By Angela Nkwocha
One of the policies and strategies employed by developing economies to grow their industrial base is import substitution. Import substitution industrialisation strategy (ISI) involves producing locally, goods that were formerly imported.
ISI is a trade and economic policy that advocates replacing foreign imports with domestic production. It is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialised products.
Nigeria has made several attempts at building a virile industrial base through import substitution. The concept depended on importing processed materials for assembling. The strategy bequeathed to the nation a number of assembly plants that were dependent on complete knocked down (CKD) components imported from industrialised nations.
Essential materials such as cement, needed for infrastructural development, were imported by companies that bagged the bulk cement locally. The nation depended majorly on imports to satisfy local demand for cement as the few cement plants were producing at low capacity.
This was the scenario until the Obasanjo administration came up with the backward integration policy for the cement sector in 2002. The policy was designed to encourage local players to set up production plants with a view to making the nation self-reliant.
This policy has started to yield fruits. This year, local manufacturers of cement announced that they now have capacity that far exceeds demand. Some of them have even concluded arrangements to export the excess to neighouring West African countries.
Dangote Group, which is the main driver of this revolution, changed the story when it ventured into local manufacture of cement, taking advantage of the enabling environment that the government had put in place to encourage local players.
Dangote Cement Plc (DCP) currently operates three cement plants located at Obajana, Kogi State, Gboko, Benue State and Ibese, Ogun State. Benue Cement Company Plc (BCC) was incorporated in 1975, with the Federal Government of Nigeria as the core investor. The company commenced cement production in 1980 with an installed capacity of 900,000 MT (Metric Tonnes) of cement per annum.
In 2000, the Federal Government sold its interest to Dangote Industries Limited (DIL) following a privatisation exercise conducted by the Bureau of Public Enterprises (BPE). DIL subsequently transferred its stake in BCC to DCP in 2009. Sequel to DIL’s takeover and subsequent investment in the company, the company’s installed capacity has been increased from 900,000 MT per annum to four million MT per annum.
Dangote Cement, Obajana was incorporated as Obajana Cement Plc on 4 November, 1992 by Kogi State government to operate plant(s) for the preparation, manufacture, control, research and distribution of cement and related products.
In 2002, DIL bought over Obajana Cement Plc from Kogi State Government and commenced the construction of the Company’s first cement production plant in 2004. In 2007, the company commissioned its production plant in Obajana, Kogi State.
The Obajana Cement Plant, following expansion and construction of additional lines, now has the capacity to produce 10.25 million tonnes of cement per annum. It is the largest cement production plant in Sub-Saharan Africa. In December 2009, DIL transferred its entire shareholding in BCC to the company.
In July 2010, the name Obajana Cement Plc was changed to Dangote Cement Plc. Dangote Cement Ibese, a plant with an installed capacity of 6 million metric tonnes of cement per annum, was commissioned by President Goodluck Jonathan on February 9, 2012, and consists of two production lines of 3 mmtpa.
The plant has substantially boosted the supply of cement in the Nigerian market, since it started rolling out cement.
Dangote Cement is putting finishing touches to the plan to start the construction of another 6 mmtpa Ibese Phase II cement project, which will take Ibese to 12.0 mmtpa capacity when completed. There are also plans to further add a 5.0 mmtpa Line 4 at Obajana, which will take the capacity to 15.25mtpa by 2015.
Already, Dangote cement plants combined give a figure of over 20 mmtpa capacity, which surpasses local demand estimated at 17mmtpa. When the capacities from the other local manufacturers such as Lafarge, BUA and Ibeto Cement are added, it becomes apparent that Nigeria has indeed attained self-sufficiency in cement production.
Available data indicates that local cement consumption rose by 11.1 percent from 8.42 mmtpa in 2004 to 9.35 mmtpa in 2005. In 2006 it rose to 10.08 mmtpa, 10.98mmtpa in 2007 and by 22.1 percent to 13.41 mmtpa in 2008. Average cement consumption went up to 14.80 mmtpa in 2009, 15.83 mmtpa in 2010. In 2011, local consumption of cement was 17.10 mmtpa.
In the same 2011, cement production from local manufacturers started closing the gap on domestic cement demand. With total local consumption estimated at 20.97 mmtpa by end 2012, Dangote Cement plants, with over 20 mmtpa capacity, has met local demand for cement. Additional output from other manufacturers will not only exceed local demand but also launch the country into the league of cement exporting nations.
Explaining the company’s aggressive expansion drive, during the Ibese commissioning, the President/Chief Executive Dangote Group, Aliko Dangote, said: “The aggressive expansion of our local production capacity at our plants is to ensure there is always adequate capacity to meet local demand and export so that this country never again has to import cement to meet her requirements.”
The Dangote initiative, could well serve as a blueprint or model for the nation’s true industrialisation. The government should consider having other ‘Dangotes’ in all the sectors of the economy. Having a Dangote in the oil refinery sector would, as an instance, mean an end to fuel importation. A Dangote in vehicle manufacturing means kissing goodbye to imported ones. In essence, we should try and introduce a ‘Dangote’ in every ailing sector of the economy. This will bring us closer to the Nigeria of our dreams.
The success of import substitution in local cement production can be replicated in other sectors of the economy, if the government and the other stakeholders muster enough will power to drive the process.
For instance, the government has given notice of its intention to ban import of rice into the country in the next few years. While the proposed policy is welcomed, the government needs to go a step further by providing incentives such as those provided for local cement manufacturers, to attract investors in rice farming, which is a mechanised venture. In this regard, the government could provide cheap sources of funding, tractors and other farm implements to encourage investors.
It is only when we become self-sufficient in basic commodities that we can truly beat our chest to say that we are an industrialised nation. The government should try to replicate its success in the cement sector in other areas of the economy.