• Saturday, June 15, 2024
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Rise in haulage costs makes cement pricier

BUA Cement posts N90 billion profit in 2021

The increase in haulage costs arising from petrol price hike is taking a toll on the building and construction sector, having pushed cement price up from between N4,000 and N4,500 to N5,000–N5,500, depending on location and product brand.

Industry operators and others in the sector stakeholders have expressed worry that the current increase will not only squeeze the industry further, but also deepen homeownership challenges and widen existing housing deficit.

The operators note that in the past 15 months, the increase in the price of cement has affected other building components, including paints, reinforcement and sanitary fittings, sand, roofing sheet, tiles and granite, whose prices have gone up by about 70 percent.

They cited the most recent market survey which shows that a 50kg bag of cement previously sold at N3,500 last year has gone up again from N4,700 to N5,000 per bag this year. The survey shows further that in places like Ogun, Ondo and Abuja, the 50kg bag goes for between N4, 750 and N4, 800, while in some other locations, it goes for between N4,900 and N6,000.

Read also: Inside details of cement makers’ struggle to sustain profits

High costs of building and of urban land acquisition have been established as challenges public and private sector housing developers face, according to Ayo Ibaru, CEO, Northcourt Real Estate. “As house rents and inflation continue to rise amidst rising costs of living, an increasing number of low-income tenants will likely relocate to low-income areas,” he said.

The operators also expressed concern that cement price has continued to rise in the country amid large deposit of raw materials for producing the commodity in the country such as limestone, marl, calcite, shale and gypsum.

Limestone deposits abound in many states of the country including Abia, Akwa Ibom, Anambra, Bayelsa, Benue, Borno, Cross River, Enugu, Imo, Nasarawa, Ogun and Sokoto, while about a billion tonnes of gypsum deposits are spread over a number of states in the country, including Yobe, Adamawa, Bayelsa and Anambra.

Hyginus Nwomeh, a builder operating in Isolo area of Lagos, blamed the current situation partly on what he called “monopoly” that defines cement manufacturing in Nigeria.

“Today, cement production is still controlled by Dangote, Lafarge and BUA who control 60.6 percent, 21.8 percent and 17.6 percent of the market respectively. They dominate the market and have practically fenced off potential players and competitors,” Nwomeh told BusinessDay.

He noted further that housing construction in Nigeria remained largely bricks and mortar, which depend on cement, saying, “Cement-based products are critical components for housing development; without it, no decent, strong and durable building or construction could be done; cement accounts for about 40 per cent of building costs in the country.”

To many cement sellers at building material markets across Lagos, the new price increase came to them as a jolt, explaining that increase in logistics and haulage costs were not enough reason for the over-night increase in the price of the product.

“This development is a huge surprise to us because just last week we sold a 50-kg bag for N4, 600 and N4, 700, only for us to learn today that the price has increased from the factory just a few days after. We now sell a 50kg bag at N5, 000 per bag for the popular product, while the other ones go for N4, 900,” a seller who did not want his name mentioned told this reporter at Kpako Market, Isolo.

The seller recalled that in the past, cement price increases were blamed largely on high cost of production, rise in freight charges, and high cost of power, pointing out, however, that the recent petrol price hike has contributed significantly in increasing cost of transportation and distribution of products to all parts of the country.

According to the seller, the situation was such that even those who help to load and off-load the product from trucks have increased what they used to collect for the job they do because “they are complaining of the high cost of living and demanding higher pay for their services.”

“And the question we must ask is who will bear the cost? We have to add all that logistics to the price of the product to maximise profit at the end of the day,” the seller added.