Nigeria: Time to Shut Out Imported Cement?
Crusoe Osagie examines the huge investment in cement production injected into the Nigerian economy in the past five years due to the cement backward integration policy, and states that even more investments would be attracted if government takes the courageous step of shutting out imported, cheap, low quality cement from the country
If the Nigerian economy must make tangible progress one thing must happen; operators of businesses at all levels must beat their addiction to 'easy money'.
Nigeria may now be the third fastest growing economy in the world at the moment after Mongolia and China, but if the real arms of the private sector do not begin to transform their business models from the simple opening of letters of credit in favour of manufacturers in other countries; will soon become a mere artefact of history.
Also shipping of the essential finished goods into the over laboured Nigerian ports and then into the market for the waiting incomes of the burgeoning Nigerian middle class, then this record economic growth rate, like many other good global record set by the country in the past, need to be looked into.
Nigeria needs to transform rapidly from its current status of a full consumption economy, to one that produces some of the essential commodities it requires to survive and sustain economic growth and development. The country especially, must begin to produce those essential products for which it has comparative advantage.
Although there are several essential products for which this argument can be made, one of the most important is cement. With some of the largest limestone deposits in the world, at this point in the history of Nigeria's evolution, it should be a taboo to expend the nation's scarce foreign exchange on importation of manufactured cement from China, Turkey or any other nation of the world.
Analysts and private sector leaders say this is more so when manufacturers operating locally have invested billions of dollars to set up cement manufacturing factories, which they say can meet the entire nation's local demand for cement.
Thanks to the backwards integration policy of the Federal Government, no fewer than 10 cement factories have either sprang to life or have been resuscitated.
There was the Obajana phase one with five million metric tonnes capacity; Lafarge Ewekoro two with 2.5 million tonnes capacity; Dangote's Ibese, six million tonnes capacity; Dangote's Obajana phase two, with over five million tonnes capacity; UNICEM, Ashaka, Cement Company of Northern Nigeria, Lafarge's Ewekoro 1; Lafarge's Shagamu plant; Benue Cement Company, three million tonnes capacity and Edo Cement Company etc.
Ibese Cement Factory
About 60 days after its official inauguration, Dangote's Ibese Plant in Ogun State has hit its expected daily production capacity of 16,000 metric tonnes.
The Group Chief Executive, Dangote Cement, Mr. Daijeet Ghai, said the group alone was prepared to exceed the 22 million metric-tonne annual national cement demand in the country before the August target set by the Federal Government for the ban of cement importation into the country.
The Ibese plant commenced with a daily production of 12,000 metric tonnes in February, but barely two months after, Ghai said production had moved up to 16,000MMT, its full installed capacity, which would lead to the achievement of the yearly target of six million metric tonnes of cement.
The Ibese plant currently ranks as the largest cement plant in sub-Saharan Africa. The plant consists of two production lines of three million metric tonnes per annum each, and currently provides jobs for about 7,000 Nigerians.
The Dangote Cement boss said the feat recorded by the plant was a remarkable achievement, considering the fact that it only came into operation in February and had been producing at full capacity since then.
"Ordinarily, it is expected that a new plant cannot begin to produce at optimal capacity in two months. Production activity, especially for a new plant, takes time before it begins to produce optimally," he said.
Ghai explained that a number of factors were responsible for the remarkable achievement within a short time, including the independent gas turbine power plant for the plant, which makes it independent of the erratic municipal electricity supply.
President and Chief Executive Officer, Dangote Group, Mr. Aliko Dangote, had said during the inauguration of the plant that all the group's cement plants in Nigeria had a combined capacity of 20MMT annually, surpassing the estimated national yearly demand of 18MMT.
Ghai stressed that the aggressive expansion activities of the group's local production plants were meant to ensure that there would always be adequate capacity to meet local demand and diversify into the export market.
The achievement, according to him, was the fruit of the Federal Government's 2002 backward integration policy for the cement sector, which was designed to transform Nigeria from net exporter to a self-sufficient nation and subsequent exporter of the commodity.
In addition, he said, the Ibese plant would substantially boost the supply of cement in the Nigerian market, while increased supply from it would help stabilise supply and ultimately bring down the market price of cement.
