By Jude NJOKU

THE Minister of Finance, Mr. Olusegun Aganga stirred the hornet’s nest through a circular addressed to the Comptroller General, Nigerian Customs Service (NCS), Managing Director of Global Scan Systems Limited, Chief Liaison Officer, SGS Nigeria Limited and Managing Director Cotecna Inspection Limited.

In the said circular, the Minister informed them that “Mr. President has approved the following measures that would accelerate the growth of local capacities as well as provide possibilities for eventual export of cement product to other African states and beyond.”

These measures according to the Minister are:  “immediate cancellation of all unutilised cement import licenses issued from 2002 to 2008; annual review of local production in order to determine the need for cement import license  or otherwise; investors without operational land terminals will no longer be considered for cement import license from 2011; re-instatement of 20 percent import duty on bulk cement, as applicable to other finished products, in line with ECOWAS Common External Tariff (CET).

A cement factory operating below installed capacity

The proposed review is designed to provide leverage for locally produced cement to compete with imported ones; imposition of a levy of 15 percent on the cost, insurance and freight (CIF) price of bulk cement to substitute the N500 per tonne presently in force to be utilised for the development of the cement technology institute; the monitoring committee comprising relevant industry stakeholders will now monitor and verify cement companies with a view to ensuring strict compliance with the backward integration policy of government.” . This policy which was loudly criticised by unfavoured importers who insist on nothing but liberalisation of the process.

These importers were not alone in the condemnation of the policy as several built environment experts have also kicked against it.They see it as a bad omen for the construction industry which contributes about 70 percent of Gross Domestic Product (GDP).

According to them the policy will create a cement cartel or monopoly which will not augur well for the numerous homeless Nigerians who are praying for a drop in the prices of the product.

Manufacturers’ seek support for new policy
BUT the Cement Manufacturer’s Association of Nigeria (CMAN) which is at the centre of the controversy, has sought public support for the new policy, contending that they have enoughcement to meet local demand.

Executive Secretary of CMAN, Mr. James Salako was quoted as saying that about 1.5 million tonnes of clinker (semi-processed cement) is wasting away in cement factories across the country as a result of decline in demand for their products.

He stated that the situation is taking a toll on the local  manufacturers adding that they may be forced to close their factories if sales do not improve in the next three months. Salako who claimed that many of the factories were now operating at less than 50 percent of their installed capacities noted that the current situation  has pushed up overhead costs in the factories, while putting the worth of the clinker lying waste at N42 billion.

“We should support the Federal Government to enable the cement policy to work. Industrialisation is the only key to solving the teeming youths unemployment and under-development,” he said.

The CMNA executive secretary enjoined  Nigerians not to truncate the recent cement policy, but to give it a chance to succeed since it could lead the local industry into massive production that would benefit all.

The Managing Director, Obajana Cement Plc, Mr. Jagat Rattee  put the clinker lying waste at the group at about 800,000 tonnes.

Ralttee said  Obajana plant alone has over 300,000 tonnes of clinker that have taken over a space at the factory site.

According to him, local manufacturers have high inventory of clinker and cement in warehouses because of massive importation of cement and low sales from producing Factories as a result of low demand.“Those  canvassing for more importation of cement do not have the nation’s interest at heart. The market has been saturated with cement and the local cement sector has enough to meet the nation’s demand,” he claimed.

Bags of cement: Price gone beyond reach of the average Nigerian.

CMAN according to a report in Reuters expects production to rise to 20 million metric tonnes by 2012, almost double the level expected this year and a figure which could turn the country from a net importer to an exporter.

“Next year, we expect demand to be 16 million tonnes and production to be a bit above 18 million,” James Salako, CMAN Executive Secretary was quoted by the international news agency as saying.

“In 2012 we will be producing over 20 million. We have under construction of 14 million metric tonnes which will all be completed by next year,” he said. Total cement production in 2010 is expected to be around 11 million tonnes, below demand of around 15 million, but up on last year’s production of around 8.1 million, Salako said.

Selective import licences, counter productive

A CONSULTANT to the cement industries, Dr. Chiji George had in a previous interview kicked against selectively giving import licences to people because it will lead to a monopoly which is not good for the consumers. Dr. George who is the Managing Director of Matenco Nigeria Limited enjoined government to play its oversight function  of balancing between the private sector’s aim of maximising profit and what is good for Nigeria. Said he: “ We concede that the government’s claim that we need the private sector to drive or develop the economy. But we need a functional government to play its oversight role of balancing between the private sector’s aim of maximizing profit and what is good for the country.

A situation where the government has always given discretionary concessions that is perhaps selective is not good for the industry.   Go back to the 1990s and early 2000. There was this importation of bulk cement; it was one of the major problems. The cement manufacturers were saying you are allowing people to import bulk cement. They have it cheaper. So, they are flooding the market at a cheaper rate and forcing us to sell our products below our production costs.

They had an argument. It was the part of government to find out what is the cost of bulk cement outside, at what price through import duties do we give it to these importers to make sure they are in business and lower the cost of cement to force the manufacturers to also lower their cost for the good of the consumer. That was what we expected the government to do. But what was the government doing? Government was giving concession to importers, restricted the number of importers. So, it was selective, it was discriminatory and by that you made them to form a kind of cartel so that they impose prices.

It made some of them so rich at the expense of the populace and user. Some of them, luckily reinvested their mammoth gain in production facilities which was good but the history has been that of concession upon concession, making them richer and richer and making the poor user poorer and poorer by having to pay more and more. Draw the graph of the cost of one bag of cement between 1970 and 2009 and you will know what I am talking about. What has the government done to improve the lot of the users.

