Cement prices have shot up again (this time) by 66.6 percent, to N3, 000 per bag from N1,800, despite spirited efforts by stakeholders to hold the prices down.
The rise in prices this time, was caused by the inability of local cement manufacturers to augment their production through importation.
Local cement manufacturers had been given import certificates by the Federal Government, in an effort to bridge the short- fall in supply early in the year, when cement prices were soaring uncontrollably.
Informed industry sources told BusinessDay however, that the certificates, which have limited lifespans, have since expired and could not be renewed immediately because of recent changes in the leadership of the Industry and Commerce Ministry (now Ministry of Trade and Investment).
It will be recalled that cement prices across the country crashed to about N1, 800 a few months ago, following a directive from government, that cement manufacturers bring the price of this vital commodity down in 30 days.
Our sources say that because the certificates have expired, Customs cannot allow into the country, stocks of cement, now lying at the ports, not covered by importation approval.
Dangote Cement for instance has two ships of cement at the port waiting for customs clearance and more ships are on their way. Our source said clearance would start today and that price would go down as soon as we have enough cement in the market.
BusinessDay is also informed that a meeting was on yesterday, between government and market players, on the issue of renewal of importation licence and that a renewal that would last up to December, 2011 will be given by government to local cement manufacturers who already have government endorsement to deal with the issue of supply gap. Such renewals would continue until the country produces enough cement locally for home consumption.
Nigeria ’s current cement demand is put at about 17 million metric tonnes per year and total local production for 2010 was 14 million metric tonnes, which leaves a short fall of three million metric tonnes, which is augmented by import.
Dangote Cement, which currently produces eight million metric tonnes per year, is increasing capacity to 20 million metric tonnes by 2012. Lafarge Cement WAPCO Nigeria Plc, expects to increase production from two million metric tonnes to 4.2 million metric tonnes during the same period. However, Ashaka Cement Plc, which currently produces one million metric tonnes, Unicem - 2.5 million metric tonnes, Sokoto Cement - 500,000 metric tonnes, and Purecem – 100,000, are not involved in any expansion. This means that capacity would have moved by 100 per cent, from 14.1 million metric tonnes in 2010 to 28.3 million metric tonnes by 2012.
In the past, BusinessDay was able to establish that distributors’ greed, logistics, energy, high tax/levy, supplies gap and panic buying problems, were responsible for the high price of cement across the country. It may therefore not be out of place to say distributors are taking advantage of the shortfall in supply to raise price. It is therefore clear, that it is market forces that are currently playing out.
It would be recalled that between February and May this year, prices of the different brands of cement shot up by an average of 44 per cent. A bag of cement, which was sold for about N1,500 in December 2010 came up to between N2,500 and N3000. The major brands of cement in the country are Ashaka, Ibeto, Burham, Bua, Elephant and Dangote. They are manufactured in different locations across the country. After government’s intervention, prices came down to between N1, 500 and N1, 800, depending on what part of the country one was buying from. It is this price range that has now gone up to N2800 –N3000.
Transport costs are a major factor in the determination of the unit price of a 50 kilogramme bag of cement. BusinessDay’s investigations reveal that transport costs have shot up, as a result of the high cost of diesel. The farther away you are from point of production, the more you have to pay for a bag of cement because cost of transport increases with distance.
The cost of cement affects the quality building blocks churned out by moulders, as well as patronage. According to one of the masons interviewed by BusinessDay in July, “The hike in price of cement has caused a drop in the quality of the blocks being produced as block makers are desperate to break even in the face of the challenge and there is a lull in building activities.
“A 6x6 inch block which sold for N90 before the price increase now sells for N115 while the nine inch block which sold for N120 now sells for N140.”
