BusinessDay
Nigeria's leading finance and market intelligence news report.

Rising cement price leaves no one untouched

Bisoye Abiodun is a support staff with one of the telecoms companies in Lagos, who started a building project in Mowe area of Ogun State in February 2019, with savings from his moderate salary, targeting to finish the project in 30 months and bid good bye to Lagos landlords.

That dream, it appears, has been deferred as Abiodun’s project has stopped at walling level due to rising cost of building materials, particularly cement, which is a major component of building and construction.

“When I started this project, cement was selling for N2,300 and N2,500 per 50kg bag, depending on the brand. The project suffered significant stops in 2020 by both Covid-19 pandemic and EndSARS protests. When work resumed on the project after those stops, the crisis in the cement market began and from N2,500 per bag, the commodity now sells for between N3,600 and N4,000 per bag,” Abiodun told BusinessDay.

According to Abiodun, there was no way he could continue with the project in the circumstance, more so as the price of other building materials like reinforcement (rods) has also gone up considerably. “The project can wait; my urgent need for now is feeding and getting well,” he said.

Similarly, Francis Ikemefuna, an Aba, Abia State-based real estate consultant, has had what was a big business opportunity cut short by the rising cost of cement in the state.

Ikemefuna got what was, to him, an interesting brief from his client on a building project that would be starting in the last quarter of 2020, to deliver good and affordable housing for low income families.

His client recently suspended the project, citing unsustainable increase in the price of cement to N4,500 from N2,650 per 50kg bag in some South East states. “The project, which would have started in November 2020, was suspended because the contractor presented a fresh estimate, based on current realities, which increased the cost of the project by 43 percent,” Ikemefuna told BusinessDay correspondent in Aba.

The real estate consultant lamented further that the current hike in price of cement prevented his firm from renovating some of the properties they manage. This happened after they had assured their tenants that they would renovate their buildings in December 2020, using the yuletide period.

“We couldn’t start because of high cost of cement. And unfortunately, four out of the six landlords, who agreed on the planned renovation, have now asked us to notify the tenants of possible rent increase to enable them renovate the houses,” he said.

From the various states of the federation, reports are the same of increase in the price of cement to a crisis level. The increase has already triggered ripple effect on the open market where prices have gone up by as much as 60 percent in some states.

This has worsened construction costs in a sector reeling under pressure from disruptive policies and ineffective housing supply, thereby hurting individual and corporate home builders and players in cement business.

BusinessDay investigation points to various causes of the price increase. The export of the product to neighbouring countries, despite huge domestic demand, is a strong suspect responsible for the shortage.

It was gathered that the Federal Government granted Dangote Cement and BUA permission to transport products across the border where cement and its by-products are said to command higher prices.

There are other reasons for the price hike one of which, according to an inside source in a popular cement manufacturing company in Port Harcourt, is construction hype that is always high during dry season when most construction companies increase their activities to meet targets and deadlines.

“Despite about 20 million housing units deficits and huge shortage in cement and cement products supplies in the country, the Federal Government still gives waivers to Dangote and BUA to export cement,” Leke Akinbamde, CEO, Achievers Blocks and Cement Firm in Abeokuta, said.

The Nigerian cement industry has three major players dominating the market, with Dangote Cement plc leading the pack with 60.6 percent share of the market and a local installed capacity of 29.3 million metric tons (MT); Lafarge Africa plc has 21.8 percent share with a production capacity of 10.5 million MT, while BUA Group accounts for 17.6 percent share and 8.0MT per annum.

There are also small players in the market, like the PureChem Industries based in Ogun State with 900.000MT. Local cement production capacity is expected to hit 53.8 million ton per annum when a new additional plant from BUA materialises.

While the entry barrier remains high, manufacturers have strong influence over the prices they pay to their suppliers, reflecting the monopolistic nature of the market.

This explains why, according to BusinessDay market survey across states in the South West, South East, and South South, the price of the commodity differs from one region to another and according to brands.

For instance, whereas the price of a 50kg bag is N3,600 in Lagos, it sells for between N4,700 and N5,000 in Akwa Ibom State; N3,000 in Abia State; between N4,500 and N5,500 in Ogun State; between N3,800 and N4,000 in Oyo State; between N3,000 and N3,400 in Edo State; between N3,300 and N4,200 in Port Harcourt, while in Owerri, the Imo State capital, the price hovers between N3,400 and N,4000.

Concerns have continued to mount over this soaring price of a commodity as important as cement and how that impacts negatively on the building and construction industry, home ownership and business.

Kunle Awobodu, president, Nigerian Institute of Building (NIOB), was of the view that price increase in inputs to construction without corresponding increase in citizen’s purchasing power would reduce construction activities meant to rejuvenate the economy.

“Construction contracts in a regime of skyrocketing and unstable prices will witness many fluctuation claims with the potential for disputes and project abandonment. A cycle of project failures may start when prices are beyond the reach of clients and developers,” he posited.

Continuing, he said, “All the cement manufacturing plants have been existing in Nigeria before the lockdown. We acknowledge that there may be need to maintain and repair, it is our view that this, however, is not enough justification for the astronomical increase in cement prices.”

In Ilorin, the Kwara State capital, Abiodun Aminullah, a cement dealer, noted, “The market has been some how difficult because we have been having some difficulty in cement supplies for the past five weeks; we used to sell a bag for N2,300 but early in December, it went up and we sold a bag between N4,500 and N5,500, depending on how we got it.”

Miffed by the whole development, Robert Eghosa, a civil servant in Benin City, lamented that Nigeria was a country where you wake up to meet different challenges. “How can the price of cement just jump up to N4,000? This simply implies that people like us cannot own a home,” he said.

Also in Benin City, Omoregie Cyril, managing director, D Prince Builders and Estate Developers, noted that the price increase had slowed down the rate of building projects in the city.

“When the price goes up, it also reflects in the amount paid to purchase property. The truth is if 100 persons could buy and build when it was N2,600, not everyone can afford to buy at the current price,” he explained.

In Port Harcourt, Godson Nnodim, a building materials seller in Mile 3, told BusinessDay that the cost of cement in particular had become a stumbling block to many people who wanted to embark on building projects.

“The cost of cement now is unbearable. Can you imagine that a bag of cement is now N4,200 per bag? How can people build houses?” he queried, disclosing that his brother who started building his house last year has stopped the project because of high cost of building materials.

It is feared that chances of consumers paying cheaper prices for 50kg bag of cement may not come soon, except issues bordering on foreign exchange rates, pricing of gas and haulage are addressed.

Ikenefuna advised that government should, as they put their eyes in things like crude oil, regulate cement manufacturers and, if possible subsidise cement production, because every human being needs shelter.

 

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