My friend who is building went to buy cement the other day and he told me the cost of a bag of cement and he screamed. I told him, Well, I don’t know what you expect. Recently, the government talked of giving some people some licences to import. Some people again, selective again, who are those ‘some’ people? It is still within the clique. So, you see them enriching a clique of people at the expense of users. Until a policy that balances is developed, nothing will happen

Experts kick against new policy

PRESIDENT of the Association of Professional Bodies of Nigeria (APBN), Mr. Segun Ajanlekoko was not comfortable with the decision of the government to put a 35 percent tariff on imported cement.

Cement for sale: At what cost?

“I don’t know the rationale behind it. If we can meet our requirements, yes of course, the government has the statutory duty to protect home-based industries but from research and what is on the ground, it is known that production or supply of local materials (cement) has not matched the demand or the need of the country. I hope that the policy would be looked at and if possible, reviewed so that we can help the construction industry to grow;  if that kind of import duty is slammed on one of the key essential commodities that we require now, it would be anathema to increasing the housing stock and providing housing to the homeless people. I hope the government did its home work well and see that it will work. But from our own standpoint, it will definitely lead to significant cost increase in the industry,” he said.

A former Minister of Sports and past president, Nigerian Institute of Building (NIOB), Bldr Bala Kaoje who specifically described the measure as a bad omen for the construction industry, explained that if implemented, the quest to provide the 16 million housing shortfall in the country would become a total mirage.

“The increase in the tariff of cement is not a good omen for the construction industry in Nigeria. As I speak to you, cement in a number of countries is very cheap and if the tariff is increased, it means we would be paying more for cement. That will also affect projects that are being executed by people who are low income earners. Those people who are not in government and they are not in big companies, that is,  the low income earners who would want to build their own houses will find it more difficult.

One of the basis of government controlling prices is to make life easy for its citizens but when prices are allowed to skyrocket, the citizens would be unhappy and would not be able to meet their needs and objectives. The major problem in Nigeria today is the lack of adequate housing for the people. We have over 16 million housing deficits. Even the major material that we use in construction, the price is skyrocketing, so it means it would be very difficult for us to catch up and provide affordable houses to
Nigerians,” Bldr Kaoje said.

Also reacting to the increase, a former president of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Chief Dosu Fatokun noted that restricting importation to only seven companies will create a near monopoly.

“If you allow everybody who has the capacity to import, you find that if prices do not come down through competition, at least it will stabilise the rate of increase.

But with these seven, there will be monopoly and you know the disadvantages of a monopoly. I understand that the government might be trying to control quality and sanitise the system, but I doubt whether the envisaged benefits will be realisable. I believe that this may be government’s short term measure to solve the cement problem. However, what I think the government should do is to adopt the China model. In China, you can hardly travel a few kilometres without seeing a cement manufacturing plant. You don’t have to be producing millions of tons of cement but you will be adding to the total output and will be serving your community,” he said.

On the implication of the new policy on real estate, Chief Fatokun said low cost housing will continue to be a mirage in the country. Roads, he said, will continue to be bad, as cement is an important material in any type of construction.

Another estate surveyor and valuer, Chief Innocent Mekson Okoro described the new policy as out of tune with prevailing realities. “I think that such high rate of tariff on the importation of cement and other materials is not a good thing; it should have been a gradual thing. You just don’t wake up overnight and do something that you cannot control. What I see is a situation where the local production cannot meet the demand and whether the government likes it or not, the forces of demand and supply will take place.

If there are so much inelastic demand, what happens is that the price will be too expensive and the cost of production will also be expensive. At the end of the day, the final output, that is the buildings, either for sale or lease, will also be expensive because the owner has spent a lot of money to deliver a particular property either for commercial or residential purposes”

Chief Okoro who is a former National Publicity Secretary of NIESV noted that “with the increase in demand, the price will push up. At the end of the day, what the government is trying to protect will be of no use to anybody. It is the final consumers that will suffer”.

He counselled  government on what to do. “What I think the government should have done is to first shore up the production level and research into or create a new local alternative to cement. Everything shouldn’t be cement, there is clay. They should pump money into  the production of local alternative to cement and try as much as possible to dissuade people from concentrating on the use of cement as the only means of building. When the concentration on cement reduces, the price effect will be a bit flexible and at the end of the day, the cost of delivery will be low and the rental value will not be high due to excessive demands”.

New group alleges hijack of the industry by a cabal

APART from the importers who were shoved aside in the present arrangement, another war is being waged by a group which goes by the name – Cement New Entrants Forum of Nigeria (CNEF). Only last month, the group launched a two-pronged campaign to force down the price of locally manufactured cement to N700 per 50 kg bag at retail shops by 2015. The group claims that  CMAN in collusion with some government officials is ripping off Nigerians at the current factory gate price of N1,300.

Chairman of CNEF, Prince David Iweta told Vanguard Features, VF  that 95 percent of limestone, the raw material  used in cement production is obtained freely from the Nigerian soil, and if government extended the same support it was giving to CMAN to the new entrants to run their local cement plants, they would contribute about 12.2 million metric tones to the market and sell cement at a factory gate price of N500.

They alleged that the major manufacturers that are celebrated today have been granted and imported over 30 (thirty) million tonnes of cement each for longer period of 10 years that afforded them the opportunity to achieve the claimed huge investment in local cement production.

Disclaimer

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