Monday, May 17, 2021

With cement prices 240% above global average, Nigeria raps dominance of monopolistic cement producers hampering economy

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Lawmakers on Tuesday criticised the dominance of three large firms in Nigeria’s cement industry amid price rises they said impedes construction critical to economic recovery, calling for looser licensing rules to attract new entrants.

Nigeria has total cement production capacity of 47.8 million tonnes and annual demand for around 20.7 million tonnes, but cement prices are some 240% above the global average, they said, a serious dampener on Africa’s largest economy. A tonne sells for up to $135 in Nigeria, industry data shows.

Lawmakers have challenged cement price hikes since 2016 given the dominance of Dangote Cement (DANGCEM.LG), founded by Africa’s richest man Aliko Dangote, which has 60.6% market share. Lafarge Africa (WAPCO.LG) accounts for 21.8% while BUA Cement (BUACEMENT.LG) has 17.6%.

In a motion adopted in the upper house Senate, lawmakers called for a relaxation of licensing restrictions to create the competition needed to drive down prices.

They warned of the negative impact of high prices on the Nigerian economy, which emerged from recession in the 2020 fourth quarter but is grappling with double-digit inflation and a shrinking labour market amid mounting armed violence.

“The recent increase in the price of cement slowed down the amount of construction work being embarked upon…and almost collapsed the procurement plan of the government in 2020,” the motion said.

Cement firms raised prices during Nigeria’s 2016 recession to counter low sales volumes, and the country shut land borders in 2019 for more than a year to curb smuggling, damaging exports. Firms raised prices to make up for revenue losses.

“If the status quo persists, the negative consequences of high prices on the economy will outweigh the benefits of producing cement locally,” lawmakers said.

President Muhammadu Buhari has made investment in railways and roads a focus of his administration’s drive to kick-start growth, but falls in public revenue – linked to lower oil prices due to the coronavirus pandemic – have checked his ambitions.

The Senate can influence government policies but relies on the executive to implement them.

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