Contrary to expectations by builders and sundry consumers arising from the announcement of a cut in the ex-factory price of BUA cement to N3,500, retailers are still selling the product at the old market price.
Across major markets in the country, where available, a 50kg bag of BUA cement is selling for an average price of N5,500. Various reasons have been adduced for this, chief among which is rising transportation costs due to subsidy removal.
The management of BUA Cement had, precisely on October 1, 2023, announced a reduction in the ex-factory price of their product to N3,500 per 50kg per bag, down from N5,500, assuring that the new price would take effect from October 2, 2023.
Two months later, the market is yet to see a reflection of the ‘new’ price as, according to market watchers and the product retailers, the price has remained unchanged as the old one still prevails.
Mustapha Umaru, an industry expert and Equity Research Analyst at CSL Stockbrokers Limited, said that the expected price reduction hasn’t been noticeable due to retailers factoring in transportation costs, especially in the light of the subsidy removal.
“Considering the substantial transportation expenses arising from the high fuel cost due to the removal of subsidy, retailers are factoring these into their prices. As a result, the effect on retail prices is expected to be minimal,” Umaru said.
Abigail Alabi, a research analyst at Vetiva Capital Management Limited, pointed out that the impact of the price reduction on BUA cement might be evident in the northern regions, where the product is more available.
“The impact of the price reduction may be noticeable in northern regions where BUA cement has a more extensive presence. However, in other regions, the effect might not have materialized yet due to the limited reach of BUA,” Alabi said.
But a BusinessDay market survey reveals that the story isn’t any different even in the north. In Abuja, for instance, Monday Okafor, a major distributor in the Nyanya area of the city, told our reporter that the price reduction had not been effected, adding that both BUA and Dangote brands were available but selling at old prices.
Read also BUA Cement, other laggards cause market’s 0.66% dip
In Port Harcourt, distributors don’t have the product in stock, according to our reporter who surveyed the building material markets in Garden City. He discovered that other brands, particularly Dangote, were still selling at the old price of N5,600/bag.
Our reporter in Benin City found out that the market was yet to see the new price as announced by BUA. Osagie Imafidon, a dealer in Benin City, told the reporter that the price of BUA cement remained high at between N4,500 and N5,500, adding that he was yet to get new stock.
In the East, which is supposed to be part of BUA’s catchment markets, the product is either out of stock or too expensive for consumers. At the building material market at Ojike Lane, a BUA distributor, Aba, told our reporter that he had yet to get a supply at the new price. The dealer said he still had old stock and would comply with the new price regime when he gets a new supply at the new price.
In Lagos, South West Nigeria, in over eight markets surveyed across four locations—Adeniji Adele in Lagos Island, Ketu in Ojo, Ikotun-Egbe in Alimosho, and Suru Alaba in Ajeromi Ifelodun, the product was nowhere to be found. However, a dealer in Festac Town with old stock told our reporter that he was selling at the old price.
BUA Cement is Nigeria’s second-largest cement company, with an installed capacity of 11 million metric tonnes annually. The company aims to reach 17 million metric tonnes annually by completing two new plants in Edo and Sokoto states by early 2024.
BUA’s price cut was a move in competition to gain prominence this year. However, it explained that the move responded to the need to boost the country’s building materials and infrastructure sectors.
Read also BUA Cement cuts cement price to N3,500/bag
“As per the commitment made to reduce prices and following a periodic review of our operations for efficiency, the management of BUA Cement Plc wishes to announce and inform our esteemed customers, stakeholders, and the public that effective October 2, 2023, we have decided to bring the price reduction forward.
As a result, BUA Cement would now be sold at an ex-factory* price of 3,500 Naira per bag so that Nigerians can begin to enjoy the benefits of the price reduction before the completion of our plants,” the cement manufacturer said in a statement on X.
BUA Cement has been expanding its capacity to gain market share from the leader, Dangote Cement, and has overtaken Lafarge Africa. From 2018 to 2022, its installed capacity increased from 5 million tonnes (MT) to 11.0 million MT, at a compound annual growth rate (CAGR) of 21.8 percent.
Since listing on the exchange, BUA Cement has recorded revenue growth over the past two years. Revenues have grown more than threefold to N361.0 billion in 2022 over the past five years, driven mainly by volume and price growth and N2221 billion in the first half of 2023.
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