Dangote Cement’s slash of the prices of its 32.5 grade and 42.5 grade of cement to N1,000 and N1,150 has set off a chain of reactions. Some are praising its gesture; others believe there is more to the cut than meets the eye, reports TOBA AGBOOLA.
When Dangote Cement slashed the price of cement, it never envisaged the chain of reactions that would follow. The new regime put the price of Dangote’s 32.5 cement grade at N1, 000 per 50kg bag and that of 42.5 grade at N1,150 per bag. The slash has not gone down well with other producers and estate developers.
While some stakeholders described the price cut as good, others are imputing motives over the company’s action.
Bua Group, a major player in the industry, is one of those hailing Dangote’s gesture. Its Chairman, Alhaji Abdulsamad Rabiu, said he had been advocating a sharp reduction in the unit cost of the product to enable Nigerians realise their dreams of owning their own houses.
“It is against this background that I commend Alhaji Aliko Dangote for this patriotic initiative, which is long overdue. With the low price, more consumers would buy cement, which will not only shore-up its volume, but also increase stakeholders’ market share,” he said.
Rabiu urged cement producers to emulate Dangote and bring down the price of cement, noting that there is no reason a bag of cement should cost so much. He said he had already directed all his plants to follow suit and implement the new price regime.
He noted that more should be done to bring down the price further for the sake of Nigerians, insisting that there is really no reason for cement to cost more than N1, 000 per bag, bearing in mind the massive success of the backward integration policy, which started 12 years ago with billions of dollars injected into the cement industry.
Similarly, the Lagos State Chairman of Block Moulders Association of Nigeria, Alhaji Okunola Abegunde, said he had been longing to see a time like this when the price of cement would crash to allow low-income owners own their houses.
The Chairman, Coalition Against Building Collapse, Kola Ojewuyi, who chided Dangote’s critics who had earlier condemned the firm’s campaign on the adoption of 42.5 grade cement, which they described as a ploy to increase the price of the essential commodity. He hailed the decision, urging the management of the company to sustain the new price regime and ensure that it is not hijacked by profiteers.
A real estate developer, Femi Odusanya, also said this was the time the low-income owners had been waiting for to build their own houses. He said before now, the cost of cement was too high for the average Nigerian, and this had been very discouraging. “I am convinced that things will be better as against initial belief that anything that goes up must definitely come down,” he said. A block moulder, Tunde Balogun, agrees with him, noting that with the new development, the cost of block will also come down. He however, reassured that the leadership of the association of block moulders would decide on the next line of action.
The Nation gathered that the move by Dangote Cement was aimed at making cement products cheaper as they were in 2005 when a bag of the product was sold for less than N800. The Group Managing Director (GMD), Dangote Cement, Mr. Devakumar Edwin, explained that the new price regime is exclusive of Value Added Tax (VAT), which represents about 40 per cent discount on the prevailing market price, selling at N1, 700, irrespective of the grade.
“We recognise the need for a rapid response to huge infrastructure and housing deficit in the country and one of the ways to address the issue is to bring down the price of building materials to make it affordable, especially cement, which is within our control. This is part of our contributions to the transformation agenda of the administration,” he said.
However, as patriotic as the price cut may look, there are those who are not swayed, arguing that there is more to it that meet the eye in the new development. For instance, investigations show that despite the price slash, the price of cement is still high and there is no sign that it may come down soon.
According to a dealer at Cement Bus Stop, along Lagos Abeokuta Expressway, Mr Dotun Adisa, the product is still being sold for between N1,750 and N1,900 and this may continue for a long time.
“Please, don’t believe the N1,000 price as announced. Our cement is still between N1,750 and N1,900. It depends on the quantity you want to buy and it may be like this for a long time. We don’t believe in the price slash,” Adisa said. Another dealer, who spoke with The Nation, Mr. Benjamin Okafor, also said there was no sign that the cement price would fall. “All this news of N1,000 slash is fake as far as we are concern. The price of the product is still high. It hovers around N1, 800,” he said.
Similarly, the Managing Director of Elleon Properties, developers of Aspen Estate in Isheri North area of Ogun State, Mr. Sola Adekunle, said Nigerians would no longer take news emanating from cement companies on price reduction serious again, as there had not been any significant reduction in the price of the commodity two weeks after the announcement.
