Production cut, monopoly, cause of cement price hike — Survey

Stakeholders in the building industry have attributed the high cost of cement in Nigeria to forces of demand and supply caused by monopoly and low production levels of major producers of the commodity.

A survey conducted by our Correspondent in states in the South -West of Nigeria -Ogun, Oyo, Osun, Ondo, Ekiti and Kwara – showed that the cost of a bag of cement ranges from N3500 to N4000 depending on the brand and the area.

The high cost of cement, it was also discovered, had impacted on the construction industry with some people with building projects either temporarily suspending work for now or reducing the level of work.

Speaking to our Correspondent on the issue, Mrs Funmilola Adeboje, a cement distributor in Ibadan, said cement companies have reduced the number of distributors to only a few who get the commodity directly from the source.

She said that the few distributors selected, now called major distributors, have monopolized the market and thus the hike in price of the commodity.

“Only a few distributors have access to cement directly from the producers and because of shortage in supply the force of demand has also made the price to increase.

“In time past, I booked directly from the company, but I was told I can no longer book to get the cement, that I should come and buy it when cement is available.

“We don’t know how much the companies release the products to the major distributors but we buy at varying prices; N3,500 to N3,600.

“We only gain N100 on each bag and sometimes you can get as low as N20 on each bag and this was not how it used to be before now,” she said.

A sales representative of one of the major cement companies, who pleaded anonymity, said the issues affecting sales of cement in Nigeria are many.

He explained that production plants of two major cement producers had not been working at full capacity since the middle of 2020, “and the companies have just been patching things up.

“The plants when repaired can work at full capacity for a while and then it will break down again.

“Due to shortage of supplies, the market forces took over in dictating the price because of high demand over supply and some other factors such as limited access given to distributors.

“The selected few also have to tip some people to get the commodity because of shortage in production and that increases the overall cost of selling cement in Nigeria.

“Lafarge has its own issues and also Dangote with producing optimally. So, the major distributors are maximizing the situation to their advantage.

“The cement companies would care less about the price as long as their commodities are being sold. Government might need to regulate the issue to rid it of corruption,” he said.

The source said one bag of cement is sold at from Bodija market for between N3,700 to N3800, but from the distributor it goes for N3,400 to N3,500.

According to him, the companies most times are discreet or not forthright with the actual price of the commodity, but a bag was sold for between N2,500 and N2800 in time past.

“A distributor that gets maybe 20 truck loads of cement in time past, but due to the situation on ground now gets two to five trucks and so they want to make the profit of 20 trucks from a few trucks,” he said.

A building contractor, Mr Rotimi Omoniyi said the increase may be due to foreign exchange or production inputs, which has affected the selling price.

“I don’t think there is anything we do in Nigeria that has no connection with foreign exchange and that increases the cost of production.

“The masses are at the receiving end of high cost of production of goods in Nigeria,” he said.

Cement sellers in Osun have attributed the hike in the prices of the product to scarcity and activities of middle men.

They said due to the unavailability of the product since 2020, the prices had been fluctuating.

In Osun, Mr Ibrahim Awolola, a cement distributor in Osogbo, said the increase in the price of cement in the market was due to its unavailability because of a sharp drop in production.

Awolola explained further that manufacturers of cement were also complaining of unavailability of raw materials for production, which in turn affected its availability

He said that the situation was simply in line with the law of supply and demand, “the more scarce and unavailable a commodity is, the more expensive it will become.”

Awolola also said that cost of logistics and transportation the hike in the price of cement in the market.

The cement distributor said a bag of Dangote cement is sold between N3,600 and N3,700, depending on the location.

He, however, assured that whenever there is improvement in the production of cement and supply exceeded demand, the price would definitely come down.

Speaking in the same vein, another cement retailer in Osogbo, Mr Adewale Adeyemo, said that the scarcity of cement was the major factor that forced the price up.

Adeyemo said that information also made available to him revealed that haulage companies which provide trucks for the supply of cement have withdrawn their services, while the few ones working are the ones dictating the price of transportation.

In Akure, Mr Godswill Chima, a landlord in Oba-Ile, urged government to allow other investorys to engage in the production of cement rather than leaving the product in the hands of Dangote and BUA alone.

“There is too much monopoly of cement production. Government needs to encourage other local producers by giving them license with low tariff, because high rate of tariff is also discouraging those willing to invest in cement production.

“In March, I bought a bag of cement at the rate of N3, 500 now it is N4, 000, which is too bad for majority of people building houses, especially civil servants.

“If care is not taken, many landlords will increase their house rent because they have no choice than to increase it,” he said.

Mrs Labake Lijoka, a cement trader in Okitipupa, said that she was surprised at the increase in price of cement to N3,600 from it’s former N2,500.

She appealed to the Federal Government to intervene in the matter by prevailing on the producers of the product “as the high cost has affected business and customers are no longer patronising them.”

Also speaking with our Correspondent in Ilorin, Hajia Ayo Bello, a cement dealer, disclosed that a bag of cement sold for as high as N4, 000 to N4, 500, a couple of months ago.

She however said that a 50kg bag of Dangote cement now sells for N3,700 or more depending on the area.

The cement dealer said that Elephant cement sells for N3,700 per 50kg bag, Ashaka cement is N3,750 and Bua cement N3,700 to N3,750 depending on the area.

Bello also attributed the high cost of transportation and some government policies as equally responsible for the increase in price of cement in Ilorin and across Nigeria.