By Ayodele Ifasakin
Speaking to Financial Vanguard on condition of anonymity, a top official of Lafarge Africa Plc, makers of Elephant Cement stated that the operating environment has not been favourable to the cement industry as input costs continue to soar daily. The source noted that the cost for the importation of the machine and its parts for maintenance have been rising due to exchange rate volatility.
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| Nigerians’ Hope For Lower Cement Price Dims |
The source emphasised that the rise in inflation is also a concern to the industry, urging the government to quickly address the problem.
Another factor for the rise in the price of cement is the rising cost of energy. “The machines that are used in the cement industry consume gas and electricity supply is erratic and cannot be relied upon,” the source added.
Concerning the threat by the government to lift the importation of cement, Lafarge source said: “It is not the best option; the government should tackle the causes for inflation and provide the necessary infrastructure for production.”
Commenting on the cost of inputs used by the cement manufacturers, Kabiru Rabiu, Group Executive Director, BUA Cement, said: “If you look at production costs the mining cost is probably not more than 30% and that is the only local thing, but for instance, the energy cost is about 40 to 50% and is index to dollars.
“The price of gas that used to operate the cement plant 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.
For example, last year we paid gas at N418 and then it jumped up to N750 and today the last invoice was priced at N1500 “Also we all import our gypsum, yes in Sokoto, we use local gypsum, but we do import our gypsum which is also priced in US dollar and you clear it using the dollar as a benchmark and then you transport it to your site. The bag in which we put cement also is in dollars because we import polypropylene as well; as the exchange rate of dollars continues to rise, this price will continue to go up.
So it is a perception that has been created that 90% of cement is local. The reality is even though you could say so, but the reality is that everything is indexed to dollars.
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.”
Dangote Cement to key into CNG by 2025
Meanwhile, as part of measures to tackle the rising cost of transportation, Dangote Cement has assured that it will key into the Federal Government’s agenda, to run all cement trucks on Compressed Natural Gas, CNG.
The Chairman Dangote Group, Alhaji Aliko Dangote, also disclosed the company’s ongoing efforts at ramping up production with the ongoing construction of a new plant of 6 million metric tonnes per annum at Itori, in Ewekoro Local Government Area of Ogun State, to spur the supply of cement which would have some positive effect on price in the long run.
