Nigeria Needs N2.1trn Investment To Meet Local Cement Demands, Crash Prices

Nigeria needs a whopping N2.1trillion($5billion) investment in its cement sector to meet local cement demands as well as crash the price of cements in the country, LEADERSHIP investigation has shown.

Currently, the market price for a 50kg bag is about N4,000 which is considered expensive considering that the price jumped by more than N1,500 in the last two years.

This, experts have attributed to demands outweighing supply, hence, leading to a hike in price. Although, Dangote, BUA and Lafarge- the three big cement manufacturers in the country- have ramped up production in recent times, it still falls below the required demands.

According to reports, Nigeria has one of the lowest per capita consumption of cement in the world even as it trailed Ghana, Senegal, Ivory Coast, Egypt, among others, on African continent.

Checks reveal that the per capita consumption of cement in Nigeria is about 123kg per person, which is less than two and a half bags of cement, whereas Ghana is about 5 bags per person.

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This means there is still an underproduction in Nigeria because, last year(2021), the consumption and demand was about 30million tonnes whereas, the country should be aiming for 60 to 70 million tonnes per annum.  The world average, according to findings, is 650kg per person which is 13 bags per person, hence, making Nigeria, one of the least in terms of per capita consumption of cement.

To meet up the country’s demands, LEADERSHIP analysis shows that, using official Naira exchange rate of N420 to a dollar as at the weekend, Nigeria needs to woo about N2.1trillion($5billion) investments to its cement sector. This translates to about additional 10 cement production lines as each cement facility costs about N210billion($500million).

Corroborating LEADERSHIP findings at the official visit by the minister of Information and Culture to BUA Cement Plc(Sokoto Plant) in Sokoto State at the weekend, Alhaji Lai Mohammed, while calling for more investors and investment into the cement sector of the economy to meet demand, appreciated the ways in which the cement factory was able to leverage conducive businesses atmosphere created by the current administration at the federal level to attract more investors into the country.

“The demand for cement is so high and until we are able to ramp up supply, we will not be able to have a reasonable price.It takes a minimum of $500million to have a Cement Line. So, it’s very expensive to set up.

“The future is to invite more investors to take advantage of the conducive environment created by the current administration. The issue of tax holiday, the ban on importation of cement, government’s divestment from the cement industry and of course backward integration policy, among others, I believe, will help investors make returns easily because, if you made $500million investment on a cement Line, it takes 4 to 5 years gestation period before you can even start producing. Probably, it will take 10 years to make a break through. And that is why, the tax incentive of the federal government is so key and critical in making Investors come into this venture,” he pointed out.

Earlier, he said, the inspection was in continuation of its tour

of public and private sector projects that are impacting positively on the lives of the people across the country, adding that, “within the past two months alone, we have visited four projects, the latest being this BUA Cement facility here in Sokoto.”

Others, he listed, were: the Dangote Petroleum Refinery and Petrochemicals as well as the Dangote Fertilizer in Lagos visited on April 3rd 2022; the Lekki Deep Sea Port in Lagos, which government visited on May 4th 2022 and the

Duchess Hospital also in Lagos visited on 10th of May, 2022.

All these projects, he stressed,  are beneficiaries of the conducive business environment created by the administration of President Muhammadu Buhari, under the auspices of the Presidential Enabling Business Environment Council (PEBEC), which has implemented over 150 reforms since 2016, as well as the Companies and Allied Matters Act, 2020(CAMA 2020) – Nigeria’s most significant business legislation in three decades.

“The result of this favourable business environment is the birth of new businesses such as the 5 Million tonnes per annum(mtpa) BUA Cement here in Sokoto; the $2.5 billion Dangote Fertilizer Plant that will produce 3 million tonnes of Urea every year; the 650,000 barrels per day oil refinery due to open later this year; the Lekki Deep Sea Port, one of the most modern sea ports in West Africa and the 5,000 barrels per day Modular Refinery in Ibigwe, Imo State,” he pointed out.

Speaking on the need for more investment in cement production, the managing director/CEO, BUA Cement Plc, Mr. Yusuf Binji, said: “the per capital consumption of cement in Nigeria is about 123kg per person, which is less than two and a half bags of cement, Ghana is about 5 bags per person, so, there consumption is very high. That is where Nigeria should be as a country. That means there is still an underproduction in Nigeria because, last year, the consumption and demand was about 30million tonnes and we should be like 60 To 70 million tonnes, even countries like Senegal, Ivory Coast, Egypt are far above Nigeria in terms of per capital consumption.”

“We have factors of demands and supply that do influence the price and definitely Nigeria still have a very low per capital consumption of cement compared to Ghana.”

Cement business, he said, is capital intensive, adding that, “.. but we must invest in Nigeria to make her grow. As I have said, our consumption which 2 and a half bag per person is among the lowest in the world. The world average is 650kg per person which is 13 bags per person.  So, if we are to get to that level, you need about 10 more of this (BUA Sokoto) facility in Nigeria and that is where we should be.”

To address the demand shortfall, he said, his cement company is targeting 17million tonnes per annum by 2023, believing that, “as the supply increases, the factors of demands and supply will play and you will see the benefits coming down to the people. Right now, the margins made by retailers are very high and this shouldn’t be the case. It should get to the people just a little above the factory price which I said, is a 30 per cent lower. So, that is going to have an impact on the pricing. Now the demand is very high, exceeding supply and people are making a lot of margin based on this.”

The plan to increase its production capacity from the current 11million metric tonnes of cement per annum to 17million, he added, was to ensure its cement product is readily available across the nook and crannies of the country.

Stressing that BUA Cement remains the largest cement producer in the

North West, South South and South East of the country and the largest private employer of labour in the North-West, he added that, BUA Cement (Sokoto plant) is primarily engaged in the business of quarrying, extracting, processing and dealing in limestone as well as the manufacture and supply of cement.

He equally disclosed that there are 443 permanent staff and that, together with all other ancillary jobs, the company generates about 10,000 direct and indirect jobs in the country.

Stating that the firm’s Sokoto plant is the first cement plant in Nigeria to use Liquefied Natural Gas to generate 50MW of power, thereby, replacing coal in its kiln, he added that, this  has made the plant environmentally friendly to also curb climate change.