Economy
Nigeria’s high housing deficit of approximately 17 million as at 2015, shows that a lot of work needs to be done in the housing sector. However, the rising prices of cement will certainly lead to high rents, pressure on the existing houses and result in the increase of slum dwellings, homelessness, overcrowding, squatter settlements in major cities.
By Anthony Isibor
GENERALLY, Nigeria has an estimated housing deficit of about 17 million and it is projected that about N59. 5 trillion will be required to remedy the gap in this sector. This figure is for 2015 and the gap must have widened by 2021 as well as the cost to bridge the gap. Apart from the issue of limited access to finance in tackling housing delivery in Nigeria, the high cost of building materials and land and difficulties accessing land are some of the major drawbacks requiring immediate intervention for the country to achieve its housing delivery program.
Unfortunately, the rising cost of cement, which is a major component in the provision of housing is a major threat in a country that has been slow in adopting alternative and local materials for building like brick, which can be obtained locally.
For many Nigerians, the current price of a bag of cement, which is between N3,350 to N4,000 is untenable and will worsen the already harsh condition in the sector. Already, some Nigerians have raised concerns over the high cost of rents in many state capitals due to the shortage of houses while their incomes have remained unchanged for years.
Already, government policies are being blamed for the plight of tenants since there are no significant improvement in the provision of houses. For instance, some Nigerians believe that the rise in the price of cement is caused by numerous taxes and other retrogressive policies that hinder any meaningful progress by manufacturers, especially in the heavy industry like the cement sector in the country. There are also the challenges of haulage and the poorly maintained roads across the country.
Recently, Lola Ashiru, the senator representing Kwara South Senatorial District, one of the co-sponsors of a bill to introduce policies such as tax reliefs to encourage local investments in cement production, argued that cement, which is one of the few building materials in which Nigeria is self-sufficient and has a price range which is reportedly about 240% higher than the global average.
The bill is requesting the federal government to provide more industrial incentives and protection to industries by offering concessionary loans and high and competitive tax incentives for new entrants in order to boost production of cement, reduce prices and encourage more ‘valuable’ local producers.
Although the Nigerian cement industry has several big players like Dangote Group, Elephant, Ashaka, Ibeto, Eagle, BUA, and Larfarge, many Nigerians have described their activities as the “oligopoly of three major players”.
Reacting to the high prices of cement in the country, Bismarck Rewane, CEO, Financial Directives Company dismissed the notion that the three big players in the sector – Dangote, BUA, and Larfarge are engaging in price-fixing.
Speaking on the Business Morning show on Channels TV on February 14, 2021, Rewane attributed the rise in cement prices to the fall in the value of the naira.
“It is not totally true that consumers are exploited, but it is also possible if there is collusion, but that is one of the reasons the Consumer Protection Agency will not allow that.
“The price of cement has been around N2,300 to N2,500 over the last 3 years with rising inflation of about 11 percent to 12 percent, and a relatively stable dollar over that period.
“However in the last year, we have seen about a 25 percent loss in the value of the currency,’’ he said.
He explained that in spite of the fact that most of the inputs in the production of cement are not imported, the equipment which is imported and paid for in dollars are amortized and depreciate over time.
“There is also the need to put into consideration that these industries put together, employ over 100 to 200 thousand people, who have to be paid to keep the factories running,” he said.
Rewane insisted that the government’s ban on the importation of finished cement products into the country was not to dissuade potential investors but to encourage local production. According to him, the only thing preventing investors from joining the industry is the huge capital required to enter into the business.
“There are no barriers except the level of capital which is around $5 billion to $6 billion to set up an efficient cement operation.
But Abdulsamad Rabiu, Chairman and Founder of the BUA Group said on Arise News of February 9, 2021 that the high cost of cement was due to the inability of the few producers to meet the high demand for the product. He insisted that the country’s Backward Integration Policy, BIP on the industry didn’t allow the entry of more players and called for the liberalization of Nigerian cement policy to boost production and subsequently crash the price of the commodity.
“Nigeria is over 200 million people today in terms of population. If you look at the production of cement, last year, we were under 30 million metric tonnes.
“In fact, last year was higher than the year before, which means that in 2019, we were doing between 26 and 27 million metric tonnes. I am talking about production and not installed capacity, which is another thing entirely.
“Nigeria’s 200 million people make it about 130 kilograms per head. If you check, you will see that most countries in Africa are doing between 170 kilograms to 200 kilograms per head.
“So, Nigeria is actually producing less than other countries in Africa, apart from maybe the Niger Republic. So, that means that we do not have enough capacity,” he said.
The BUA chairman also revealed that “the moment you have any problem in any of the plants in Nigeria and there is a shut-down or any challenge, immediately, you will see the impact in terms of the price going up.
“That is because we do not have any buffer whatsoever. So, it is like from hand to mouth daily. The reason why the price of cement went up recently was simply that there was an issue at one of Lafarge’s plants and they had to stop production for few months to rectify that.
“So, as that had happened, the supply from Lafarge reduced by about 25 percent in Ogun State. Also, one of the plants of Dangote Cement had a technical issue and briefly, they couldn’t load. But that has been resolved.
“But because that took about one month, the price of cement went up to about N4,000, from N2,800,” he said.
Rabiu also said that he had advised the federal government to open up the industry to allow more players in order to crash the price of cement in the country.
Although the challenges of the cement sector are numerous, there are surmountable and all that is required is for the government to provide necessary and competitive incentives that will allow new players into the sector. The federal government should ensure that the huge deficit in housing delivery is bridged and that the contribution of mortgage financing to Nigeria’s GDP, which is close to negligible, with real estate contributing less than 5% and mortgage loans and advances at 0.5% of GDP, according to World Bank 2015 report, is improved upon.
Apr 26, 2021 @ 13:47 GMT|
Tags: Rising cement prices threaten Nigeria’s housing delivery programs
