Nigeria’s industrial sector needs competition for price control
Despite local production capacity and volume, the price of cement has remained a concern for the construction industry and everyday Nigerian with the desire to own a house. What can be done to reduce the commodity’s price?
It is something that ordinarily it should not have happened and I know what I went through. The cement policy is good because it has helped us to put up many plants in the country, but the government needs to look at the industry to see how they can bring in more companies to come and participate because if today, God forbid any producer has a serious issue with any of the plants and it is shut for months, the shortfall will be huge.
The moment you have any problem in any of the plants in Nigeria and there is a shut-down or any challenge, immediately, you will see the impact in terms of price going up. That is because the country does not have any buffer whatsoever. So, it is like a hand mouth daily. The reason why the price of cement went up recently was simply that there was an issue at one of Lafarge’s plants and they had to stop production for a few months to rectify that.
So, as that had happened, the supply from Lafarge reduced by about 25 per cent in Ogun State. Also, one of the plants of Dangote Cement had a technical issue and briefly, they couldn’t load. But that has been resolved. But because that took about one month, the retail price of cement went up to about N4,000, from N2,800 despite our ex-factory prices remaining the same. The policy is a good policy in a way but it has to be re-jigged so that more people that are interested can invest because we have the population. We are already doing our own part by signing a contract to construct 3 more plants of 3million metric tonnes each in Adamawa, Edo and Sokoto States by 2023.
There is no point in making a policy that only one, two, or three people are able to benefit from that policy. That does not make sense. I am benefiting from this policy, but I know it can be improved. You can’t have a policy that is capable of restricting so many people from participating, at the end of the day, you are just creating a monopoly. Nigerians should benefit from the industry.
What exactly are operators doing to intensify competition in a way to drive down cement price?
After everything that is going on, there is little we can do to change it. I can tell you that a few weeks ago, one of our competitors decided that they wanted to increase the price, and they did increase but I was waiting to see how the market would react but I saw that the market has accepted the price. So the issue is that we have one player that is controlling over 50 per cent of the market and anytime you have that kind of situation, it is very difficult and the same thing is happening in the sugar industry with the Backward Integration Programmme (BIP).
In that industry, we have only three players and a condition under the policy is that unless you are seen to be investing in a plantation, you will not be able to go into sugar refining. This is another kind of policy where few people are benefiting and 300 million people are suffering. We are making money but how much money do you really need? We have 200 million people and we are paying more than what other countries are paying. I am ready to reduce my sugar and cement price if other companies are ready and I challenge them and we can.
This can happen. However, whenever anyone tries to come up with any of these businesses, the person will be frustrated and will be stopped simply because some do not want competition, but we need competition. If we are competing and we have other players in the industry we would have better and quality products. I can assure you that God willing by the time we finish our Sokoto line that is coming on stream this year, we pray it would have a positive impact and put us in a position to reduce our prices.
Any hope on sugar price reduction?
I believe that the sugar price of N18,500 per bag is way too high, but we have just started our Port Harcourt refinery and with that, we are looking to reduce the price of sugar very soon simply because we have the capacity and the greater percentage in terms of production and with that, we will be able to determine the price of sugar and we are looking at before Ramadan which is the end of next month to bring down the price of sugar because it is way too high as well.
These are policies that have been in place for a long time before now. I am not trying to blame the government but trying to blame us because the policies were made a long time ago. These policies were made during Obasanjo’s time and they have been there. The thing is that if you have us as powerful people and we have these policies, it is difficult for someone to come and change the policy. It is very difficult. I know a lot of people that have the capacity and the interest to come and participate and invest, but they are afraid because they know they would be muscled out.
What we are doing in the sugar industry and if we are able to get it right, we will be doing enough sugar for local consumption and export. So, we really need to push for increased production because if we do not, we will be a dumping ground and you cannot stop it because if you do, you will not be complying with the AfCFTA agreement that we have signed. For me, I think the AfCFTA is a good opportunity and the market is there for everyone, we just need to get our acts right. I like AfCFTA. It is a great thing for the entire continent as you can move around visa-free to take whatever you produce although the rules are there. We have to really ensure that the rules of origin are adhered to in a bid to protect local manufacturers
Would you say the present cement price is fair?