Ewekoro II
In what appeared like a performance review of the newly constructed 2.5 million-metric- tonne-capacity Ewekoro II plant, the Managing Director of Lafarge Wapco Cement Company Plc, Mr. Joseph Hudson, has described the new facility as working in the line of its objectives.
He said the plant, which has worked for over 300 days had been utilising part of its 90 megawatts power station to advantage, adding that Nigeria's market would be excited by the output of the plant.
"We are excited at what we have got. The new plant is a pride to the development of Nigeria's market. In time to come, the local market will be excited," he said.
Hudson said the company was prepared to partner the government in the areas of raw materials development, stressing that the nation's abundant limestone remained a viable alternative for development in the non-oil sector.
Obajana Factory
Nigeria consumes about 18 million metric tonnes of cement annually, of which the Obajana cement factory contributes about 60 per cent.
The $1.2billion first phase of the factory began operation in 2007 and now operates two lines of production with 5million metric tonnes installed capacity the third line, which has a capacity of over 5 million metric tonnes per annum is now ready for commissioning.
The company is now an exporter of the product. It exports cement to neighbouring Niger Republic, Togo, Chad and Cameroon, Rathee said.
The factory is run on a 135-megawatt power plant in which surrounding communities are also beneficiaries. The company is not connected to the national grid because of the poor condition of power services in Nigeria.
It has a 90 kilometre gas pipeline through Ajaokuta from the Nigeria Gas Company (NGC). It also has two 10 million litres capacity standby tanks of Lower Power Fuel Oil (LPFO). It has a limestone quarry and eight kilometre conveyor belt, a water reservoir and a housing estate.
The plant has four gigantic cement silos each having a capacity of 75,000 metric tonnes and 60 per cent of the workers are indigenes of Kogi State. The staff categories are mostly junior and senior staff. But the staff strength of the company is around 1,286.
There are a host of other cement manufacturing companies scattered across the country. There is the Cement Company of Northern Nigeria, the Benue Cement company owned by Dangote, Edo Cement Company owned by BUA Group, the UNICEM consortium in Cross River State, Lafarge's Ewekoro I and Shagamu plants, Ashaka Cement managed by Lafarge among others.
All these cement investments would never have materialised without the deliberate effort of government to encourage local production through the backward integration policy.
Moving Forward
Now that these investments have come into the country, for them to be sustained, government needs to take the next courageous step; brave the odds and allow only local cement manufacturers feed the Nigerian market with locally manufactured cement.
The reason for this is simple; local output of cement, now around 28 million metric tonnes, far outstrips local demand, which stood at about 18 million tonnes in 2011.
Therefore, the August date line picked by the federal government for the termination of all forms of cement import may have been perfectly timed and should not be reneged.
If the Nigerian economy must make tangible progress one thing must happen; operators of businesses at all levels must beat their addiction to 'easy money'.
Nigeria may now be the third fastest growing economy in the world at the moment after Mongolia and China, but if the real arms of the private sector do not begin to transform their business models from the simple opening of letters of credit in favour of manufacturers in other countries; will soon become a mere artefact of history.
Also shipping of the essential finished goods into the over laboured Nigerian ports and then into the market for the waiting incomes of the burgeoning Nigerian middle class, then this record economic growth rate, like many other good global record set by the country in the past, need to be looked into.
Nigeria needs to transform rapidly from its current status of a full consumption economy, to one that produces some of the essential commodities it requires to survive and sustain economic growth and development. The country especially, must begin to produce those essential products for which it has comparative advantage.
Although there are several essential products for which this argument can be made, one of the most important is cement. With some of the largest limestone deposits in the world, at this point in the history of Nigeria's evolution, it should be a taboo to expend the nation's scarce foreign exchange on importation of manufactured cement from China, Turkey or any other nation of the world.
Analysts and private sector leaders say this is more so when manufacturers operating locally have invested billions of dollars to set up cement manufacturing factories, which they say can meet the entire nation's local demand for cement.
Thanks to the backwards integration policy of the Federal Government, no fewer than 10 cement factories have either sprang to life or have been resuscitated.
