In the past six months, Nigerians have witnessed an uncontrolled increase in the price of cement, a key material in the construction industry. TEMILOLUWA O’PETERS writes on the impact on building projects
Mid-April 2020, Mr Idowu Adesina, an accountant, started the expansion of his family house to a two-storey building. Trying to take advantage of the lockdown period, he had begun the project with the hopes of completing the building before the lockdown was lifted.
However, the house, which he lives in with his wife and children, stands uncompleted today.
According to Adesina, this is largely due to increasing cement price.
He said, “Cement is like gold now; it’s hard to get. When I started out, I had a budget for the entire project. Now, I have surpassed the budget by far because of the increase in the prices of building materials, especially cement.
“I had to suspend the project because I couldn’t keep up with the price increase. I also have my family to feed and with the increase in the prices of almost everything, I had to prioritise the most important things.
“It’s heartbreaking because I had plans of dedicating the house this April, but look at the situation now.”
Prior to the fourth quarter of 2020, cement was sold for between N2,400 and N2,500 per 50kg bag in many states. But in October, the price of the commodity started rising as a result of insufficient supply and other factors, and has increased by about 45 per cent to N3,500 per 50kg bag.
The price of a bag of cement currently ranges from N3,500 to N3,800, depending on the brand and the location.
In August 2016, the price of a bag of cement was increased from N1,600 to N2,300. Thus, between August 2016 and today, the price has risen by more than 137 per cent.
With cement being one of the main materials in building, the persistent increases in prices pose a threat to many projects and the performance of the construction industry, according to stakeholders.
A developer and the Chief Executive Officer, Bezaleel Construction and Designs, Blessing Aderomu, complained that cement price had been a huge problem for his business as almost everything in the built industry involved cement.
According to him, another major challenge aside the price is the availability of the commodity.
He said the high demand for cement amid very little supply brought about the price hike.
Aderomu stated, “In the space of six months, we experienced a huge price increase, which translates to an increase in the overhead/budget and slows the rate of development when clients have to look for money to add.
“If the client is not willing, that means you have to reduce the quality of the output, which is not desirable, because quality comes first.
“If you don’t construct a standard building, you cannot ensure the occupant’s safety. We need more cement in circulation to force down the price.”
Stakeholders decry price hike, call for cement market liberalisation
The President, Nigerian Institution of Estate Surveyors and Valuers, Emmanuel Wike, said the increase in cement price would affect the number of properties coming into the market in the next few years.
Describing cement as a key construction material, he said its high prices would affect the general cost of construction.
He noted that this would further increase the housing deficit of 22 million units in the country, thus making more people unable to afford houses.
According to him, the price hike will also cause some developments to become abandoned projects.
He enjoined the government to encourage people who had the resources to decentralise the market in a bid to put an end to a situation “where just a few organisations are suppliers/manufacturers of cement.”
“Those who have the resources to go into this kind of investment should be allowed so that at the end of the day, there’ll be competition. The Federal Government should create policies that will encourage this investment,” Wike said.
The President, Nigerian Institute of Building, Kunle Awobodu, also called for the liberalisation of the cement market.
He lamented that the recent price hike was creating crises in the built industry, with the attendant increase in the costs of construction.
According to Awobodu, the hike is creating friction between clients and construction firms due to cost variations and giving rise to abandonment of projects as well as discouraging people from embarking on new projects.
He also warned of the imminent danger of substandard construction, saying the low purchasing power of Nigerians could lead to compromised quality.
The NIOB President called for the establishment of more cement factories in the country so as to encourage more competition and ultimately crash prices.
The President, Real Estate Developers Association of Nigeria, Dr Aliyu Wamakko, said with the escalating price of cement, it was becoming impossible to provide affordable housing to Nigerians.
He advised the government to come in to regulate the activities of cement manufacturers in the country or allow the importation of the commodity.
Wamakko stated, “All the items used to make cement are being produced locally; so, we wonder why cement price has gone up to N4,000 per bag.
“The Federal Government should cancel the ban on the importation of cement and allow people to bring in the commodity so that we can provide houses to Nigerians.
“The Federal Ministry of Trade and Industry and the Standards Organisation of Nigeria should come together to look at the factors of production of these cement manufacturers so that at least, we’ll be able to understand the way forward.”
