•As production cost shot up 121%
•Manufacturers’ profits down 4.1%
•Naira depreciation, smuggling fueling price increase -Manufacturers
The combined impact of Naira depreciation and high inflation pressure has triggered a 121 per cent rise in the production cost of cement, dimming Nigerians’ hope for lower cement prices.
Another factor militating against the lower price of the product is the rising trend in smuggling to neighbouring countries where the price is higher than the price in Nigeria.
In neighbouring countries like Chad and Cameroon, the price ranges from $120 to $150 per 50kg bag of cement. At an exchange rate of N1,600 per dollar, this translates to a price of N240,000 to N270,200 per 50kg bag of cement, which is far higher than the local price of N8,000.
Confirming this development, Kabiru Rabiu, Group Executive Director, BUA Cement, said: “ One of the pressures that we see is that there is a lot of illegal smuggling of export of cement to Cameroon and Chad. What happens is that if you take cement just across the border to some of these markets, it is selling at $150 to $270. That is why we realize that a lot of our cement is actually not only going to the North East but to Maiduguri in particular because there are a lot of distributors taking this cement across borders because it offers a lot of margins.”
Financial performance
Vanguard’s analysis of the financial performance of the top three leading cement manufacturers revealed a decline in profitability due to the rising cost of production.
The companies are Dangote Cement Plc, Lafarge Africa, and BUA Cement Plc.
Specifically, the combined revenue of the three top cement manufacturers grew by 84.5% to N1.116 trillion in Q1’24 from N604.9 billion in the corresponding period Q1’23.
The rise in revenue was however overshadowed by a 121% spike in combined production cost to N586.6 billion in Q1’ 24 from N264.9 billion in Q1’23.
As a result, the combined Profit Before Tax, PBT fell by 4.1% to N 196.4 billion from N 204.8 billion.