TUNDE KAZEEM
It is remarkably easy to forget the lessons that history has taught us to prioritise short term interests over long terms gains. Throughout history it is amazing how many people fail to take on board the lessons of the past, and apply them to current situations.
After independence and during the oil boom of the 1970’s Nigeria Invested in seven cement plants as part of an import substitution, industrialisation policy designed to increase local value added production capacity and to reduce an over-reliance on imported products.
By 1986 local cement production capacity in Nigeria was a record 3.5 million tonnes per annum (accounting for 81.4% of total supply in Nigeria). In the same year, 800,000 tonnes of cement were imported into the country (accounting for 18.6% of supply). We had a local cement industry that met over 80% of local demand and created value and wealth for our country and its people. So what do you think we did?
The country threw open its doors to the indiscriminate importation of cement into the country. We wilfully and irresponsibly flooded the market with imported cement, causing the collapse of the local cement manufacturing industry. By 2003, local cement manufacturing capacity had collapsed to an all time low of 1.98 million tonnes, meeting only 23.53% of local supply, while 8.4 million tonnes of cement were imported, accounting for over 70% of supply.
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In 1999 our country entered a new era of democratic government and in 2002, that government introduced an import substitution policy designed to re-energise our country’s manufacturing sector and to once again, reduce our overreliance on importation.
2008, six years after the institution of the import substitution policy, marked the highest per annum cement consumption in Nigeria on record, at 13.04 million tonnes. But by this time local production had increased to 6.06million tonnes representing 46.50% of total supply, with the balance of 53.50% supplied through imports (6.98million metric tonnes).
There is an even more convincing figure. In 2008, the 6.06 million tonnes of cement that were produced locally in Nigeria would have cost us US$770 Million to import at an average import price of $127.50 per tonne. That’s money that would have been paid into the accounts of foreign cement suppliers and that would never have been seen again.
Projections for 2009 suggest that local production of cement is expected to be between 10 million and 11 million tonnes and is expected to meet significantly more than 50% of the national supply.
The government has been taking the right approach towards the progressive replacement of cement imports with locally manufactured produce. The fact that local demand for cement in Nigeria currently exceeds local production capacity is well acknowledged. But the progressive reduction in the level of imports as new production capacity comes on stream is the right approach to solving the problem of supply.
Therefore, government should not fall for the antics of those who for selfish reasons are calling for unbridled importation but remain steadfast in its constructive approach to local cement capacity expansion.
However, this trend will continue only if the implementation of the import substitution policy is maintained and sustained. The ‘U’ turn in 2007 with multiple issuance of licenses for imports to trading companies has the potential to reverse this trend and local manufacturing capacity will be once again run down in the same way that it was in the late 1980s and 1990’s.
Recent media reports have accused the cement manufacturing industry of operating a ‘cartel’ designed to control cement sales in Nigeria and explicitly stated that cement manufacturers had failed to utilise the import quota allocated to them by the government as part of the progressive ‘substitution’ process. Those who are familiar with the Nigerian cement market will confirm that this allegation can not be true. Reports from the ports confirm that all cement manufacturers that have associated companies with import terminals utilised their quota and delivered import volumes to the market. The import figures for 2008 are: Dangote Cement 3,179,000 metric tonnes, Burham Flour Mills 1,720,000 metric tonnes, Lafarge/Atlas 481,000 metric tonnes and Eagle Cement 530,000 metric tonnes. In 2008, local manufacturers imported a total of 5.91 million metric tonnes of cement into Nigeria.
These facts go to confirm that indeed, local cement manufacturers are actually working in support of the government goals of making cement available and actively working to meet local demand through imports complimentary to local manufacturing volumes and are substantially increasing local production levels to meet demand.
