In recent months, the soaring cost of cement in Nigeria has sparked widespread concern. This critical issue has caught the attention of the Joint Committee of the House of Representatives, leading to a full-scale investigation into the arbitrary rise in cement prices across the country. Major producers like Dangote Cement Company and Lafarge Africa PLC have been summoned to provide comprehensive documents detailing their production costs to justify the skyrocketing prices.
Chairman Rep. Jonathan Gaza (APC-Nasarawa) is at the helm of this initiative. During a public hearing in Abuja, he emphasized the need to understand the factors driving cement prices to over N10,000 in several regions. The committee aims to ensure a fair pricing structure that benefits all Nigerians.
The Inquiry Begins
Unveiling the Cost Structures
Rep. Gaza made it clear that the committee’s interest lies in the production costs from 2020 to the present. The companies have been asked to disclose detailed information about their average daily consumption of raw materials such as coal, gas, gypsum, limestone, clay, and laterite. Additionally, they must provide data on their average daily cement production.
This inquiry extends to imported components and their costs, both in naira and dollars. Local components’ prices are also under scrutiny. The committee has requested a summary of monthly cement prices and production quantities from 2019 to the present, along with audited accounts, bills of lading, and customs duties paid.
Tax Waivers and Incentives
Another crucial aspect of the investigation involves examining any tax waivers and incentives received by these companies. Contracts for gas and explosives are also on the table. The committee seeks to understand the financial landscape and the benefits enjoyed by these cement giants, aiming to correlate these factors with the current market prices.
Financial Records and Site Visits
The committee, after thoroughly reviewing the financial records, plans to visit the production plants of these companies. This move is intended to get a firsthand look at the production processes and ascertain the real cost of cement production. The ultimate goal is to determine a fair price of cement for all Nigerians.
The Producers’ Perspective
Dangote’s Defense
During the hearing, Dangote Cement Company’s Group Managing Director, Mr. Arvind Pathack, presented a detailed explanation of their cost structure. He emphasized that 95 percent of production costs are either imported or linked to foreign exchange. Pathack highlighted significant increases in the prices of key inputs like gas, AGO, gypsum, imported coal, spare parts, new trucks, and tyres, ranging from 100 to 333 percent.
Pathack also pointed out logistical challenges, including poor road conditions, which elevate delivery times and truck maintenance costs. The lack of sufficient foreign exchange to settle trade obligations has resulted in forex losses of N150 billion per annum, coupled with a staggering 30 percent interest rate on loans.
Comparative Analysis
To provide context, Pathack compared cement prices across different countries, showing that Nigeria’s prices are among the cheapest in Africa. He attributed prices exceeding N10,000 to retailers, not the company itself. While Dangote Cement sells at an average of N7,200, the higher prices seen by consumers are often due to markups by intermediaries.
Committee’s Concerns and Questions
Profit Margins
Rep. Dabo Ismail (APC-Bauchi State) voiced concerns about the significant profits declared by Dangote Cement Company. Despite sourcing most raw materials locally, the company reported a profit of N524 billion in 2022, N553 billion in 2023, and has already made N166.4 billion in 2024. This profitability raises questions about the justification for the continuous price hikes.
Consumer Hardship
The committee members expressed their worries about the impact of these rising prices on ordinary Nigerians. With the cost of cement surpassing N10,000 in many areas, the burden on consumers is substantial. This situation is particularly troubling given the essential role of cement in construction and infrastructure development.
Industry Challenges
Forex and Devaluation
Mr. Pathack shed light on the forex challenges faced by the industry. The over 220 percent devaluation of the naira between May 2023 and June 2024 has significantly affected production costs. The insufficient provision of forex by the Central Bank of Nigeria (CBN) forces companies to pay in dollars for some contracts, exacerbating the financial strain.
Security and Infrastructure
Insecurity and inadequate public power supply further complicate the industry’s operations. These issues not only increase production costs but also affect the overall efficiency of the supply chain. The committee acknowledges these challenges but stresses the need for transparency and accountability in pricing.
Recommendations and Future Steps
Policy Review
The committee has urged cement producers to review their policies and operations to find ways to reduce prices. This includes exploring more efficient production methods and better logistics management. The goal is to create a more sustainable pricing structure that reflects the true cost of production without unduly burdening consumers.
FCCPC’s Role
Chairman Gaza pointed to the inaction of the Federal Competition and Consumer Protection Commission (FCCPC) as a contributing factor to the current situation. He criticized the FCCPC for their lack of responsiveness to price hikes, which has exacerbated the problem. Gaza expressed hope that the committee’s engagement with industry players would lead to tangible results.
Site Visits
Following the review of financial records, the committee plans to conduct site visits to cement production plants. These visits aim to provide a clearer picture of the production process and costs involved. By seeing the operations firsthand, the committee hopes to gain deeper insights that will inform their recommendations.
Also Read: Cement Price: Reps panel threatens arrest warrant against Dangote Cement
Frequently Asked Questions (FAQs)
Q: Why is the Joint Committee investigating cement prices?
A: The committee is investigating the arbitrary rise in cement prices to ensure a fair pricing structure that benefits all Nigerians. They aim to understand the cost drivers and hold producers accountable.
Q: What information have the cement companies been asked to provide?
A: Companies have been asked to provide detailed information on their production costs, including daily consumption of raw materials, production quantities, imported and local component costs, tax waivers, incentives, and financial records.
Q: What challenges do cement producers face?
A: Producers face challenges such as high input costs, forex shortages, naira devaluation, security issues, and inadequate infrastructure, which all contribute to higher production costs.
Q: How does the committee plan to address these challenges?
A: The committee recommends policy reviews, better logistics management, and increased transparency. They also plan to visit production plants to gain firsthand insights into the production process.
Q: What role does the FCCPC play in this issue?
A: The FCCPC is responsible for regulating prices and ensuring fair competition. However, the committee criticized the FCCPC for their inactivity and non-responsiveness, which has contributed to the current high prices.
Conclusion
The Joint Committee of the House of Representatives’ investigation into the arbitrary rise in cement prices marks a significant step towards ensuring fair pricing for Nigerians. By examining the production costs, financial records, and industry challenges, the committee aims to uncover the root causes of the price hikes.
Also Read: BUA crashes cement price from N5,000 to N3,500 per bag
With the cooperation of major producers like Dangote Cement Company and Lafarge Africa PLC, and a commitment to transparency, the committee hopes to create a more equitable pricing structure for cement in Nigeria. This initiative underscores the importance of accountability and fair practices in the industry, ultimately benefiting consumers and the economy at large.
