Cement price war: Experts canvass policy liberalisation for virile competition

Built environment professionals are of the opinion that full liberalisation of cement policy in the country will open up the industry for more players, allow healthy competition among manufacturers and bring about crash of cement prices. Dayo Ayeyemi reports.

It is no longer news that a 50-kilogram bag of cement cost between N3, 600 and N4,000 in the market, depending on locations and brands. What is news is on the necessary solutions to crash the high cost.

However, apparently worried by the  exorbitant prices of cement in the country, built environment experts are currently  calling for full liberalization of cement policy to give room for more players and healthy competition in the industry.

Healthy competition by at least 10 manufacturers, they are of the opinion will promote quality products and affordable cement prices.

They urged the Federal Government to take a look at the telecommunication industry, where virile competition among stakeholders led to the crash of  SIM cards and recharge cards prices, which hitherto sold N19,000 and N1,500 minimum respectively in 2002 -2005, until Globacom and others came into the market.

Recall that the price of cement was increased by major manufacturers to N4,000 last year November from N2,600 initial cost. Since the hike in cement price, citizens, comprising home seekers and estate developers have not stopped complaining about the issue, seeking government’s intervention in order to reduce the nation’s accommodation gap, which the United Nations’ estimates put at over 17 million units.

However, built environment professionals’ current agitation is not unconnected to the on-going cement price war between the Dangote Group and BUA cement.

 

BUA vs Dangote

BUA Group Chairman, Abdulsamad  Rabiu, had last week, in a television interview, called for the liberalisation of Nigeria’s cement policy, describing the current  policy as ‘favouring the big players’ which had led to a hike in cement prices.

He alleged that the big players were exploiting Nigerians. He also linked high prices of cement to low production capacity.

Rabiu said: “Look at the numbers, Nigeria is over 200 million people today in terms of population. If you look at the production of cement, last year, we were less than 30 million metric tonnes. Nigeria’s 200 million people make it about 130 kilograms per head.”

Rabiu also said that during the tenure of former President Olusegun Obasanjo, he had pushed for a cement policy that would allow more players in the industry, a move which would have crashed prices.

He said his company and other big industrial players were benefitting, but insisted that the country had no business with a cement price as high as N4,000.

He said the big players were exploiting Nigerians, adding there were plans by the company to slash prices.

Respondingt, the Dangote Group’s Executive Director, Project and Portfolio Management, Edwin Devakumar, on Arise Tv News ‘Morning Show’, last week, said the firm received the challenge of BUA Group to crash the price of cement, boasting that it would beat any competitor to it.

He said “We dropped the price by almost 25 per cent in 2015. Today, one of the players says he wants to drop the price; he is selling as I said 10 per cent higher than my price. Today my price is N2,450, they have announced their own price is N2,700. So, they can drop that price. They can drop a bit further no problem. If they drop the price, we will follow.”

Dangote also denied that government policies were tailored to favour the company since the tenure of Obasanjo, saying “the policy is a very open policy, and does not endorse any particular cement company.”

According to him, the recent increases in prices were linked to foreign exchange and the resulting fall in the value of Naira.

He argued that the primary consumption of cement in any country was on infrastructure, but for Dangote, government’s infrastructure consumption has been low.

 

Experts’ responses

Managing Director, Ace HI-Teck Construction Company Limited,‎ Adewunmi Okupe, said that he sincerely prayed they would walk the talk.

“We don’t need all this drama at all. Let the party that wants to take the lead do so without hinging his promise on acceptance by the other party to do the same. The lower the cement price the better for the masses,” he said

President of the Nigerian Institute of Building, Mr Kunle Awobodu, is of the opinion that if the price of cement is crashed, it would grossly address the affordable housing challenge in the country.

He pointed out that cement policy liberalisation would open door for more players, leading to healthy competitions in the sector, but with a resentment.

He warned that some times, people must be mindful of quality control of cement.

Chairman, Nigerian Institution of Estate Surveyors and Valuers (NIESV), Lagos Branch, Mr. Dotun Bamigbola, stated that competition among manufacturers of cement would bring down prices, leading to better value for customers.

“Competition is part of market force which affects commodity pricing. Competition is good for any market. It brings out the best quality at probably the lowest or appropriate price. Lafarge and others should join the competition for Nigerians to have better cement pricing.

“With just two companies, it is not far from a monopoly. It is better to have three, four or more competitive cement producing companies as a developing nation with high housing deficit.”

Former President of the Nigerian Institute of Town Planners (NITP), Mr Stephen Onu, asked about the comparative price of cement in the neighboring countries.

He pointed out that monopoly sponsored by powers that be that would not tolerate competition is unacceptable.

“Why do you frustrate other players in the industry? Why should one man or company be allowed to take over almost all cement producing companies in Nigeria at the expense of citizens of this country? Let the price war start not on media platform but in the market place.  If BUA is sincere let it brings it’s price down now,” Onu said.

Chairman, HOB Estates Limited, Chief Olusegun Bamgbade, added that virile competition would stabilise the price of cement in the country, saying that “a single firm cannot dominate and dictate the price of a commodity being produced by several others.

“We need to look at the telecom industry. MTN and ECONET dominated the scene and explored the opportunities of pioneers resulting in excessive profiteering until GLOBACOM came on board and introduced per second billing system. That was the beginning of price war in the telecom industry.

Former Chairman, Estate Surveyors and Valuers Registration Board (ESVARBON), Elder Williams Odudu, is of the opinion that competition will certainly bring down the price of cement in the short term.

However, he stated that in the long run, both companies might come together to agree and fix a price that may not be in the interest of the masses in the long run.

“There is need to devise a means of reducing prices of other building materials such as plumbing and electrical materials,” he said.

Chairman of Lagos State Chapter of NITP, Ayo Adejumo, said that good competition is a welcome idea, stating that “monopoly does not help economy of any nation.”

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