By EMEKA OKOROANYANWU and ADEWALE SANYAOLU
When the Federal Government introduced the backward integration policy in the cement sector in 2002, little did it know that the industry would blossom into a multi-billion naira industry it is today, with investments hitting $9.5 billion.
The policy, apart from stimulating massive local investment in cement manufacturing, also aims to make Nigeria to be self-sufficient in cement production, as well as have enough to export. But the recent announcement by Dangote Cement Plc., that it has shut one of its local plants, came to many Nigerians and industry players as a rude shock. The development has, thus, put the over $9.5 billion investment in the sector under threat, as a result of massive importation and dumping, leading to glutted warehouses.
Indeed, the current development negates the initiative of the backward integration policy of the Federal Government targeted at encouraging local production of cement in a sector where productive capacity and local demand had just been matched, as announced by local manufacturers. It will be recalled that mass importation of cement had its leeway, following the decision of a Court of Appeal, sitting in Owerri, in July last year, which gave a leading player the right to import cement, with Dangote Group alleging that the local cement importer had dumped a sizeable quantity of cheap imported cement into the country, causing poor sales by local cement manufacturers.
Already, about 2,500 permanent and casual workers of the Dangote Cement plant in Gboko, Benue State, have been temporarily laid off, as the company awaits improved business environment to re-commence operations. A recent visit by Daily Sun to Dangote Cement Plc. plants in Gboko, Benue State; Obajana, Kogi State, and Lafarge Cement WAPCO recently, depicts a picture of a sector groaning for survival, as a result of the glut and dumping, thereby leading to stocked warehouse of raw materials and finished products, idle lorry loads of cement at the firm’s trailer parking bay and an empty loading bay – a section, which used to be a beehive of activities. Special Adviser to the President, Dangote Group Plc.,
Alhaji Aliko Dangote, Mr. Joseph Makoju, boasted that Nigeria is producing cement in excess of demand at the moment, regretting that instead of grinding clinker for production, they are now stocked in huge volumes. Makoju argued that if government was to allow imports, maximum duty on import should be introduced and enforced to the latter. Again, he stated that government should focus more on infrastructure development such as roads and bridges, while also utilizing more cement in road construction activities. The special adviser disclosed further that while local manufacturers are exporting their excess capacity, cement is being dumped into the country at reduced costs.
On the way out of the doldrums, he said manufacturers have commenced the process of making representations to government in order to save the situation, because investors want some form of protection, especially from imports, adding that manufacturers are creating value, giving employment and building capacity. Plant Manager of Lafarge Cement WAPCO, Mr. Lanre Opakunle, explained that the development has forced the company to scale down its operation by 50 per cent because the firm cannot continue to produce without patronage, especially when cost of production is on the upscale. Opakunle lamented that at the moment, the firm has over 220,000 tonnes of clinker – an essential raw material used in the production of cement, in inventory, regretting that the volume of clinker currently in stock was capable of producing over 300,000 tonnes of cement.
Besides, he hinted that all its three plants – Sagamu, Ewekoro II and Lakatabu – has a combined production capacity of 10,000 tons per day, adding that at the moment, the combined production of the three plants is far less than its capacity. “At the moment, our silos are full. And once this happens, we will have no option than to move out and stock some of the raw materials elsewhere, which is additional cost on our part. Currently, we are grappling with high cost of production, especially for Gas. And, as you know, it is not all cost that you can pass to the consumer. But at the same time, there is a limit to what we can absorb,” he said. The development in Lafarge Cement WAPCO further confirms the claim of Dangote Cement Plc., which recently announced the suspension of production of cement at its four million metric tonnes per annum Gboko Plant, as a result of glut in the cement market.
The glut, the company said, was caused by the high volume of imported cement, which comes in cheaper than locally produced ones. Also, speaking, the Production Manager,Lafarge Cement WAPCO, Mr. Sulaiman Agbedejobi, disclosed that the development has assumed a worrisome dimension with production capacity only attaining 180 tonnes as at 2pm on Friday, when ordinarily 1,200 tonnes would have been achieved if all things are right. According to a statement by the Group Head, Corporate Communications, Dangote Group, Mr. Tony Chiejina, production figure for the first eleven months of the year shows increased local production level with supply now surpassing demand. Total supply of cement to the market at the end of November, according to him, when compared to the same period last year, has shown a record increase of 11.4 per cent, the highest ever.
He said that the production figure for the first 11 months of the year showed increased local production level with supply now surpassing demand. “With the dumping of subsidized imported cement in the South Eastern market, there is no way our Gboko Cement plant can survive. In fact, employees have been put on forced leave pending when the situation improves. “Inventory of finished products is beginning to build up at our plants. Don’t forget that projects from our investments of about N280 billion in additional capacity are already on stream, with lines 3 and 4 at Ibese and line 4 at Obajana, coming on stream early this year. At the moment, Dangote said it has inventory of 950,000 tonnes of cement and clinker.
But stakeholders regretted that the development is happening at too early stage in the investments circle, when the investors are yet to recoup significant part of their investment. Besides, they maintained that importation of cement to the detriment of the local economy has been very attractive because it comes with paltry duty of 20 percent and levy of 15 per cent and clinker at 10 percent, a development that makes the landing cost of imported cement to be very cheap with a bag going for as low as $35/T FOB.