affordability, in addition to developing an export strategy for the sector.”

The minister said his ministry would work with all the stakeholders in the sector to ensure sustainable growth and development.

“This is the key message that I want to pass across in terms of where we are today and what our plans are in terms of where we want to be, going forward. I want to carry everyone along in terms of what we are looking at and incorporate your inputs into what we are planning to do so that at the end of the day, it will be a win-win situation for all the manufacturers, consumers and the Nigerian economy at large,” he said.

Makoju, a consultant to Dangote Cement Plc, had affirmed that contrary to rumour making rounds that Gboko plant was shut down because of turn around maintenance, the board of Dangote Cement actually temporarily closed the plant due to huge cost of running it with the prevailing investment climate in the country.

According to him, the high cost in running Gboko plant was crippling the company’s investment plan and it was caused by the government’s alleged insensitiveness over their inability to provide good investment clime for local investors to grow their businesses.

“In the last six months, we manufacturers of cement in Nigeria have been storing tonnes of cement and clinkers in our warehouses since there has been significant drop in demand of cement and no market to sell our products. We were spending a lot of money on buying gas, LPFO and building expansion programme. But we are very worry with the state of our business and the sector since government is not getting us the interventions we need to protect the local market. We don’t have any choice than some of us to start shutting down our multi-billion Naira investment place due to lack of market,” Makoju said.