Lafarge, BUA, Dangote Sends Strong Message To Nigerians, Reveals Why Price Of Cement May Not Decrease, See Details
The rising cost of cement in Nigeria has become a significant concern, driven by factors such as the ongoing depreciation of the Naira and increasing inflation. The combined effects have led to a staggering 121% rise in cement production costs, making it unlikely that prices will decrease anytime soon. Currently, a 50kg bag of cement sells for around 8, 000 to #9, 000 in Nigeria, but smuggling to neighboring countries like Chad and Cameroon, where cement prices are much higher, is exacerbating the problem. In these countries, a bag of cement can cost between $120 and $150, translating to approximately N240, 000 to 270, 200 per bag when converted at the prevailing exchange rate of 1, 600 per dollar.
This significant price disparity has fueled smuggling activities, reducing the availability of affordable cement in Nigeria and further driving up costs for local consumers. Industry experts warn that without targeted Interventions, the hope for lower cement prices in Nigeria may remain elusive as pPnDPVbBpCLoduction costs continue to rise.
The profitability of leading cement manufacturers in Nigeria, such as Dangote Cement Plc, Lafarge Africa, and BUA Cement Plc, has been negatively impacted by the rising production costs. Despite an 84. 5% increase in combined revenue to N1. 116 trillion in Q1 2024 from N604. 9 billion in Q1 2023, the 121% spike in production costs to #586. 6 billion during the same period has led to a decline in profitability. The combined Profit Before Tax (PBT) for these companies fell by 4. 1%, from N204. 8 billion to #196. 4 billion.
The National Association of Block Moulders of Nigeria (NABMON) has called on the Federal Government to reduce import duties on cement manufacturing components to attract more foreign investment in the sector. NABMON’ s National President, Mr. Adesegun Banjoko, noted that the current price of cement in Nigeria is still too expensive for many.
The rising costs of energy and imported materials are major contributors to the increase in cement prices. Cement production relies heavily on gas and electricity, but erratic power supply and the rising cost of gas, which is indexed to the US dollar, have driven up production expenses. Additionally, key inputs like gypsum and polypropylene, which are also priced in dollars, have seen their costs rise due to the weakening Naira.
Kabiru Rabiu, Group Executive Director of BUA Cement, highlighted that while some local materials are used in cement production, many costs are tied to the US dollar, meaning that as the Naira depreciates, these costs will continue to rise. The situation is compounded by the fact that essential materials and energy inputs, such as gas, are paid for in Naira but indexed to the dollar. Rabiu emphasized that the perception of cement being primarily a local product does not reflect the reality, as many critical inputs are affected by exchange rate fluctuations.
The combination of these factors suggests that without significant changes in government policy or economic conditions, cement prices in Nigeria are likely to remain high, further straining the construction industry and consumers alike.
