The Nigerian cement sector said to be grappling with a significant surge in prices, witnessing a sharp escalation from N5000 in December 2023 to between N6,500 and N7,000 per bag by February 9, 2024.
Investigations reveal that members of the Cement Manufacturers Association of Nigeria (CMAN) collectively raised prices by over N1000 per bag, impacting both construction professionals and consumers.
This surge has rippled through related sectors, with sandcrete block prices increasing from N450 to N500 for a six-inch block, and from N550 to N600 for a nine-inch block. Ready-mix concrete and in-situ concrete production costs have also surged, potentially driving up prices for new homes, rents, and maintenance expenses.
The Nigerian cement industry, dominated by three major players, sees Dangote Cement Plc leading with a commanding 60.6% market share and a local installed capacity of 29.3 million MT. Lafarge Africa Plc holds 21.8% share with a production capacity of 10.5 million MT, while BUA Group accounts for 17.6% share.
Stakeholders attribute the price hike to infrastructure challenges, including inadequate transportation networks and an unreliable power supply, which compound operational costs for cement producers.
A report by Cardinal Stone titled ‘Nigeria Cement Rebounding from a Tumultuous Year’ anticipates continued high cement prices in 2024. The tumultuous year of 2023, marked by poorly executed naira redesign, cash scarcity, currency devaluation in June, and heavy rainfalls during the third quarter, heavily impacted the industry.
However, the report projects a sector rebound in 2024 based on increased infrastructure budget allocation of N1.32 trillion, the establishment of the Infrastructure Support Fund (ISF) by the Presidency, active implementation of the African Continental Free Trade Area (AfCFTA), and increased production capacity.
Regarding pricing dynamics, the report notes that cement prices are expected to remain high in 2024 as producers seek to offset operational costs amidst volatility in the forex market and high inflation.
Mr. Adebayo Adeleke, the Group Executive Chairman of Lancelot Group, emphasizes the critical role of cement in Nigeria’s economy for the development of basic infrastructure such as roads, water supply, hospitals, schools, and housing. He highlights the expanding domestic demand for cement, which outstrips local production, leading to daily price increases.
The chief executive officer of Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf stated that this is a reflection of the general macroeconomic environment, a reflection of the inflationary trend.
He pointed out that, “this inflation phenomenon is cutting across all sectors of the economy. And for those in production, their costs are also going up; costs of inputs are going up, costs of transportation are going up and costs of energy are going up.
“Exchange rate is affecting practically all the sectors. Because like many other manufacturing industries, they also have their own imported components in their production ecosystem.
“And any imported item now, or imported inputs, the costs are going up again. So that is what it is. So that means that the cost of construction will go up, our ability to meet housing needs and bridge the housing deficit will also be negatively affected because of the high cost of cement and other construction materials.”
Yusuf added that, “cost of projects will generally go up, all the construction projects that are in the budget. So, a lot of project costs will have to be reviewed, whether in government or in the private sector.”
On the way out, Yusuf explained that, “is for us to address the macroeconomic issues. Macroeconomic challenges of high inflation, depreciating exchange rate, liquidity in the foreign exchange market, high energy costs, among others need to be addressed.”
He called for better liquidity in the forex market; stronger naira, that is a stronger exchange rate, adding that, “we must ensure a local production of petroleum products, which hopefully may bring down the cost of energy. All of those things could help to mitigate the problem.”
