Displaying items by tag: Nigeria

"We believe that Nigeria has arrived as a cement manufacturing country," said Joseph Makoju, Chairman of the Cement Manufacturing Association of Nigeria (CMAN), to mark yet another 'moment' when Nigeria's ability to produce cement has overtaken its demand.

One of Makoju's reasons for Nigeria's 'arrival' was the fact that the Nigerian government hasn't issued any import licenses since the start of 2012.

As Global Cement Weekly #46 noted in April 2012 this is strange given that domestic consumption is up to 18Mt/yr: a figure 4Mt below modest estimates of national capacity which start at 22Mt/yr. According to Global Cement monthly price reviews the cost per bag has risen by 20% since 2010 despite presidential orders to keep it down. However much cement Nigeria seems to produce the price still keeps on rising.

The prices aren't the only figures that are rising year-on-year. Dangote, Nigeria's leading-producer, reported an increase in operating profit of 14% to US$745m in 2011 from US$654m in 2010. Lafarge WAPCO, the country's second largest producer, reported an increased operating profit of 41.7% to US$74.1m from US$52.3m.

Prices continue to rise but this could be due to cartel-like behaviour. President Goodluck Jonathan seemed to suggest as much in 2011 when he ordered prices down. Then again Nigeria's poor transport infrastructure and distribution chains could be to blame for rising prices instead. CMAN has announced plans to promote the use of concrete road construction with the government and Dangote announced plans in August 2012 to widen its distribution by opening more 'mega-depots' and signing on new distributors.

It's unclear exactly how much cement the Nigerian market actually wants. Its per capita consumption is 110kg, compared to 280kg in South Africa and over 600kg in Egypt. This is way down the consumption/GDP curve compared to Europe and North America. Its population has reportedly risen by 30m from 2006 to 2012. This implies massive total demand and demand potential.

So - past massive transport infrastructure projects, improved distribution and possible price inflation - how does Nigeria keep momentum? Ironically, given Nigeria's protectionist stance against imports, one of the measures CMAN is exploring is how to export cement to other countries. Recent news reports about local producers in Namibia and South Africa fighting foreign imports suggest that other African countries are starting to 'arrive' too. Even building the roads may not be enough to keep Nigeria's cement express-train on track.

Nigeria: This week has seen a major development in the Nigerian cement industry, with a call from domestic manufacturers to ban cement imports, three months ahead of the government's schedule for the ban. The call has been presented in some quarters as proof that the country, long blighted by high cement imports, has achieved President Goodluck Jonathan's bold target of making Nigeria a net exporter of cement before 2013. In the face of steadily diminishing oil revenues the government would like Nigeria to be known as the regional cement exporter, but what else might happen?

According to the Cement Manufacturers' Association of Nigeria (CMAN), the country's total cement capacity now stands at 22.5Mt/yr. Domestic consumption is estimated at 18.5Mt/yr, translating into a required capacity utilisation rate of 82%. It is bizarre, therefore, that cement producers feel the need to call for an import ban. Perhaps:

a) The producers know that they can't compete with the low cost of imports from outside Nigeria,

b) The producers want to recoup their plant investment costs as quickly as possible,

c) The producers know that they can't export if the country continues to import.

With notoriously poor transport links within Nigeria, option c may be a small factor. If road and rail links are poor, transport costs increase and exports become less desirable for both the supplier and the end-user. What is more likely however, is a combination of a and b. Producers need to recoup their investments but can't if China and India can undercut them from thousands of miles away. If the desire to recoup investments goes unchecked when the import ban comes in, there is a high potential for cartel-like behaviour to surface again in the country.

One does not have to look back far to the last major incident of apparent cement market cartelisation in Nigeria. In mid-2011 President Jonathan had to step in and personally call for a 25% price reduction. His target was hit within three months, but since then prices have slowly started to rise again, even with Dangote's Ibese 6Mt/yr plant coming online just three months ago! With four producers committed to setting up a 3Mt/yr plant each by 2015 in exchange for 2011 import licences, the supply of cement in Nigeria will continue to rise, making the temptation to collaborate even stronger.