The Chairman and Founder of the BUA Group, Alhaji Abdulsamad Rabiu, has called for the liberalisation of Nigeria’s cement policy to boost production and subsequently crash the price of the commodity.
Rabiu, however, attributed the high cost of cement in Nigeria to low production capacity.
Rabiu told reporters on Monday in Lagos that the price of cement, which presently sells for about N4,000 per bag, remains high in Nigeria because the few producers are not able to meet the country’s huge demand.
“That is a simple economics of supply and demand,” he said, just as he faulted the belief that the country is self-sufficient in cement production.
“That is a simple economics of supply and demand,” he said, just as he faulted the belief that the country is self-sufficient in cement production.
The billionaire explained: “Look at the numbers: Nigeria is over 200 million people today in terms of population. If you look at the production of cement, last year, we were under 30 million metric tonnes.
“In fact, last year was higher than the year before, which means that in 2019, we were doing between 26 and 27 million metric tonnes. I am talking about production, and not installed capacity, which is another thing entirely.
“Nigeria’s 200 million people make it about 130 kilograms per head. If you check, you will see that most countries in Africa are doing between 170 kilogrammes to 200 kilogrammes per head.
“So, Nigeria is actually producing less than other countries in Africa, apart from maybe Niger Republic. So, that means that we do not have enough capacity.”
According to Rabiu, whenever any of the plants of the few players in the industry develops a fault, the impact is immediately felt on the price of the commodity, which is passed on to buyers of the product.
According to him, “The moment you have any problem in any of the plants in Nigeria and there is a shut-down or any challenge, immediately, you will see the impact in terms of price going up.
“That is because we do not have any buffer whatsoever. So, it is like hand to mouth daily. The reason why the price of cement went up recently was simply because the was an issue at one of Lafarge’s plants and they had to stop production for few months to rectify that.
“So, as that had happened, the supply from Lafarge reduced by about 25 per cent in Ogun State. Also, one of the plants of Dangote Cement had a technical issue and briefly, they couldn’t load. But that has been resolved.
“But because that took about one month, the price of cement went up to about N4,000, from N2,800.”
According to him, during the administration of former President Olusegun Obasanjo, he had advocated for a review of the country’s cement policy.
Rabiu said he advised the federal government to open up the industry to allow for more players, expressing the belief that such would help to crash the price of cement in the country.
“Even though this cement policy is a good one, it must be done in such a way that a lot of players must come in and participate. There is no point in making a policy that only one, two, or three people are able to benefit from that policy,” he said, adding: “That does not make sense. I am benefiting from this policy, but I know it is a bad policy. So, whilst the policy is good, the way it is being administered is not good. You can’t have a policy that restricts so many people from participating, at the end of the day, you are just creating a monopoly.”
He said although the policy had helped the country to put up so many plants, he argued that the government needs to take a second look at the policy, to see how it can bring in more companies to participate.
He described Nigeria’s cement sector as important to the economy, maintaining that, Nigeria has no business selling cement at N4,000.
“Our ex-factory price is still about N2,700 per bag, but cement is selling between N3,500 and N3,800. I had to stop my people from collecting money last week, simply because we are collecting money much more than what we can produce,” he said.
The BUA chairman said there are many other companies that have the capacity and access to funding to be able to compete in the industry in Nigeria, adding that the entire country is sitting on limestone.
“Anywhere you go, there is limestone in Nigeria,” he emphasised and explained: “And the cost of production is probably the lowest in Africa.”
Rabiu urged the federal government to open up the cement industry for more competition.
According to him, the few players in the industry, “are making so much money in the industry and Nigerians are the ones paying for this. I am part of it, but I know it is wrong.”
Rabiu pointed out that the same thing is presently happening in the sugar industry, with the Backward Integration Programme (BIP).
He stated: “In the sugar industry, you have a situation where you have only three players and there is the BIP policy, which states that unless you are seen to be doing a plantation you would not be allowed to do sugar refinery.
“Again, it is the same kind of policy where few people are benefiting and 200 million people are suffering. The business is doing well, we are making money, but how much money do you really need.
“We have 200 million people and they are paying more than what other countries are paying for something that ought to be cheaper.
“Today, I am ready to reduce my cement and sugar prices, if other companies are ready and I challenge them. If you are posting 50 per cent as profit, and Nigerians are paying for that, why can’t you make 25 per cent profit, so that instead of N4,000, they would be paying N2,000 per bag of cement, and it can happen,” Rabiu said.
Obinna Chima, Goddy Egene