Stan Okenwa
11 November 2009
THE sudden imposition of levy on bagged cement imports, a move to revive local production has attracted the criticisms from developers. Before now and precisely in 2008, the federal government through the former minister of Commerce and Industry had lifted ban on bagged cement to allow for the importation of the observed shortfall in the product put at about 10 million tons so as to enhance infrastructure and housing delivery.
But the Ministry of Finance, penultimate week announced the removal all forms of restrictions on the importation of gypsum as part of incentives to encourage domestic cement producers.
It also said government has placed a five percent import duty ceiling on gypsum until its local production on a commercial basis is achieved.
Meanwhile, issuance of cement import licences henceforth will be dependent on the guarantees that such licences will be fully utilised within a specified period of time, as any abuses will attract appropriate sanctions.
A statement from the ministry disclosed that President Umaru Yar'Adua has also approved 2013 deadline for the completion of backward integration in the cement industry, while definite and measurable milestones together with strict monitoring mechanisms will be put in place.
To fast-track the process, the duration for obtaining exploratory and mining licences from relevant government agencies has been reduced to 18 and six months, respectively.
Government also imposed a N500 per ton levy on cement imports to encourage domestic production.
Daily Champion's investigation on the cement market weekend revealed that the shockwaves coming from these policy summersault has jerked up cement price from N1,490 per bag to N1,650 in some parts of the country.
Industry observers say the development has started disrupting the speed of infrastructure and housing delivery as the product price may still go up further.
But the statement signed by Deborah Okafor, special assistant to the minister of finance on communications, disclosed plans to establish a cement institute as a way of developing local capacity.
The institute is to be funded through the N500 per ton special levy on all cement imports as approved by President Yar'Adua.
Government will as well intensify efforts to streamline ports procedures in order to ensure that all cargo is cleared from the ports within a 48-hour maximum period.
Meanwhile, tariff incentives for imported spare parts and machinery items for cement production have been reinstated.
The statement further stated that government granted two to three years duty-free importation period for machinery, equipment and spare parts to cover the plant building phase and the first two years of commencement of production.
It also approved tax deductible incentives on investments in system conversion to coal.
It would be recalled that government in 2002 began implementation of self sufficiency drive of cement in order to boost local production, cut down importation and ultimately reduce prices.
In furtherance to this and to stabilise the soaring domestic prices, the policy was reviewed in 2008 with additional licences issued to companies that were committed to producing locally.
Okafor, however, stated that the current measures were to further build on the incentives put up earlier, but based on a more comprehensive review of the sector.
Other cost-reducing measures for cement manufacturers approved for implementation include "concessional pricing and special allocation of LPFO; de-linking the price of gas for cement production from the price of LPFO as well as granting duty free importation of LPFO during periods of acute domestic shortages of cement."
Also approval was given to classify cement companies in the same manner as fertiliser companies with regards to gas pricing and examine the key cost drivers in cement production, together with cement manufacturers, with a view to articulating a sustainable price for cement in the domestic market.
The presidential committee headed by Mansur Muktar, minister of finance, in its report had recommended systematic and controlled programming of cement imports subject to appropriate tariffs and reinstating of policy banning importation of bagged cement in line with national industrial policy.
The committee also pushed for a restriction on the issuance of cement import licences to only manufacturers and other players with track records of commitment to backward integration, including bulk cement importers with suitable bagging facilities.
Muktar hoped that the presidential gesture would enable government address critical challenges facing the cement sector by encouraging local producers to meet local demands as well as contribute to export.
"It is our hope the cement manufacturers will reciprocate the good gesture of Mr. President by dedicating themselves to not just meeting domestic demand for cement but achieving the target of making Nigeria a cement exporting nation by 2013", the statement quoted Muktar as saying.
Meanwhile, government will soon constitute an inter-ministerial committee to drive the full implementation of the president's directives. Nigeria's total cement demand is estimated at 13 million tons per year, of which around 5 million tons is imported.
Meanwhile, the Federal Government is set to launch N100 billion Cotton, Textile and Garment Development Scheme.
The fund is said to be the most comprehensive and realistic initiative at reviving the sector that was once the second highest employer of labour in Nigeria after government agencies.
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