Need For Infrastructure Devt To Boost Production Capacity

The cement sector has proven to be resilient in the face of macro-economic headwinds that have surfaced in recent times.

On the international scene, the pandemic, trade restrictions, and geopolitical spates left a little dent on the cement industry in 2020. However, the industry surpassed its pre-pandemic demand level in 2021. In Nigeria, the cement sector rose 6.6 per cent Y-o-Y, its fastest expansion since 2015, bringing average growth since the pandemic outbreak to 5.3 per cent against the 3.8 per cent average growth rate in the prior two years.

Thus, the cement sector outpaced the broader economy by 7.1x since 2020, with its contribution to real GDP improving to 0.9 per cent (N658.6 billion) in 2021 from 0.8 per cent in 2019. Likewise, average industry revenue from domestic cement sales rose 32.9 per cent Y-o-Y to N511.9 billion, the steepest increase since 42 per cent in 2017.
Apart from the difficulty in ensuring food security for its teeming populace, Nigeria is faced with the challenge of providing shelter for the people. This shows the building sector needs a lot of cement to meet this critical social amenity need of a population of about 250 million people.

At present, the Nigerian cement industry has three major players; Dangote Cement Plc, BUA Cement Plc and Lafarge Africa Plc. Manufacturers Association of Nigeria (MAN) in its report attributed the increase in the manufacturing production value in the second half of 2021 is associated with the increase in cement production due to the new BUA cement factory in Sokoto.

Stakeholders noted that, “the Nigerian cement industry is a growing sector of the Nigerian economy, largely linked to the performance of the construction sector. The cement industry only accounts for 0.91 per cent of Nigeria’s real GDP.

“However, the boost in the performance of the cement producers will have a significant impact on the economic value that the sector presents to the country’s economy as a whole.”

Recently, at the inauguration of a new three million metric tonne plant of BUA Cement Plc in Sokoto, President Muhammadu Buhari said, the massive investment witnessed in Nigeria’s cement sector is a proof that his economic policy is working.

Buhari said: “you all know one of the economic pillars of this administration has been to create an enabling environment for businesses to thrive. This is necessary for job creation. Indeed, our economic initiative, in the last few weeks I visited the State, I observed many private sector investments in action.

“It is therefore very clear for all to see that our policies are working. Progress is gradually being made in all parts of the country.”

Also, the Central Bank of Nigeria(CBN)’s Governor, Godwin Emefiele linked the successes recorded in cement production to the restriction of access to foreign exchange for imports of 43 items including cement in 2015.

He revealed that, as a result of the huge investments in cement manufacturing by BUA, Dangote Cement and Larfarge, Nigeria’s cement production has increased by 100 per cent to 60 million MTPA between 2014 to 2016.

He said: “following implementation of this new directive, I am pleased to note that the production capacity of the cement industry in Nigeria has doubled from 30 million tonnes in 2014 to about 60m tonnes in 2021.

“Consequent upon this investment by local businessmen into the cement manufacturing sector, our nation has been able to conserve billions of dollars, as no dollar from our external reserves have been spent on importing cement into the country in the last six years. “

Emefiele noted that the massive investments in the cement sector have created thousands of jobs across multiple sectors of the economy.

In a report by Afrinvest Limited titled: ‘Nigerian Industrial Goods Sector Update 2022 – Unravelling Untapped Value’ said: “the impressive performance notwithstanding, the cement sector’s momentum seems to have waned since the 2016 recession (sector’s average GDP growth was 30.3 per cent Y-o-Y between 2013 and 2015).

“The lost steam in the sector’s trajectory is premature as the low per capita cement consumption in Nigeria contradicts expectation that the country’s $3.0 trillion infrastructure gap, wide housing deficit (+17.0 million units), rising urbanisation rate (+52.0 per cent) and a large population (+206.0 million) would sustain solid cement sector performance into the long run. Instead, cement players have grappled with excess capacity, cost pressures and a challenging operating environment,” he stressed.

It noted that housing policy failures and high price of cement in Nigeria derail cement consumption from its potential. Nonetheless, the value to be unlocked is immense.