The price of cement in Nigeria is not fair simply because we do not have the capacity to meet the demand that is the simple answer and it is simple economics of demand and supply. In Nigeria, people say we are producing enough, we are self-sufficient, we can export but look at the numbers. Nigeria is over 200 million in terms of population and if you look at the production of cement last year, it was under 30 million tonnes, which means the year before, we were doing between 26 million tonnes. The actual production last year was under 30 million tonnes. Nigeria is a country with about 200 million people so that makes it about 120 or 130 kilogrammes per capita consumption.
If you look at other countries in Africa, you will find out their consumption rate is 170 to 200 kilogrammes of cement. This means that we do not have enough capacity and once we have a shutdown in any of the cement plants, you will immediately see the impact on prices because we do not have any buffer. This is why today, it is more expensive to build a house in Nigeria more than anywhere else in Africa and it does not make sense
The implementation of the AfCFTA has begun. What opportunities exist for Nigeria and companies like yours? How can the challenges to integration be addressed?
The AfCFTA is a very good one and important development for Nigeria but then again it depends because I can see a lot of opportunities for us if we get it right. What the AfCFTA means is that you will be able to move goods, services and people freely within the entire 54 countries, especially if you are able to produce in Nigeria and able to go into these countries and sell your products.
However, the fact that Nigeria is heavily dependent on imports, and our population is very large and consumption is very high, we might be a dumping ground if we are unable to produce. Every country will dump their goods in Nigeria because we have the market and the population. We are the biggest market in Africa, but if we produce and whatever we produce can go anywhere in Africa for sale then it is a good one for us.
For me, if you look at my factory in Sokoto State, that plant is only 120 kilometres to Niger Republic and only about 400 kilometres to Burkina Faso and neither of these companies are producing cement apart from Niger which has a very small amount of clinker, therefore, nobody anywhere in the world can compete with me in Burkina Faso and Niger Republic. Burkina Faso is landlocked; they do not have limestone and they cannot produce clinkers. They import the clinkers and they process it and they have to import it from Turkey or China which means that they have to transport the raw materials by sea to one of the ports near them and the cost of production is much higher, so it is good for companies like BUA in Sokoto to take advantage of the market. It is a fantastic opportunity for BUA and this is why we are establishing another line that will be mostly for export.
For other industries in Nigeria that are struggling and if you now allow other goods to come in and you are not competitive, we will be turned into a dumping ground. We need to actually step up and produce more so that we can not only satisfy our local needs but also meet the export demand under the arrangement
The AfCFTA is happening and it is here to stay. Nigeria has signed along with another 54 countries; therefore it is happening. There are lots of companies that will benefit from this arrangement, but if we do not step up our game and stop all sorts of people dumping their goods on Nigerians, you will see that in no time it will be a big challenge for us and I am looking forward to a situation where people will start stepping up their game to take advantage of this trade deal. The market is huge and it is about 1.3 billion people
Today, only about 30 percent of Africans can actually travel to other African countries without a visa. If I want to travel to South Africa, I will need a visa, but if a German wants to travel to Kenya, he requires no visa. Hence, non-Africans actually have more access to Africa than Africans, which actually does not make sense. Less than 30 percent of Africans can travel to other African countries. With this arrangement now, it will take a bit of time meaning that we can actually travel to most of these African countries without obtaining a visa at all. Under the AfCFTA, we are hopeful it is going to be much better because we can now travel without much restriction.
Do you see the pandemic having an impact on some of your projects, especially the oil refinery, in terms of investment and completion timelines?
Whenever there is a crisis that is when you see opportunities. The covid-19 pandemic offered us opportunities to negotiate good deals that would never have happened if things were normal. When we did our bond issuance, not many expected that. The whole world is awash with cash and if you have a very good project the money will be available to you. We do not expect the refinery project to be delayed although the Covid-19 is there, but we expect that sometime this year, we will commence. Over the years, we have hardly had to change our timelines on project completion. The present projects would not be different and in keeping with the BUA promise of timely project deliveries, I do not expect anything less with this. We should do the groundbreaking for our 200,000bpd refinery and Polypropylene plant in May and expect operations to start in 2024 and we can then fill the huge gap in Nigeria and the surrounding region with our products.