For a developing nation, undertaking large-scale construction across the country, the exorbitant price of cement, which recently hit the roofs, is very worrisome. Nigerians have been groaning under the huge cost, and that is why the presidential intervention aimed at reducing the price, within thirty days, not only offered some hope of relief, it also showed the sensitivity of President Goodluck Jonathan to the plight of Nigerians. That is in spite of the fact that the gesture is coming a little late.
Interestingly, major cement manufacturers, not only agreed to lower the price of the product, some of them , 48 hours after the directive, actually commenced measures that could force down the price. Such measures like purchase of 5,000 delivery trucks by Dangote Cement; the commencement of production by Benue Cement Company (BCC), which had shut its plant earlier and thus denied the market its supply of 3,000 trucks of cement per week.
But beyond the hope offered by the presidential order, what is the reality of the situation? How far can the stop-gap measures take the country? For a product which was selling between N1,400 to N1,500 at the beginning of the year to suddenly spin off to N2,400 and above per bag, shows that something is wrong with the market. The manufacturers had blamed the sharp increase on the cost of diesel, which rose from N80 per litre to N160/170 per litre, especially as transporters whose truck are powered by diesel had to also increase their charges.
Also, the high cost of Low Pour Fuel Oil (LFPO) - a major component required to run the manufacturing plants - helped to up the price of the product.
We are concerned that the panic measures being initiated by the manufacturers, seem artificial and tailored to fit the presidential order. It may turn out to be a quick-fix dose whose effect will soon wear off. The government has agreed to supply diesel at reduced prices to the manufacturers. Good enough! But for how long will this gesture last? Ultimately, a resolution of the energy crisis in the country will save the cement manufacturers, and indeed the entire real estate sector from the economic burden of electricity generation.
Beyond this, the price of cement, which is largely imported, shot up simply because supply dropped. The basic law of demand and supply is in action here. If the supply rate and chain improves, the cost will surely fall. Therefore, we believe the government should deliberately liberalise the importation of the product without necessarily jeopardising the economic interest of the local investors/manufacturers in the sector. All the interest groups within the cement market with diabolical aim should be smashed. Also, we believe that the Bank of Industries can provide facilities that can enhance the productive capacity of the local manufacturers, so that we are ultimately freed from the importation snag and its implications. Needles to add that except the government addresses this frontally, its housing programme stands threatened.
Perhaps more worrisome is whether indeed, the President can actually enforce the order to reduce the price. Is it a mere moral persuasion and plea or does the order have implication that the full powers of the state can be deployed to ensure compliance? Does any manufacturer not willing to "comply" stand the risk of government's penalty? How will government compel a manufacturer to sell at a particular price? Can the government dictate price in a free market economy, driven by the private sector? These are some of the questions which the presidential order on the price of cement has raised.
We believe government's concern on the issue should go beyond the token effect of the order, to addressing the fundamental problems that are 'de-industrialising' Nigeria. And for a product which is not only central to construction, but also without substitute, the Federal Government must rise above the short-lived euphoria of playing to the gallery, by tackling decisively the factors militating against cheaper cement and indeed, other building materials.
No comments:
Post a Comment