New cement policy dims stakeholders’ confidence in Q3

The new cement policy introduced by the Standards Organisation of Nigeria (SON) has smothered the business confidence levels (BCI) of key stakeholders in the industry in the third quarter (Q3), BCI index released by the Lagos Chamber of Commerce and Industry (LCCI) has shown.

The BCI index fell to 8 percent, from 15 percent recorded in the first quarter. Apart from this, poor credit conditions in the built sector were also fingered as another key issue affecting business and investing activities in the cement industry.

There have been allegations, right from early part of the year, that 32.5 cement grade is largely responsible for building collapses around the country. This raised credibility issues in the sector, prompting the intervention the House of Representatives, which eventually set up an ad hoc committee to examine the complaints.

Subsequently, the SON issued a directive that cement with strength rating 52.5R be used for bridges; 42.5R for casting of columns, beams, slabs and for moulding blocks, while 32.5 be used for plastering only.

“Why I am most surprised is the process that was followed,’’ said Joe Hudson, CEO, Lafarge, in an exclusive interview with Real Sector Watch.

“When you change standards, you know there are lots of stakeholders and you have to get them on the table; you have to have discussions around implications. And frankly, that was not done,’’ he said, stressing that the process followed by the SON before issuing the directive was woefully inadequate.

“If this is the way we manage key regulatory issues in Nigeria, then it does send a very strong message to people wanting to come in,’’ he said.

Lafarge WAPCO, United Cement Company of Nigeria (UniCem) and Ashaka Cement (AshakaCem) are the most victims of the new policy as they produce the 32.5 grade in large quantity.

Olivier Lenoir, managing director, Unicem, Calabar, had earlier stated that 90 percent of cement produced by his company for many years was of 32.5 grade, saying that there had never been a collapse incident associated with his firm’s products, pointing out that “regulators should not take arbitrary decisions based on inconclusive processes, but rather ensure that all stakeholders are properly engaged, as it creates doubts about the investment climate in the country.”

But Devakumar V.G Edwin, group managing director/CEO of Dangote Cement (DangCem) plc, told Real Sector Watch that “42.5 is a superior grade,” adding that his firm refused to produce 32.5 even when it could have had better bottom-line performance by doing so.

ODINAKA ANUDU