Cement, at N1,400, defies increased capacity, intervention

The price of cement in the Nigerian market is still high, at an average of N1,400 per bag, despite significant increases in capacity built over the past 12 years of backward integration in the industry and intervention in the market by Dangote Cement which ‘crashed’ the price by about 40 percent.

 

Following the 2002 backward integration policy of the Federal Government in the cement industry, the industry’s annual production capacity has increased from just two million tonnes in 2002 to about 29 million tonnes at the moment.

Riding on this increased capacity and a ‘patriotic desire’ to contribute to reducing the country’s staggering 17 million housing units deficit, Dangote Cement which controls about 60 percent of the Nigerian cement market, recently announced a landmark reduction in the prices of its 32.5 and 42.5 cement grades to N1,000 and N1,150 respectively, down from N1,600 and N1,700.

Housing sector players hailed the move, describing it as a courageous step towards growing the sector by increasing affordability and home access to the country’s army of low income earners.

A recent BusinessDay survey on the price of cement in different markets across the country, however reveals that the commodity still goes for between N1,350 and N1,700 depending on location.

In Abuja, our survey reveals that while sellers buy Dangote Cement brand for N1,350 from the company’s factory in Obajana, Kogi State, they sell for N1450, while the Lafarge brand of the commodty sells for N1,500 and the Ibeto Cement brand is out of stock.

Chukuwuneke Onyeneke, a cement dealer in the Federal Capital Territory, explained to our correspondent that the differential in the market prices and the price as advertised by Dangote could be linked to communication gap between the manufacturers and the distributors on the new price regime.

In Lagos, Nigeria’s commercial nerve centre and the largest construction site, the story is not any different, as our findings show that as against a 40 percent price reduction, cement price has gone down by just 18 percent with Dangote’s 32.5 grade selling for between N1,400 and N1,500 per bag, depending on location.

In the Ojo area of the state, the 32.5 grade of Dangote Cement sells for N1,400 per bag at major depots and N1,500 at smaller outlets and the 42.5 grade goes for about N1,600 while a bag of the Elephant brand sells for N1,600 at major distributor’s outlets and N1,700 at other outlets.

Gbemileke Akinbamde, Lafarge’s general manager for sales and customer service, confirmed to BusinessDay that their product at unit price goes for N1,500 per bag and N1,400 for bulk purchase, explaining that “Lafarge’s price should not come as a surprise because Lafarge has never made any public declaration that cement price has been reduced; it is only Dangote Cement that said publicly that cement price has come down”.

In other locations, the story is 

virtually the same such that in Ogun State, Dangote’s 32.5 grade sells for between N1,300 and N1,400 per bag while Lafarge goes for N1,500 per bag and N1,400 for bulk purchase; in Enugu, Dangote and Unicem sell for N1,400 apiece, down from N1,650 and N1,800, while Ibeto sells for N1,500.

Our findings in Kano reveal that at Tarauni Market depot, Dangote’s 32.5 and 42.5 grades sell for N1,400 and N1,600 per bag respectively, which Ali Mai-Cement, one of the dealers in the market, attributed to mounting transport cost from the central depot in the metropolis.

In Port Harcourt and some parts of Imo State, cement sells for an average of N1450 per bag and the Dangote 42.5 grade sells for between N1,450 and N1,500.
In Owerri, the state capital, other brands like UNiCEM sell for between N1,450 and N1,550 while Ibeto Cement sells for N1, 450.

Our survey further shows that the Dangote brand seems to be driving away other brands in the open market, as only the brand is available for sale. In the rural areas, we discovered that buyers go for the cheapest brand, and Dangote brand fits into that mould, thereby dominating the shops. Most of the sellers stock only the 42.5 grade, which they call ‘construction’ cement.

Analysts are of the view that the price differentials at various locations are to be expected, explaining that cement is a regional market whose prices depend largely on nearness to production plants and also on transport cost.

Joseph Makoju, the honorary adviser to the President/CEO of Dangote Group, had stated that notwithstanding the drop in the price of the commodity by their company, end-user-prices would depend on the location, as the company would charge between N100 and N200 per bag for transporting the commodity from their factory to the depots in various parts of Nigeria.