The Federal Government has threatened to open the borders to cement importation if local cement manufactures refuse to play ball on cement price reduction in the country.
It said although it is aware of the macroeconomic challenges facing the country but some of the key components of producing building materials, especially cement, are locally sourced, and considered the recurring disproportionate increase in the price of the product as unacceptable and unreasonable.
Minister of Housing and Urban Development, Arc Ahmed Dangiwa who made the declaration said key input materials for cement production such as limestone, clay, silica sand, and gypsum sourced within our borders, should not be dollar-rated.
Dangiwa spoke in Abuja at an emergency meeting held with cement and building materials manufacturers.
He said the price of gas that manufacturers are using as excuse should not be because gas is a raw material found within the country and the excuse of increase in mining equipment should not come up because the equipment bought by these manufacturers are used for decades and not just purchased daily.
The Minister said the border was closed to the importation of cement to help local manufacturers but if the government decides to open it back for mass importation, prices of cement would crash and local manufacturers would be gravely affected.
Dangiwa who called on the manufacturers to be more patriotic said BUA Cement for instance has been willing and is still willing as at the last time he spoke with them to crash the price of their cement, lower than the N7000, N8000 agreed by the manufacturers, adding that he saw no reason why others should not do same.
“The challenges you speak of, many countries are facing same challenges and some even worse than that but as patriotic citizens, we have to rally round whenever there is a crisis to change the situation.
“The gas price you spoke of, we know that we produce gas in the country the only thing you can say is that maybe it is not enough. Even if you say about 50 per cent of your production cost is spent on gas price, we still produce gas in Nigeria it’s just that some of the manufacturers take advantage of the situation. As for mining equipment that you mentioned, you buy an equipment and it takes years and you are still using it.
“The time you bought it maybe it was at a lower price but because now the dollar is high you are using it as an excuse. Honestly we have to sit down and look at this critically. The demand and supply should be good for you because the government stopped the importation of cement; they stopped the importation in order to empower you to produce more.
“Otherwise if the government opens the boarder for mass importation of cement, the price would crash but you would have no business to do and at the same time the employment generation would go down. So these are the kinds of things you have to look at, the efforts of government in ensuring things go well.”
Earlier in his speech, Group Chief Commercial officer, Dangote Cement, Rabiu Umar blamed the high cost of gas and mining equipment for the hike in cement price.
He said: “It is safe to say we are all Nigerians and we are all facing the current head wind that is happening. I will like to speak on the popular believe that most of the raw materials to produce cement are available locally. While we have limestone and in some cases we have gypsum and some cases coal, the reality is that it takes a lot of forex related items to produce cement.
“Most of the cement plants in Nigeria use gas to produce, the gas is index to a dollar and it is almost half of the total cost of production. So if 50 per cent of your cost of production is index to the dollar it means if the dollar changes then your total expenditure would change in that direction.
“For us to mine the limestone, one needs to import the mining equipment and the equipment is a substantial part of the cost of production, you have to invest in a lot of those equipment and invest in keeping them going. On the issue of the gas we also have the issue on the quantity of gas, we are not getting enough gas to produce enough to put into the market then we talk about the price and quality of the gas because they are all related.
“Regarding what is happening at the border towns because of the devaluation of naira it has made it a lot more attractive for people to come from neighbouring countries, with foreign exchange, buy cement and export it illegally across the border, of course what that has done is demand has increased meaning that available stock in the country has reduced and that has put a lot of pressure on the prices.”
The Minister also blamed on the Cement Manufactures of Nigeria for not regulating the price of cement in the country because earlier, the Executive Secretary of the Association, Salako James had informed the minister that the association does not discuss or determine the price of individual companies but are only made aware of prices from the market like every Nigerian.
Dangiwa said the Ministry would be settling up a committee which would be comprised of representatives of each cement manufacturer in the country, its association and the government to fashion out modalities to resolve the problem of high price of cement in the country.
Worried by the astronomical increase in cement prices, the Minister of Works, David Umahi and the Minister of Industry Trade and Investment, Doris Uzoka-Anite separately invited the main manufacturers, Dangote Cement Plc, BUA Cement Plc and Lafarge Africa Plc to a meeting to discuss the issues involved with a view of finding an enduring solution to the surging prices.
