Experts Reveal How Price Of Cement Can Be Reduced Amidst Tinubu’s Directive

Despite a previous agreement between manufacturers and the government, and a presidential directive aimed at reducing cement prices, the cost of cement continues to soar, raising concerns among experts and real estate operators.

They are now advocating for effective strategies to make prices more affordable.

Contrary to the agreed price range of N7,000 to N8,000 per 50kg bag, major cement brands like Dangote, BUA, Lafarge, and Ibeto are retailing at an average price of N11,000.

This persistent high price comes even as the federal government hints at the possibility of opening borders for cement imports to foster market competition.

Industry professionals and real estate investors label the current cement price as unsustainable, unrealistic, and detrimental to investment.

The exorbitant cost is impacting various stakeholders within the real estate sector, from developers to property owners and end-users, forcing many to incur expenses far beyond initial contract prices.

The immediate past president of International Real Estate Federation (FIABCI)-Nigeria, Adeniji Adele, told BusinessDay in an interview, “It is monopoly that is driving up the price of this commodity and, for me, until that monopoly is broken, we will continue to be at their mercy.”

Adele said that the way to do this is to to liberalise the cement market by giving licence to more people to manufacture the product so as to increase supply to match the surging demand from commercial real estate developers, highways and bridge contractors and private home builders.

The Cement Producers Association of Nigeria (CPAN), on their part, called on President Bola Tinubu to end the monopoly in cement production and distribution, urging him to revisit the backward integration policy of past administrations so as to allow the sector to meet the available demand at affordable price.

“The President, working with the Ministry of Industry, Trade and Investment and the Ministry of Finance must dismantle monopoly and expand the scope for participation by those with verifiable local investment in cement and other interests,” the association’s chairman, David Iweta, said.

It is a widely held view that it is monopoly in the industry that is fuelling the price.

Experts are of the view that the over 300 percent increase in the annual profit margin by major cement producers is a practical demonstration of the exploitation of Nigerian cement consumers by the monopolists.

They said, “This increase in their annual profit margin is above that of bigger cement plants in other developed economies of Switzerland, China, Mexico, Taiwan and India with profit margin average of between 13 percent and 17 percent.”

Though he shares the view that the high price of cement is a huge challenge for housing and other aspects of construction, Emeka Eleh, Principal Partner at Ubosi Eleh and Co, believes that the manufacturers are simply adjusting the price to their cost of production.

Eleh said, “It is not only the cement manufacturers. It cuts across sectors. Many companies have shut down and those that are still in business are struggling with soaring logistics and diesel costs plus double taxation.”

He explained that logistics cost has increased since after the petrol subsidy removal which has seen the price of petrol go up by over 200 percent to N600—N700 per litre, up from N165 per litre.

He added that the manufacturers also contend with poor state of the roads in the country.

Diesel price, he noted, has also gone up from between N850 and N900 per litre in January this year to N1,700 per litre at the moment. Cement manufacturers need diesel to power their generators.

They also need diesel to power the heavy machinery used for blasting the raw materials extracted from the quarries. So, he said, energy is a problem and that needs to be addressed for prices to come down.

The Founding Managing Partner and Deputy CEO at Purple, Obinna Onunkwo, agrees, stressing that government needs to do something, not through price control but by addressing the obvious challenges which these manufacturers face such as the issue of inflation, volatile exchange rate, energy costs, etc.

CEO, Estate Links, Gbenga Olaniyan, who is canvassing opening up the borders to allow imports for a short time, say between now and December, laments the huge adverse impact of the high cement price on all stakeholders in the real estate value chain.

Olaniyan, who is an estate surveyor and valuer as well as a property developer, says the impact is at different levels, including those who are about to start projects, those who have started and those who have not started at all.

He said, “We have seen some developers who have decided to hang on so that they can configure the project and find out its viability. Some have decided to sit back and consider the viability or market value of the project while those that have started have only two choices to make—to hold on or to continue working.

“we are already finding a lot of contractors declaring force majure, especially for fixed contracts, that’s where the contracts have been paid for in advance. When such contractors go to the cement depot to get cement, they are told that there is no cement. So, a lot of contracts are facing force majure at the moment.”

Olaniyan disclosed that a lot of projects are now going for arbitration and indeed ending up in court because with the current price of cement, the developers are actually sweating.