The needless cement war

THE current mistrust existing among some cement producers and the reported glut in the cement market are as unnecessary as they are worrisome. Cement, a major item in the housing industry, accounts for about 40 per cent of the cost of housing. Being very critical in curbing the country’s housing deficit, the cement industry deserves urgent government and other stakeholders’ intervention.

The total supply of cement as of November this year, when compared to last year, was said to have increased by 11.4 per cent. The glut, according to the management of Dangote Cement Plc, was occasioned by the influx of imported cement into the market and the high volume of local production. The company said it recently closed its Gboko plant in Benue State as a result. As the Group Head, Corporate Communication of Dangote Group, Anthony Chiejina, put it, “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.” 

In a dramatic twist, the management of Ibeto Cement Company Limited debunked Dangote’s position. In a public statement signed by its Executive Director, Strategy and Public Affairs, Dr. Ben Aghazu, Ibeto accused Dangote Group of insincerity and monopolistic tendencies. Aghazu emphasised, “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.” 

This is unhealthy for the cement industry and the quest for mass housing in Nigeria. Cement is a key component of the construction industry. There is housing deficit of between 16 and 18 million housing units in the country. Over 80 per cent of Nigerians are said to live in rented apartments and it is estimated that it would take up to N56 trillion to reverse this deficit. The critical question is: why has the glut not significantly brought down the prices of cement? Today, the price of a 50-kilogramme bag of cement is between N1, 900 and N2, 000. For a greater part of 2010, the price was about N1, 500. Early last year, the price went up to as high as N2, 300.

Not happy about this high price, President Goodluck Jonathan directed cement manufacturers to bring down the prices within 30 days. The manufacturers, who pledged to do as directed, blamed the situation then on post-election violence in the North, low supply of Low Pour Fuel Oil mainly used in the manufacturing industry, and shortage of trucks to convey the products to the end users across the country. It is curious that in spite of all the assurances then, the presidential directive has not led to a downward slide in cement price towards the N1,000 per bag mark.

Part of the problems of the industry is policy inconsistency by the Federal Government. It keeps banning and unbanning the importation of cement such that both the importers and manufacturers have had to contend with problems at one time or the other. For instance, in 2008, the government gave import licences to 13 local companies to import bulk cement. This was ostensibly to engender more competition in the industry and bring down the prices. Two years after, the government imposed a 35 per cent levy on importation quotas. This was to encourage local production of the product. This year, the government has not issued any import licences.

Besides, in 2005, the Federal Government issued Ibeto a guarantee to operate its proposed bagging plant in Port Harcourt, Rivers State, for at least 10 years. Hardly had the plant taken off when the same government closed it down. Ibeto went to court and, according to Aghazu, it later secured approval to import 1.5 million tonnes of bulk cement annually from October 2007 to September 2017. Thus, the company says it is the only one importing bulk cement in the country currently.

Cement is a strategic commodity, essential for Nigeria’s economic security and infrastructure renewal and expansion. It should be made readily available in every part of the country and at affordable cost. The government should help the cement manufacturers by providing the infrastructure necessary to make their business grow.

In a well structured economy, the cement war would be unnecessary. The Federal Government must ensure a competitive business environment that attracts and retains global investment into the cement industry. Last year, a leading cement manufacturer had assured the nation that Nigeria would earn enormous foreign exchange from cement exports this year.  It is also envisaged that local self-sufficiency will be achieved in 2013. These options should be vigorously pursued and will go a long way in combating any glut in the market. The Ministry of Trade and Investment should address the concerns of all stakeholders without sabotaging the economy and compromising consumers’ interest.