Business
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Dangote Cement Plc has reduced the price of its product but people are skeptical over its true motive for doing so now
| By Anayo Ezugwu | Nov. 24, 2014 @ 01:00 GMT |
THE drop in the price of Dangote brands of cement in Nigeria has triggered-off mixed reactions from stakeholders including other cement manufacturers as well as real estate developers in the country. While some stakeholders described such decision as the right step in the right direction, others said there are ulterior motives behind the sudden reduction of price by Dangote. Dangote pegged the price of a 32.5 cement grade at N1,000 per 50 kg bag, while the higher 42.5 grade would sell for N1,150 per bag.
Abdulsamad Rabiu, chairman, Bua Group, a major player in cement productions, lauded Dangote’s gestures. He described it as not only commendable, but encouraging. He said, he has been advocating for a sharp reduction in the unit cost of the product to enable Nigerians realise their dreams of owning their own houses. “It is against this background that I commend Alhaji Aliko Dangote for this patriotic initiative, which is long overdue. With the low price, more consumers would buy cement, which will not only shore-up its volume, but increase the market share of the stakeholders. I urge all cement producers to emulate Dangote and bring down the cost of cement. There is absolutely no reason for a bag of cement to cost so much.
“While it is true that we have infrastructural challenges, it is not much as to make the cost of cement so expensive. On our part, I have already directed all our plants to follow suit and implement the new price regime. There is really no reason for cement to cost more than N1000 per bag, bearing in mind the massive success of the backward integration policy, which started 12 years ago with billions of dollars injected into the nation’s cement industry,” he said.
According to Rabiu, the funds injected into the sector led to increase in the national productivity of cement from 2.2 million tonnes to more than 30 million tonnes. BUA Group acquired Edo State Cement Company, where it injected more than $500 million in its green field project; producing about three million tonnes per annum while deploying the latest technology in cement production.
Rasidi Adebowale, national president, Block Moulders Association of Nigeria, said he received the news with a pinch of salt, especially on what the price reduction holds for his members as well as Nigerians. Expressing optimism that the new price review would translate to reduction in the price of blocks, he urged other cement producers in the country to do the same in the interest of the nation.
Kunle Awobodu, public relations officer, Nigerian Institute of Building, NIOB, said the gesture from Dangote will help to upgrade the quality and standard of building. He said it was not clear whether the measure was to help Nigerian people and the construction sector or to drive away competitors? “It’s a good development. Nigerian cement is one of the most expensive in the world despite the fact that there is increased production in Nigeria and most of the materials are sourced locally. NIOB as a professional institute is an advocate of reduction in cement price to N800 per bag. We have written the National Assembly on this,” he said.
Devakumar Edwin, group managing director of Dangote who announced the new price regime by said the move was in line with the company’s commitment to the nation’s dire need for the development of infrastructure and to boost the federal and state government’s ongoing effort to reduce the near 20 million housing deficit in Africa’s largest economy.
“We recognise the need for an increased rapid response to the huge infrastructure and housing deficit in the country, and one of the ways of addressing the issue is bringing the price of building materials down to much more affordable levels especially cement which is within our control as part of our contribution to the transformation agenda of the Goodluck Jonathan administration and the attainment of key milestones in the Millennium Development Goals, MDGs.
“Since the commencement of the implementation of the backward integration policy for cement in the country over 12 years ago, the local production capacity of the product rose from less than three million metric tonnes per annum to about 38 million metric tonnes per annum. During the more than 12-year period of the backward integration policy, nearly $20 billion has been directly and indirectly injected into the Nigerian cement industry with Dangote Cement Plc accounting for 60 percent of that spends,” he said.
According to Edwin, Dangote Cement Plc would continue to ensure alignment of its corporate social responsibility with its strategic business initiatives and will continue to evaluate its pricing regime in Nigeria’s best interest. He said the need to meet the aspiration of the consumers made the company to crash cement price to N1,000. He noted that the company was taken further step to deliver the product to the dealers with its enhanced transportation system in order to reduce the retail price of its product in the country. “We have also drastically reduced the price of 42.5kg, which is our premium, to N1,150 per bag ex-factory, ex-VAT for the benefits to trickle down to the consumers. We have enough trucks to deliver cement at the door steps of dealers and consumers.”
Edwin said the products would, henceforth, be delivered at the door steps of consumers in the south-south, southeast and southwest at the rate of N100 per bag because of the proximity of their factories to these regions, while they will charge N150 per bag in other parts of the country. He added that its major priority is to ensure that the customers are protected in the distribution chain, assuring that it would put mechanism in place to monitor the sale of the product. The company is also optimistic that reduction in the price of cement will increase per capital consumption of cement in the country.
A statement by the company at the end of a management meeting said, however, that the new prices were exclusive of the Value Added Tax, VAT, representing about 40 percent discount on the prevailing market price of the product currently sold for N1,700 irrespective of the grade, across the country.
Investigations have shown that since the implementation of the backward integration policy for cement about 12 years ago, the local production capacity of cement has risen from a meagre 2 million metric tonnes per annum to the current 38 million metric tonnes per annum. Stakeholders have noted that in the last 12-years of the backward integration policy, more than $20 billion has been directly and indirectly sunk into the nation’s cement subsector with Dangote Cement accounting for almost 60 percent of the total expenses. With this development, the nation’s cement market has entered a high demand phase; especially as dry season is setting in, which is the peak for increased construction activities in the country.
Nigeria is likely to go back to the 2012 era, where the country was almost self-sufficient in cement production, which necessitated the ban on importation of the product. There is no doubt that the cement sector is still plagued with so many challenges like infrastructural deficit, power problem and access to funds among others. Only time will tell whether government would complement Dangote’s initiative by improving the state of infrastructural facilities in the country.
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