How infrastructure gap fuels expansion in cement industry

Nigeria has a population of 198 million growing at 2.6 percent. But the infrastructure stock does not grow to match this rising population. According to the National Infrastructure Master Plan, Nigeria needs to spend $3 trillion and five percent of GDP annually to bridge the infrastructure gap. From roads to bridges, down to power and railways, the country’s infrastructure has recorded significant depletion in the last 20 years, owing to poor maintenance culture, lack of sufficient funds and corruption.

Nevertheless, the gap presents a huge opportunity for the cement industry players, who are aggressively expanding capacity and operations to tap into the hiatus.

Prominent among the players is the Dangote Group, whose local capacity is estimated at 29.4 million metric tonnes per annum (mtpa).

In 2016, Dangote Cement commenced the construction of a $1 billion investment in cement plants in Okpella, Edo State, with potential for 6,000 new jobs.

The 6 million mtpa capacity cement plant in Okpella came on the heels of a similar arrangement for another 6 million mtpa cement plant in Itori, in Ogun State, where the company is currently running a 12million mtpa cement plants at Ibese, in Yewa division of the state.

By the time the investment is completed, Dangote’s production capacity will hit 41 million mtpa in Nigeria alone.

Dangote Cement already has a strong presence in many African countries.

While reviewing the company’s operations in the second quarter of 2018 on July 22, Joe Makoju, group chief executive officer of Dangote Cement, said Dangote has invested $3b in building manufacturing plants and import/grinding terminals across Africa.

Makoju stated that the investments were located in Cameroon (1.5 million mtpa clinker grinding), Congo (1.5 million mtpa), Ghana (1.5 million mtpa import), Ethiopia (2.5 million mtpa), Senegal (1.5 million mtpa), Sierra Leone (0.7 million mtpa import), South Africa (2.8 million mtpa), Tanzania (3.0 million mtpa), and Zambia (1.5 million mtpa).

“In all, the company, which employed 27, 952 workers in Nigeria as at 2017, had its revenue increased by 16.9 percent and earning per share increased by 3 percent to N6.60 kobo per share for the second quarter, which ended June 30, 2018.”

Dangote Cement Plc recorded a rise in its profit before tax to N155.6bn for the half-year of 2017, compared with N124.9bn posted in the corresponding period of 2016.

Gross revenue was N412.7bn as against N292.2bn reported in June 2016.

But Dangote Cement is not the only firm expanding operations.

Last week, BUA Group commissioned 1.5 million mtpa Kalambaina cement plant in Sokoto State, which cost $350 million to build.

The ultramodern cement plant has a 32 megawatts multi-fuel captive power plant and a coal mill, blessed with huge limestone deposits.

One significant thing about the plant is that it increases cement production in Nigeria and BUA’s capacity in particular.

BUA is building a $1 billion Obu Cement Complex in Okpella, Edo State. The plant, commissioned in August 2017, will be completed by end of this year.

By the time the Okpella plant is completed by end of the year, BUA’s total production capacity will hit eight million MT and would give 35 percent of the entire volumes produced in Nigeria.

Another critical aspect of this plant is proximity to Niger Republic, which enhances its export potential. The cement plant started three years ago when BUA engaged Sinoma at the height of foreign exchange crisis and began production in March this year.

“Nigeria now produces over 40 million MT of cement, more cement than any other country in Africa. Nigeria’s huge market size, low per capita cement consumption of 125kg and estimated housing deficit of 17 million are key drivers,” Yemi Osinbajo, vice president, said at the commissioning.

“We can revolutionalise road construction by simply deciding that we can build roads with concretes. I have no doubt that this will boost employment generation and economic growth,” he stated, adding that a road has been completed in Ogun with concretes, while the Apapa road is being rehabilitated with concretes.

Abdul Samad Rabiu, chairman and CEO of BUA Group, said the new plant will be generating more power than is currently generated by the entire Sokoto State.

According to Rabiu, the plant will run on coal, heavy oils or a mixture of both, and the use of coal is expected to save over 70 percent of energy costs compared with 15 million litres of fuel oil per month or 40 tonnes or even 20 trucks of fuel that could have been used per day.

He said at least 2,000 direct and 10,000 indirect jobs are required to get the plant running, adding that the $1 billion Obu Cement Complex in Okpella, Edo State, commissioned in August 2017, will be completed by end of this year.

More so, Lafarge Africa has taken some steps in recent times to show that it is committed to tapping into the infrastructure gap.

In November 2017, Lafarge Africa issued and listed 85.26 million ordinary shares of 50 kobo each in the name of minority shareholders of Ashaka Cement (AshakaCem) Plc. This was after the conclusion of share exchange agreement seeking to consolidate the Gombe-based Ashaka Cement as a wholly-owned subsidiary of Lafarge Africa.

In 2012, Lafarge Wapco invested €6 million in a ready-mix plant.

In 2014, Lafarge Cement Wapco disclosed plans to invest $1.37bn to boost cement production in Nigeria in three to four years.

The group also invested heavily in United Cement Company’s Mfamosing plant in Akamkpa local Government Area of Cross River.

Lafarge may be slow in cement, but it is strong in concrete production. Successive chief executives of Lafarge Africa have told BusinessDay that the firm is not keen at becoming the largest cement maker in the country but is focused on providing solutions to Nigerians.

ODINAKA ANUDU