The Chairman, Lagos State Bricklayers’ Association, Ladogan Zone, Kennedy Ikeri, said the price hike had also affected bricklayers, adding that it had rendered some of them jobless.
He said most of them experienced problems with clients, who struggle to provide materials, majorly cement – a development that made them unable to proceed with their jobs.
He added that while they were not getting many contracts, they were also not getting enough money from jobs done.
“We had contracts that were pending, but based on the price of cement, the contractors suspend the projects. It has been affecting our work and make a lot of our workers and bricklayers stay back at home,” he stated.
According to Ikeri, if there is proper competition, cement price will not be as high as it is now.
“Because a few people are the ones producing most of the cement in the market, they always have that privilege to fix a certain price at any time. But if there are different manufacturers distributing cement, the price will reduce because the supply will be more than the demand,” he said.
Manufacturers acknowledge supply gap
The Chairman, BUA Cement, Abdulsamad Rabiu, had also called for the liberalisation of the country’s cement market earlier this year so as to boost production.
Rabiu was quoted as saying in February that the policy was “favouring the big players” and had contributed to a hike in prices.
He also attributed the high cost of cement in Nigeria to low production capacity, noting that the few producers were not able to meet the country’s huge demand.
He said when there was any problem or challenge in any of the plants of the few players, the impact was immediately reflected in the price.
Rabiu stated, “Even though this cement policy is a good one, it must be done in such a way that a lot of players must come in and participate.
“There is no point in making a policy that only one, two or three people are able to benefit from.
“That does not make sense. I am benefiting from this policy, but I know it is a bad policy. So, whilst the policy is good, the way it is being administered is not good. You can’t have a policy that restricts so many people from participating; at the end of the day, you are just creating a monopoly.”
The Dangote Group also recently acknowledged that about 40 per cent supply gap existed in the country’s cement market.
It’s Group Executive Director, Strategy, Portfolio Development and Capital Projects, Devakumar Edwin, said at a briefing in Lagos that cement manufacturers were working to close the gap.
Edwin said the demand for cement had risen because of the increase in construction activities as investors considered the industry good to hedge against falling local currency.
He noted that although the company had not increased its ex-depot price, some retailers had taken advantage of the supply gap to increase their prices because they could not get supplies as required.
According to him, the devaluation of the naira and the increase in Value Added Tax have also led to an increase in the cost of critical components such as gas, gypsum, bags and machine spare parts.
Senate rejects cement liberalisation
The Nigerian cement market is currently dominated by three major players – Dangote Cement Plc, BUA Cement Plc and Lafarge Africa Plc.
Last Tuesday, the Senate declined to advise the Federal Government on the liberalisation of the cement industry.
Senator Lola Ashiru and five others had sponsored a motion titled: ‘Need for liberalisation of cement policy in Nigeria’.
The upper chamber of the National Assembly struck out the recommendation to “advice the Federal Government to liberalise her current policies on cement production, particularly licence restriction, to attract more investors in order to make cement more available to Nigerians at a moderate price.”
The Senate also rejected the motion to set up a committee to investigate anti-competitive practices by local cement producers; direct the cement industries in Nigeria to increase their production and reduce the price of 50Kg of cement to the barest minimum.
The only resolution approved was the recommendation for the government to provide more industrial incentives and protection, like offering concessionary loans and larger tax incentives for new entrants.
The recommendations rejected by the Senate, according to Ashiru, would have boosted the production of cement as well as reduced its price in the market.
Ashiru observed that the cement market was oligopolistic in nature with three players largely dominating the scene, which he said made it susceptible to price-fixing practices.
He also expressed worry that the significant rise in cement prices in the country and the low purchasing power of Nigerians would result in substandard building construction and non-completion of planned infrastructural works.
The lawmaker said, “The recent increase in the price of cement (from N2,600 to N3,800)slowed down the amount of construction work being embarked upon, thus negatively affecting labour engagement and almost collapsed the procurement plan of the government in the 2020 Appropriation Act.
“There is an urgent need to encourage more local production of cement to satisfy the demands of Nigeria with a steady growth rate of approximately three per cent per annum; a housing deficit of 30 million units and less engagement of over 10.5 million workforce of the building and construction industry.”
Lifted from PUNCH: https://punchng.com/potential-home-owners-dreams-fade-as-cement-price-skyrockets-contractors-bricklayers-lament/?amp