Cement sector groans under massive importation

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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.

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10 Comments

  1. Udam Ochiaghandigbo on

    This report is poorly written, and at best, pedestrian. How can two people write and say that cement sector is “groaning” under massive importation without providing any comparative evidence to back up their claim? At the very least, readers should have been told the price of a bag of cement prior to massive importation and the price of a bag of cement after the massive importation took place, as well as the CURRENT price of a bag of cement now. Advise: please write a follow-up essay with comparative prices of a bage of cement prior and after the massive importation.

  2. PAID PUBLICATION?
    You want government to continue folding the hands and let you continue sapping the poor masses.
    Did you not increase cement prises up to N2650.00 before the importation that reduced it to N1600.00 now?
    If other countries can produce and export to make profit, you can also produce and export to other countries in need.
    Not all the countries are endowed with cement, you can as well look for market outlet.
    Your production can not be for Nigerian market alone.
    Stop killing this country economically by subjecting the govt to your dictates.
    Import if you don’t want to produce and force the price down further to enable poor masses build their own homes.

    • Nigerian businessmen/manufacturers/industrialists are greedy,wicked, and heartless beings. It’s like they went into covenant with satan, to not, and never make life easy for the citizens who buy their goods.

      Their complaint, and anger is that cheap imported cement from china is making it difficult for them to bleed the blood and naira from nigerians, when the minerals used for cement manufacture are available locally, and not imported to justify the inflationary costs they often to impose on nigerians. They have the carte blanche to extract the minerals, and may not be paying any tax or whatever to the communities from which the raw materials derive.

      Jonathan should grant the chineese, and other foreign nationalities the right to establish cement industries in nigeria, to force down cemment price, to enable low income citizens to build cheap houses.

      I hate wickedness, and insensitivity towards others.

      ehi

      • The petroleum sectors of Nigeria economy was monopolised by foriegn company and people like you slaves stead to commed Dangote group for investing on non oil sectors of the economy, still wanted the forieger to take over the sectors. Answer these questions. What did you do for those embessled subsidy money?. What happen to our unfunctional refineries?. Those oil foriegn companies that polluted niger delta with oil activities and failed to make any meaningful development to that region are fearing them?. The oil wells of Nigeria was allocated to foriegn companies and imagined Nigeria is 6th largest producer in the world and largest producer in africa and Nigerian dwelling in poverty. There are other potentials in non oil sectors that required invesment instead of ignorantly accusing Dangote for his patriotism for investing in non oil sectors of the economy. Many of our politician invested in foriegn countries, how many you accused them. If you cannot commend Alhaji Aliko Dangote GOD Almighy is blessing him every seconds by the souls of millions of Bread-winners legitimately produces and their families.

  3. Corruption is clearly buried in Nigerians bone-marrow. Please the editors of this article should tell us how much they’ve received from Mallam Aliko Dangote. Haba how can you talk of glut & groaning of cement in Nigeria when a bag still cost N1,700 now but did cost N1,600 in Sept last year. Please ask Mr Aliko Dangote why did he not build any of this his factory in the east and expect east to buy his product- Mad man on suit.

    • Mr chuka how many bags of cement did consumed in a year? Why much ado if answer No? The construction company are the highest consumer of cements. Do you know the costs of constructing v.p residence by Julius Berger, imagined over 70% of 2013 budgent is for construction, definately the costs of construction is too costs by these foriegn companies. How many time did you accused these construction company for expensive projects because they consumed cement more than you do.

  4. Emeka Okoroanyanwu,am surprised and shocked that you could join a Yoruba man(Adewale Sanyaolu),who is representing the interest of a Yoruba controlled cement company(WAPCO),and that of an Hausa man(Dangote),to write rubbish about your fellow Igboi man(IBETO),whom we all know this stupid write-up is attacking.You are a fool!
    Which glut in the country,when cement is still above 1,700 naira,and not 300 naira a bag.

  5. Thank u GEJ. Let the import duties on cement be further reduced. With the availability of cheap cement, construction of roads , bridges, and houses will ensue. Thus millions of jobs will be created for artisans, civil engineers, brick layers, masons etc. And so many abandoned personal and govt projects will be completed. The wickedness of allowing only one individual to dictate the pace in the cement market is better stopped.

  6. If Nigerians cannot learn from china that has high population figure with best economy in the world by channelling its human resources into production not consumers of fairly and unfairly used products, substandard products and other products we can produce locally so our populations instead to be a economy potentials for development it will be economy challenges for development. The foriegn construction company are the highest consumers of cements and constructed expensive projects for Nigeria so those unpatriotic Nigerian accusing dangote group for monopoly of cement, how many of you accused, julius berger, setraco etc for expensive projects?. This slavery mentality is enough of Nigerian who often claimed is educated and accuses the wright person and praised the wrong person.

  7. There is no common sense in this article.Firstly,what i perceived is that they are forming another cabal in this sector to chase away people like Ibeto cements who imports and other persons into it away by making the presidency sympathise with them by either banning the importation by this people who makes the product cheaper for the masses or increasing the import duties that will skyrocket the price.This is wickedness.
    My knowledge of economics says the higher the supply the lower the price.Tell me how could they have glut and prices are still so high except they have re-written the principle in economics.Secondly,if they think is the importation that is killing their businesses then they better involve the expertrates to come rescue them and teach them a modern and cheaper way to produce and not by making efforts to make the govt stop the importers that sells cheaper.

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