Importation and local production of cement

Following the concern raised by the Manufacturers Association of Nigeria and a non-governmental organisation, Buy Nigeria Campaign, about the reported plan by the Federal Government to approve the importation of bagged cement, it has become imperative to caution against measures that will further drive up the price of cement in the country.

The Ministry of Commerce is reportedly seeking presidential approval for some companies to import cement in 50-kilogram bags with the aim of bringing the price down to about N800 per 50kg bag. But MAN and some other stakeholders say any approval of such importation poses a grave danger to companies that have invested in facilities to locally manufacture the product.

Yet the price of a 50kg bag of cement has risen beyond the N2000 mark in many parts the country. This is due mainly to a significant shortfall between domestic demand and local production. Last year, the total local production stood at about 4.7m metric tonnes or 42 per cent of domestic demand. About 6.4m metric tonnes were imported to meet part of the shortfall, which was about 11.2m metric tonnes. It is projected that the nation needs about 18m metric tonnes per annum while local producers can only supply about 6.5m metric tonnes, leaving a deficit of about 11.5m tonnes.

Given this, the FG lifted the ban on the importation of bulk cement early in the year. Apart from excluding importation of bagged cement, only companies with investments in local production were allowed to import the product. Subsequently, 13 companies were awarded import licences with a view to making cement more available and affordable without hurting local production.

Unfortunately, this measure has not improved the situation as the current price of cement hovers between N1,800 and N2,000. This is far higher than the price before the importation regime started. Last January, the price of cement was about N1,200 per 50kg bag.

Some of the importers had reportedly blamed the high price on increase in freight charges, occasioned by the rising oil prices. Besides, there is a global rise in the prices of cement. Such rising economic giants as China are increasingly making demands for more cement to build more factories, roads, and other physical infrastructure.

The infrastructural decay in the country does not help matters. Power supply is epileptic. Railway transportation is not well developed. This leaves haulage of products, which is mainly by road, very expensive. For instance, it takes up to N180,000 to transport a truckload of cement to the eastern part of the country. Transporting the same to the North costs higher.

For now, it is necessary to allow some level of importation to fill the shortfall between local production and demand pending the time local producers are able to meet local demand. But the government should consult with cement manufacturers and employ transparent criteria in the selection of companies that will get import licences.

In the past, many potential producers were prevented and frustrated in favour of a single producer. All relevant stakeholders, especially those with local investments in cement production, should be given equal opportunity to slug it out in the market. While planning long-term measures that will guarantee self-sufficiency, the FG can manipulate tariffs to discourage imported brands and encourage local producers.

Improving local business environment, including fixing the epileptic power supply and building efficient haulage system, especially the railway, is the only enduring strategy in driving down the price of cement.