Thursday, 27 December 2012 00:00
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Protect local cement manufacturers

THE recent temporary closure of the four million metric tons per annum Gboko plant of Dangote Cement over alleged cement glut in the market, has sparked off reactions from Nigerians particularly those in the building sector. The dry season is usually the construction season in the country.  But, the high price of cement has stifled the expected expansion of the cement market.

Reports indicate that large quantities of substandard cement from Asian countries are being dumped in the South Eastern part of the country. Dumping of subsidised product has negative effect on the market where the dumping is taking place as it can kill local competitors.  As such, it was only natural for Dangote to embark on temporary closure of its plant in Gboko.

Naturally, if there is a cement glut in the Nigerian market, local manufacturers of cement must take advantage of globalisation and seek new markets in other African countries. While there is no doubt about the quality of cement manufactured in Nigeria, the issue of price is fundamental if Nigerian cement manufacturers want to do well in other African markets. This means that they must be ready to match the price of their competitors particularly those from the Asian countries.

At this time of mass unemployment, local manufacturers of cement employ hundreds of thousands of Nigerians and they deserve to be protected.  Therefore, the government should support them by banning importation of cement to the country or significantly increase the Customs duty on imported cement so that locally produced cement can do well in the market.  On their part, the local manufacturers of cement must bring down the price of cement to complement government efforts to make local cement affordable to Nigerians.

Also, simple economics indicates that mass production leads to lower cost and lower price for the consumer.  With increased local production of cement, the price of the product is supposed to come down.  Unfortunately, this has not been so.  This is the price a country pays when it has oligopolies dominating the market.

With self-sufficiency in local production of cement, it is expected that there would be a lowering of the unit price of cement and a concomitant expansion of the market following increased demand for the commodity.  Unfortunately, the sluggish global economy and the dwindling incomes across major sectors of the Nigerian economy have combined to stifle expansion of the construction industry.  Thus, total cement consumption of the country has remained at about 18 million metric tons per annum.

While government should protect the local cement industry from the onslaught of those who dump cheap and substandard cement into the country, the government must also ensure that local manufacturers of cement do not continue to rip off Nigerians with high price of the commodity.  They must bring down the price of their cement to stimulate increased demand for the commodity and expansion of the local cement market.

The local cement producers must also explore how they can expand the cement market in Nigeria.  In addition, they must take a critical look at the price of their input with a view to looking for inputs that would reduce the price of their brands of cement.  At the end of the day, only cement producers who meet the right quality at the lowest price will be patronised both in the Nigerian market and in the other African markets.

Going forward, while the government should stop the importation of subsidised cement into the country, local cement manufacturers must reciprocate government efforts by bringing down the price of their cement so that Nigerians can reap the fruit of self-sufficiency in local production of cement. To do this, they must learn to be low cost producers of cement.  In particular, they must lower the cost of the energy they use so that they can significantly reduce their cost of production through the use of alternative energy sources such as coal to fire their kilns.

They must also use local input such as gypsum which most of them now import in the manufacture of cement.  Nigeria has large deposits of gypsum.  The cement producers must find appropriate ways to exploit local gypsum deposits to their advantage.  In addition, since transportation adds to the cost of marketing, they must take advantage of the improved rail transportation in parts of the country to lower the cost of marketing their cement.  That way, the unit price of cement should substantially come down and Nigerians would reap the advantage of self-sufficiency in cement production.

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