AMONG the cartel, Dangote Cement  Plc has been and remains the biggest importer of bulk cement into Nigeria, thanks to the Federal Government yearly allocation that favours  Dangote with a quota of 6.5 million – 9 million MT per annum, against 3.2 million MT per annum shared out among the rest of the other four companies, Dangote Cement, comprising Benue Cement purchased from the Bureau of Public Enterprises in  2001 and still struggling to meet production level and Obajana new cement plant commissioned by President Obasanjo with a claimed capacity of five million MT per annum which in reality is producing about 1,500,000 MT per annum.

Dangote Cement has been in the business of bagging bulk cement since 1995, over 12 years ago, using Nigerian Ports Authority infrastructure and buildings. It was only in May 2007, that Dangote finally commissioned a cement manufacturing plant of its own initiative.
With its overriding influence on the Obasanjo regime, Dangote always managed to seize cement import quotas of between 6.5 and 9 million MT per annum. Keeping hold of so much import quota enabled Dangote to limit what was available to other operators. Dangote regulated how much of their cement import quota to use and when to use it and by so doing has successfully been manipulating market prices.
Dangote Cement did not only tyrannise other producers but also succeeded in frightening away would-be new entrants into the cement industry with bogus claims. These claims included wild production and expansion figures that were never met but were accepted by the government as a basis for the issuance of import quotas. The most viable strategy for achieving cement security for our dear country via local manufacture lies in implementing public policies that encourage more investors to enter the cement industry.

Iran’s experience
As a developing country like Nigeria desirous of meeting local needs of cement, the Government of  Iran some years ago called all stakeholders’ to a meeting and charged them  to work out  ways of becoming self-sufficient in cement production given abundance of limestone in the country.

The stakeholders deliberated and were able to come out with workable plan of action. What made theirs unique was that inputs came from all sectors in the building/construction industry- the government, cement manufacturers, importers, financial institutions, insurance companies and construction experts.
N2,000 – N2,200 to N1,550 – N1,800 a bag.

In July 2010 the following companies got six months import license. They are Dangote Group (895,000 metric tonnes), Flour Mills Nigeria Plc (600,000mt), Eastern Bulkcem Company (245,000mt), Ibeto Cement Company and Bua International Limited (225,000mt each), Lafarge Group/Atlas Cement Company (160,000mt), and West Com Technologies and Energy (150,000mt).

The most bizarre aspect is that whereas all the companies have either invested considerable resources in local cement production in the country, or are in various stages of investing in Greenfield and Brownfield plants that would increase local output, some others like Reagan Cement, Madewell Cement, Minag Cement were left out even though they have also invested in backward integration, leaving them to be reeling in heavy debt burden and stagnated.

If the claim by the shylocks that they are capable of producing the whole country’s cement requirement  is true, irrespective of the hike in duty and levy, which we understand was to discourage importation; price of cement would not have gone up as it did. The price went up because government was deceived.

When current and projected output is juxtaposed against actual demand for cement in the country, there is a yawning gap which local producers have failed to meet and will continue falling short of domestic requirements in the foreseeable future.

From reports made available by CMAN and Renaissance Capital, both studies show that there is a supply deficit, which local producers have not been able to meet despite investments in new plants. Indeed, available statistics shows that demand for cement in 2009 was 17.5mmtpa, relative to installed capacity of 13.75mmtpa.

In 2015, demand will increase to 35mmtpa, compared to 28.2mmtpa of installed capacity. These projections assume that all the plants will operate at optimal capacity, which is rarely the case. The high cost of doing business in Nigeria and other factors have helped to keep capacity utilization at an industry average of 68 percent over the last five years.

CMAN, for instance, has maintained that the surest way to making the product affordable is not by depending on imports, but by protecting and enabling local production. Whilst this is a laudable objective on the part of CMAN, the prism is too narrow. Cement production is not only needed for housing, but is just as critical for infrastructure development.

Like all developing countries, Nigeria suffers from a huge housing and infrastructure deficit and urgently needs to plug that gap. Nigeria is expected to surpass South Africa as Africa’s largest economy in the next few years, a positive signal that the per capita consumption of cement locally would remain on the rise for several years to come.

The implication is that demand for essential commodities such as cement, energy and food would continue to outstrip supply.

In the same vein, projected economic expansion and high oil prices all point to the fact that the three tiers of government will deploy considerable resources in roads and railway construction, new airports and seaports, the education and healthcare sectors, and agriculture and electricity, which are all dependent on the availability of cement as a critical component of the construction industry.

BY OBINNA NWACHUKWU, a commentator  on  national issues , writes from Lagos .