3 January 2013

Nigeria: Unnecessary Cement 'War'


In a country challenged by housing crisis, the subsisting high cost of cement is a cause for grave concern: cement accounts for over 40 per cent of the budget of housing construction.

We recall that before the cement import licences granted by the federal government expired on October 1, 2007, cement prices had stabilised at about N1, 250 per bag of 50kg. Since then, however, prices have oscillated between N1,350 and N2,100, depending on location and the cement brand.

It was estimated that Nigeria needed 8 million tonnes of cement in 2001. This figure jumped to 11 million tonnes in 2006. Currently, the country requires some 18 million metric tonnes every year. Significantly, all the five companies manufacturing cement locally have not been able to produce up to 80 per cent of this requirement consistently.

It is against this background that we find the "war" over alleged cement glut between the Dangote Cement Plc and Ibeto Cement Company Limited curious and unnecessary. According to the management of Dangote Cement, who are alleging glut in the cement market and squarely accusing Ibeto Cement Company of being the cause, it recently closed its Gboko plant in Benue State as a result.

In the words of the group head, corporate communication of Dangote Group, Anthony Chiejina, "With the dumping of subsidised imported cement in the south-eastern market, there is no way our Gboko cement plant can survive. In fact, members of staff have been put on forced leave pending when the situation improves." But the management of Ibeto Cement Company debunked Dangote's position.

In a public statement signed by its executive director, strategy and public affairs, Dr. Ben Aghazu, Ibeto Cement accused Dangote Group of insincerity and monopolistic tendencies: "Dangote Group wants Ibeto Cement Company out of the market so they can dominate the south-east zone also and thus complete their monopolistic stranglehold on the entire cement market in Nigeria."

Sometime last year, President Goodluck Jonathan, unhappy with the high cement price, directed cement manufacturers to bring down the prices within 30 days. This was not met. For the manufacturers, there has been no shortage of excuses. Nigerians deserve better.

We believe that a key challenge for government is the imperative to break a clear monopoly in the cement industry. Why Africa's most populous country should have only five companies producing and/or importing cement remains a puzzle. Worse, among the five, one or two are clearly favoured by government.

This has actually impeded genuine national development and should stop. If there are laws against monopolies, they should be enforced. However, if there are no laws to aid the government in breaking monopolies, then, the National Assembly should rise to the occasion and do its duty. Allowing monopolies to operate in any sector of the economy is not in the national interest.

The accusations of cement glut being bandied flies in the face of basic economics. A glut results when a market is excessively supplied with a particular product. The first evidence of such a situation is the drastic reduction in the price of the product, but this has not been the case of cement. The current cost of cement squarely contradicts the glut scenario being painted by Dangote Group. In this connection, the allegations against Ibeto Cement Company Limited are clearly unsustainable.

Since cement is a strategic commodity critical to the nation's economic security and infrastructure transformation, it should be made readily available in every part of the country and at affordable cost. This is the main challenge before the government and the key players in the sector.

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