The cement price slash

Recently, Dangote Cement plc, the leading manufacturer of cement in Nigeria, announced a major reduction in the price of its brand in which case the 32.5 and 42.5 grades cement from its stable will henceforth sell for N1,000 and N1,150 per 50kg bag, respectively, representing about 40 percent slash from the former price of N1,700 per 50kg bag.

For insiders and close watchers of the building materials and housing industry in Nigeria, this is the greatest news to have come out of that industry in more than a decade. This is because the development is not just monumental, but also foreshadows a phenomenal growth that is about to happen in that industry and the economy at large.

In many instances, Nigeria is described in superlative terms for the wrong reason, and perhaps in no other industry or sector is this more raucous than housing where the country is described as the world’s most expensive housing market with the costliest property registration process.

Globally, the mortgage industry in Nigeria makes the least contribution to gross domestic product (GDP). Where the US boasts of 63 percent, Britain 64 percent, Germany 55 percent, Thailand 15 percent, South Africa 20 percent, India 5 percent, and Ghana 3 percent, Nigeria boasts of a paltry 0.12 percent contribution to GDP.

The country is also known to have the lowest homeownership level. As against 72 percent in the US, UK’s 78 percent, China’s 60 percent, Korea’s 54 percent, and Singapore’s 92 percent, Nigeria has homeownership level estimated to be a little above 10 percent.

The reason frequently given by estate developers, including government agencies, for the high cost of housing in the country is the high cost of building materials, especially cement which is a major input in housing development, more so as everybody wants to live in brick and mortar.

It is for all of these reasons and more that the new cement price is celebrated. Expectation is that at this new price, in the days and months ahead, construction activities at the low end of the property market would go up because low-income earners, who had been waiting for a time like this, would move to market and thereafter to site to build their homes.

We welcome the new price and share in the euphoria and optimism that it has elicited, and hope other cement manufacturers in the country would follow the Dangote example.

We believe that, given the multiplier effect of increased construction activities in an economy, more citizens will own homes, there will be improvement in living standards and household income will jump, all arising from jobs that would be created for various skill sets, including bricklayers, block moulders, carpenters, material suppliers and even food vendors.

For us, 10 percent homeownership level in a country of 170 million people is an aberration. The situation becomes more worrisome knowing that over 80 percent of Nigerians are said to be living in ‘unplanned residences’ and those in the urban centres are living on rents that take away almost 40 percent of their income, with no adequate facilities such as water and electricity.

At a forum in Lagos at the weekend, the management of Dangote Cement explained that they were encouraged to embark on the price reduction by the implementation of the backward integration policy for cement in the country over the past 12 years, during which local production capacity of the product has risen from less than 2 million metric tonnes per annum to about 38 million metric tonnes today.

We recognise this as a product of a visionary and purposeful government, hence we call on the government of the day to truly create enabling environment for private sector enterprise, and also take a cue from this and determinedly pursue policies and programmes that will ultimately impact on the lives of ordinary Nigerians.

Much as we commend Dangote Cement for this ‘patriotic’ act, we, however, caution that it is not enough to just announce a price slash; much needs to be done to ensure that the gesture is not hijacked by desperadoes along the product distribution chain.

We also advise the Dangote Cement management that as much as it involves the Standards Organisation of Nigeria (SON) in quality assurance and regulation, it should also engage the services of Consumer Protection Council (CPC) to ensure that end users are not exploited unduly by middlemen whose profit motive belies any sense of morality.

And we sincerely hope that this move is in the overall interest of the economy and not a ploy by Dangote Cement to squeeze out other cement manufacturers because of its dominant position.