The two meetings were collapsed into one that was held at the Works Minister’s office where the position and concerns of the government were laid bare before the manufacturers.
The three manufacturers as well as the Chairman of the Cement Manufacturing Association were strongly represented at the meeting which took three hours of extensive deliberation.
Umahi expressed shock at the turn of event after being assured by the manufacturers that his alternative to road construction will be hugely supported by price-friendly cement availability.
The Industry, Trade and Investment Minister, on the other hand was perturbed that the Backward Integration Program (BIP), to which the cement sub-sector was a beneficiary seems to be of little effect despite government’s huge investment in the scheme.
Umahi said: “The essence of this meeting is the concern of the public and also the fact that this Ministry since the month of August, 2023 has been preaching on how we can utilize our local context in the construction of our roads.
“It’s been a national discourse and a subject that stirred a lot of controversy. At a time we thought we were winning. We now have this jump and I think some of the people that fought us will be laughing at us.
“You said the concrete route is going to be cheaper than asphalt and you said because there are a lot of factors that make the increase in asphalt cost to be geometric and that of concrete to be arithmetic.
“But now it’s the other way around. So, we have called for this meeting to find out why and from security report, the X factory price, though increased to a point of concern, still has a very wide margin to that of the market prices.
“So, we like to find out what are the X factory prices before this sudden increase and what are the market prices as at now and whether you have control of the market prices.
“And also, to find out, what can we do, today (Monday) and going forward”.
Uzoka-Anite expressed government’s concern about what could be responsible for the seeming lack of BIP effect on the prevailing cement price situation despite huge commitment to the scheme by the government.
While calling for honest intervention in reducing the price of cement and secure the future of Nigeria, she said: “Just like the Honorable Minister said, we are very concerned about the surging prices in everything, including cement. And for us, the Ministry of Industry, Trade and Investment regulates the development of cement.
“You were one of the BIP pilot schemes that was initiated by the Ministry and we think that the cement sector is actually a success story of the BIP.
“But to our own also shock, we saw that despite the cement, most of the components being sourced are produced locally, we are seeing your prices going up and even surging.
“It’s not going up small small, it’s actually leaping and sometimes even doubling. And it was also important for us to call you back to the table to understand from different points of view.
“One, why this surging? Given the fact that the whole idea of having cement and giving the BIP the push in cement production was to ensure that we could manage prices and manage the development of the sector.
“And then secondly, from the consumer protection standpoint to also understand also the price imputes into your pricing mechanism.
“And basically, also look at the competition issues, whether we have an issue of collusion because you guys are just the three producers.
“And usually when you have an oligopoly you have competition issues and you have collusion amongst the participants and all of those issues are of keen interest to the Ministry.
“In addition to the concern that the Minister of Works has his input or his key input to the sector and to the vision that he has for the construction industry.
“So, it’s a very important area and a very important sector for us. Cement, as you know, is the backbone for anything construction that is infrastructure development, which we have a deficit in and which we really, really need to support development and bridge the infrastructure gap or to affordable housing to just name it.
“It’s so critical that we can’t afford to close our eyes and not intervene in the sector.
“The purpose of government meeting is when we understand what your challenges are. If there are bottlenecks that we can remove to support them, we would.
“And if there are conversations that we need to have that we are not even privy to, that is peculiar to your industry that has come up since BIP took off those conversations, we can have them now and with a view to resolving all the issues and ensuring that we maintain steady pricing, bring down the price if we can, because we don’t want to be forced to come and start doing your price metrics to understand the cost of your input and all of that.
“We have a common understanding of what we need to do as joint stakeholders and partners in the development of this country and then forge one common front forward as participants and as well as stakeholders in the industrialization and development of the country. So basically, this is also the reason why we are participating in the meeting.
“We can even reinforce and strengthen our voice as government and then listen to the same, it’s the same common problem, it’s the same common solutions that we also come up with here.
A price control mechanism was also agreed to be put in place by the manufacturers to prevent unilateral manipulation of the new price regime.
It was also decided that the price would undergo further downward review once the government fulfills its commitment to resolving the challenges encountered by the manufacturers.
