AFRICA: NIGERIA: As cement prices return to rooftops

The construction of roads, infrastructure and housing is reeling again under a vicious resurgence of cement prices. Reports have it that in many parts of the country, especially the Lagos metropolis, where development of housing projects is proceeding at a frenetic pace, a bag of cement now goes for as a high as N2,800 per bag.

This obviously tops the all time high price of N2,500 per bag reported in May 2011, when newly elected President Goodluck Jonathan summoned cement manufacturers and handed them an ultimatum to crash the prices of cement within one month.

At that meeting held on Monday, May 16, 2011 at the State House, Abuja, were the President of the Cement Manufacturers Association of Nigeria (CMAN), Mr. Joseph Makoju, the nation’s foremost cement manufacturer and merchant, Alhaji Aliko Dangote, the Chairman of the BUA Group, Alhaji Abdulsamad and the Country Manager of Lafarge Cement, Mr. Jean-Christophe Barbant. At the end of the meeting, the cement moguls addressed the media, offering to comply with the presidential directive.

On Monday, June 4, 2011, Dangote announced it was crashing the price of its own products to N1,500 per bag. Briefing cement distributors, the company’s Executive Director in charge of sales, Mr. Ekanem Etim, assured that his company would expand capacity to six million metric tonnes of cement per annum when its Ibeshe plant was inaugurated before the end of 2011.

The euphoria was contagious in the industry. The Executive Secretary of the Cement Manufacturers Association of Nigeria (CMAN), Mr. James Salako, just like other ecstatic citizens, praised Dangote to high heavens. The President of the Nigerian Institute of Architects (NIA), Mr. Tunji Bolu, pledged that his institute would set up a committee to monitor the prices of cement as a show of support for the government’s responsive gesture of driving down the prices of cement.

However, barely three months after the good news, as is usual with all things Nigerian, the situation has gotten worse than ever before because Nigerians are suddenly forced to part with more money than ever to buy this essential commodity which is central to the provision of shelter to a severely under-housed population. The installed capacity of the local cement industry is put at 15 million metric tonnes, and yet it will require at least 25 million metric tonnes to meet the booming demand and stabilise prices at an affordable level.

According to current reports, the commodity is now scarce mainly because of the old culprit and nemesis of Nigerian industrialisation: poor public power supply. It was recently reported that the national grid lost about 1,000 megawatts of electricity to low gas supply to power stations, especially the nation’s largest plant at Egbin in Lagos. Other sources simply blamed the market forces of demand and supply, whereby demand continues to outstrip supply.

A recent market survey by Vanguard Newspapers in the Ojodu Berger, Isheri and Sabo areas of Lagos State and Alagbole, Akute, Olambe, Oshere and Matogun areas of Ifo in Ogun State indicated that unit prices of cement blocks have risen from N120 to N150 for six inches blocks, while nine inches moulds now fetch N175 apiece rather than the former N135.

A lesson to be learned from the forced crashing of cement prices — an old economic lesson at that — is that it is pointless to decree or dictate the prices of commodities in a free market. During the dark days of the military, efforts to force down prices eventually resulted in empty shelves and severe scarcity of essential consumer commodities. The attempt by the President to force down prices has clearly backfired. This was because other connective measures to boost production or even importation to create equilibrium between demand and supply were not taken.

The Federal Government needs to realise that its much trumpeted “Transformation Agenda” will not move forward unless hard steps are taken to remove the many cabals, cartels and monopolies that bedevil our system. To prevent a heightening of the incidence of collapsed buildings and failed infrastructure, a lasting solution must be found to cement scarcity.