“Dangote Cement should have done its homework well before going public. The company should have blocked all the loopholes that are working against the new price slash. The idea of engaging in price war or business bickering with competitors should not be handled the way it did,” Adekunle stated.
A distributor of Dangote Cement, Chika Ekpenyong also said distributors are not selling the product at N1, 000 as announced. He said: “If we are selling at N1, 000, what it means is that we should buy it at the distributors’ price of between N800 and N900 to make a profit of at least N100 per bag. We are buying from the factory above N1, 000 and could not sell at the same price, considering the cost of transportation, loading and off-loading among other charges.”
He said distributors were expected to make profit of between N50 and N100 on a 50kg bag of cement after all expenses. He sai: “We are buying at the unit cost of N1, 350 and when you add other expenses, we should be selling at between N1,450 and N1,500, which is a far cry from the over N1, 750 price before the announcement.”
Last week, cement distributors under the auspices of Association of Cement Traders (ACT) in Kano State expressed discomfort with the new Dangote Cement price, insisting that the N1, 000 per bag policy was unrealistic. Its Vice Chairman, Alhaji Dauda Bakare, said Dangote did not take into account its dealers and distributors who might have stocked large quantities of cement before taking such a decision.
Dauda asked: “How do you expect the distributors to sell for N1, 000 when we bought for N1, 385 direct from factory at Obajana and that is without transport? When you add transport you will have it at N1, 635 and we sell for N1, 750 per bag. So, how do you reconcile this? Who will bear the loss?
Dauda, who revealed traders’ dissatisfaction with the new price regime, contended that Dangote was insensitive to numerous dealers with large quantities of products, who might be forced out of business with huge loss when the new price takes effect. “Of course, the new price as announced by Dangote is a welcome development, especially to people on the street, but on the other hand, the decision to crash cement price by Dangote without due consultation with the dealers and distributors for proper assessment of the situation is not appropriate,” he stated.
Continuing, Dauda asked: “For distributors who have like 10 trucks in stock, how do you want them to sell, or do you think customers will still purchase the products from them at the old price? Honestly, we don’t know what to do. Everybody here is confused ever since the announcement was made. But, of course, it is a welcome development for the common man because people will be able to afford the product at lower cost and build their houses, but as it is it is not possible to sell at N1, 000 when we buy at more than N1, 000 from factory, excluding VAT, transport and we must also make profit as a businessmen.”
The cement traders are, therefore, demanding palliative measures from Dangote or in the alternative, asking the company to extend the commencement of the new price regime to enable them exhaust their stock. Better still, he said, the company could augment their potential losses.
Meanwhile, the management of Dangote Cement has assured Nigerians that it would put in place a monitor team to ensure that profiteers do not hijack the new price cut.
Edwin dismissed as baseless the accusation in some quarters that the price reduction was intended to chase away some manufacturers so that Dangote Cement could monopolise the sub-sector.
His words: “What we have done is a patriotic decision in the overall interest of Nigerians. We are in business to make money and we know that the price cut would not affect our profit margins. We are a Nigerian company; we have responsibility to make the product available to our people at the most reasonable price.
“As our production capacity increases, we found out that we could reduce the price to help low income earners find it easy to build their own houses and this is what we have done. Those castigating us and crying of monopoly are those who want house ownership to remain exclusive right of the rich.”
Maintaining that Dangote Cement likes competition, Edwin said it was competition that encouraged the company to commit huge investment into cement sector.
“We believe in competition and openness. We can defend our price anytime and it’s only an enemy of Nigerians that would speak against the price reduction,” he said, adding that Dangote would continue to protect the buyers from the hands of profiteers who might capitalise on the new price to create artificial scarcity.
Minister of Industry, Trade and Investment, Olusegun Aganga, at a stakeholders’ meeting in Abuja, said the decision of Dangote Cement to reduce the price of cement was patriotic and in line with the aspiration of Nigerians and the Federal Government.
He said: “Our main focus for the cement sector is to improve the standard of cement and to bring the price down. More cement manufacturers must do it themselves just as Dangote Cement has done because we do not do price regulation.”
According to him, the Federal Government has attracted new private sector investments in the cement sector worth $7billion within three years, a feat it was proud of.
Aganga’s statement came in midst of expression of surprise by many who thought such a price slash was not be possible in the next 10 years.
