21 December 2012

Nigeria: Cement Importation and Threat to Job Creation


Since the beginning of this administration, government officials have been hammering on the need to patronise made in Nigerian products.

The argument is that when Nigerians buy goods that are manufactured locally, it will encourage entrepreneurship and local investors will invest more in the economy and this will in turn lead to job creation and reduction in the rate of unemployment.

To encourage this, government has come up with policies aimed at discouraging the importation of certain commodities that are produced in the country. But this policy seems not to be working as commodities such as cement are still been imported into the country, despite the availability of indigenous cement factories in the country.

Such importation, analysts say, is capable of discouraging local investors in the sector.

Local cement manufacturing firms in the country have the capacity to produce 28 tonnes.

Local firms, include Dangote Cement, which accounts for 19.25 million tonnes out of the country's annual cement need of about 20 million; BUA Cement which produces 2.5 tonnes at its plant in Edo; Cement Company of Northern Nigeria in Sokoto, 2 million tonnes and; LaFarge Wapco which contributes 8.3 tonnes to the cement needs of the country.

Nigeria's per capita consumption of cement ranks below Senegal's which is the 23rd largest economy in Africa. The country is also behind Egypt, which consumes 48 million tons of cement in 2011 compared to the 18 million tons consumed by Nigeria during the period.

The above statistics probably explains Nigeria's parlous state of infrastructure.

Nigeria has an estimated housing deficit of 16 million units. Its roads network, which requires some quantity of cement to build, is very minimal compared to its landmass and population.

The rail system is even worst. Nigeria's rulers have only added a few kilometres of rail to what the colonial masters bequeathed some 52 years ago.

Recently, the management of Dangote Cement Plc said it was closing its four million metric tons of cement per annum line in its Gboko Plant, Benue State, because of glut in the cement market, which it said was caused by importation of the commodity.

The Group Head, Corporate Communication, Dangote Group, Anthony Chiejina, said the move was necessitated by the glut in the market arising from the success "presently being recorded with the exponential increase in local production of cement and further compounded by continued importation of subsidized cement into the country."

He said the production figure for the first 11 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 it was therefore disheartening to note that despite the glut in the local cement market, some cement importation, though reduced, have continued, thus calling to question the rigorous implementation of the backward integration policy, introduced to encourage local production.

Giving reason for the choice of BCC for a temporary shutdown, the Dangote Group image maker noted that, "with the dumping of subsidized imported cement in the South Eastern market, there is no way our Gboko Cement plant can survive. In fact, staff have been put on forced leave pending when the situation improves."

The plant employs about 1,000 staff and the laying down of this huge number could have serious negative effect on the unemployment rate in the country which is said to be in millions.

In Nigeria, every worker has about five numbers of people depending on him or her.

The spokesperson of Dangote Group also said: "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."

Chiejina said other manufacturers are also experiencing the same problem of low sale and high inventory and called for urgent solution to the ugly development

Besides, he advised that government should vigorously implement the provisions of the cement backward integration policy that are needed to protect local manufacturers from dumping.

According to him, one potent solution is for government to consider the total ban on importation of cement in view of the fact that local production now surpasses demand for cement and in the interim also increase duty and levy on imported cement to the maximum level.

If the backward integration policy is to succeed fully, Chiejina said government should help increase demand for cement by encouraging the use of concrete roads because concrete roads are more durable and much more longer lasting. Concrete roads, he further said, will save substantial outflow of foreign exchange, while reducing imports of asphalt.

He said: "Nigerians should be proud of what the cement sector has done by making the country self-sufficient and, our Ibese plant is ready to start exporting as soon as we receive ECOWAS permit to hit the ground running"

Speaking on the development, a renowned financial expert, Bismark Rewane, who is the Chief Executive of Financial Derivatives, expressed worry that government was yet to stop importation of cement despite the increased local production.

He expressed concern over the situation in the cement industry and urged for concerted efforts to save the local manufacturers.

Dangote Group alone has caused the employment of over a hundred thousand in direct and indirect labour. Hence the suspension of operation of such a key sector should disturb a serious government.

At the ground breaking ceremony of Line Four of Dangote Cement in Obajana, Kogi State, recently, President Goodluck Jonathan said, "Dangote will soon enter the Guinness Book of Records as the biggest cement manufacturing company and be recognised in Nigeria as a net exporter of cement just like crude oil."

Dangote Group has invested over $6.5 billion in cement plants and plans to invest for another 17 million tonnes by the outgoing year. The company needs all the encouragement to do more by discouraging importation.

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