Naira Depreciation and Inflation Crush Nigerians' Hopes for Affordable Cement

The dream of affordable cement prices in Nigeria has been shattered as the combined impact of Naira depreciation and high inflation has led to a staggering 121% increase in production costs.

This surge has left end-users, including block molders and builders, grappling with prices that now average between N8,000 and N9,000 per bag.

Manufacturers attribute the price hike to several factors. Kabiru Rabiu, Group Executive Director of BUA Cement, explained, “The price of gas that used to operate the cement plant actually went up a little bit; but it was not even the price that was the problem, it is more about the exchange rate, even though we pay in naira for the energy for the gas. What happened was that this gas was indexed to the US dollar.”

Additionally, the cost of imported components such as gypsum and polypropylene bags, both priced in dollars, has further exacerbated the situation.

“The more the naira gets weaker, the higher you see some of these input costs in our operation and unfortunately somebody has to bear the price,” Rabiu added.

The National Association of Block Moulders of Nigeria (NABMON) has called on the Federal Government to reduce import duties on cement manufacturing components to attract foreign investment and alleviate the burden on local manufacturers.

NABMON President, Mr. Adesegun Banjoko, stated, “The price of one bag of cement in Nigeria, currently in the region of N8,000 and N9,000, is still considered too expensive.”

Smuggling has also played a significant role in the price increase.

Cement is being illegally exported to neighboring countries like Chad and Cameroon, where it sells for $120 to $150 per 50kg bag, translating to N240,000 to N270,200 at the current exchange rate.

This illegal trade offers higher margins and diverts supply from the Nigerian market, further inflating local prices.

In response to the rising transportation costs, Dangote Cement has announced plans to switch all its cement trucks to Compressed Natural Gas (CNG) by 2025.

Alhaji Aliko Dangote, Chairman of Dangote Group, revealed ongoing efforts to ramp up production with a new plant in Ogun State, which is expected to have a positive effect on prices in the long run.

Despite these efforts, the financial performance of top cement manufacturers like Dangote Cement Plc, Lafarge Africa, and BUA Cement Plc has been hit hard.

Combined revenue grew by 84.5% to N1.116 trillion in Q1’24 from N604.9 billion in Q1’23, but profits fell by 4.1% due to the soaring production costs.

As the industry navigates these challenges, the call for government intervention grows louder.

A top official from Lafarge Africa Plc emphasized, “The operating environment has not been favorable to the cement industry as input costs continue to soar on a daily basis.

The rise in inflation is also a concern to the industry, urging the government to quickly address the problem.”