There was the Obajana phase one with five million metric tonnes capacity; Lafarge Ewekoro two with 2.5 million tonnes capacity; Dangote's Ibese, six million tonnes capacity; Dangote's Obajana phase two, with over five million tonnes capacity; UNICEM, Ashaka, Cement Company of Northern Nigeria, Lafarge's Ewekoro 1; Lafarge's Shagamu plant; Benue Cement Company, three million tonnes capacity and Edo Cement Company etc.
Ibese Cement Factory
About 60 days after its official inauguration, Dangote's Ibese Plant in Ogun State has hit its expected daily production capacity of 16,000 metric tonnes.
The Group Chief Executive, Dangote Cement, Mr. Daijeet Ghai, said the group alone was prepared to exceed the 22 million metric-tonne annual national cement demand in the country before the August target set by the Federal Government for the ban of cement importation into the country.
The Ibese plant commenced with a daily production of 12,000 metric tonnes in February, but barely two months after, Ghai said production had moved up to 16,000MMT, its full installed capacity, which would lead to the achievement of the yearly target of six million metric tonnes of cement.
The Ibese plant currently ranks as the largest cement plant in sub-Saharan Africa. The plant consists of two production lines of three million metric tonnes per annum each, and currently provides jobs for about 7,000 Nigerians.
The Dangote Cement boss said the feat recorded by the plant was a remarkable achievement, considering the fact that it only came into operation in February and had been producing at full capacity since then.
"Ordinarily, it is expected that a new plant cannot begin to produce at optimal capacity in two months. Production activity, especially for a new plant, takes time before it begins to produce optimally," he said.
Ghai explained that a number of factors were responsible for the remarkable achievement within a short time, including the independent gas turbine power plant for the plant, which makes it independent of the erratic municipal electricity supply.
President and Chief Executive Officer, Dangote Group, Mr. Aliko Dangote, had said during the inauguration of the plant that all the group's cement plants in Nigeria had a combined capacity of 20MMT annually, surpassing the estimated national yearly demand of 18MMT.
Ghai stressed that the aggressive expansion activities of the group's local production plants were meant to ensure that there would always be adequate capacity to meet local demand and diversify into the export market.
The achievement, according to him, was the fruit of the Federal Government's 2002 backward integration policy for the cement sector, which was designed to transform Nigeria from net exporter to a self-sufficient nation and subsequent exporter of the commodity.
In addition, he said, the Ibese plant would substantially boost the supply of cement in the Nigerian market, while increased supply from it would help stabilise supply and ultimately bring down the market price of cement.
Ewekoro II
In what appeared like a performance review of the newly constructed 2.5 million-metric- tonne-capacity Ewekoro II plant, the Managing Director of Lafarge Wapco Cement Company Plc, Mr. Joseph Hudson, has described the new facility as working in the line of its objectives.
He said the plant, which has worked for over 300 days had been utilising part of its 90 megawatts power station to advantage, adding that Nigeria's market would be excited by the output of the plant.
"We are excited at what we have got. The new plant is a pride to the development of Nigeria's market. In time to come, the local market will be excited," he said.
Hudson said the company was prepared to partner the government in the areas of raw materials development, stressing that the nation's abundant limestone remained a viable alternative for development in the non-oil sector.
Obajana Factory
Nigeria consumes about 18 million metric tonnes of cement annually, of which the Obajana cement factory contributes about 60 per cent.
The $1.2billion first phase of the factory began operation in 2007 and now operates two lines of production with 5million metric tonnes installed capacity the third line, which has a capacity of over 5 million metric tonnes per annum is now ready for commissioning.
The company is now an exporter of the product. It exports cement to neighbouring Niger Republic, Togo, Chad and Cameroon, Rathee said.
The factory is run on a 135-megawatt power plant in which surrounding communities are also beneficiaries. The company is not connected to the national grid because of the poor condition of power services in Nigeria.
It has a 90 kilometre gas pipeline through Ajaokuta from the Nigeria Gas Company (NGC). It also has two 10 million litres capacity standby tanks of Lower Power Fuel Oil (LPFO). It has a limestone quarry and eight kilometre conveyor belt, a water reservoir and a housing estate.
The plant has four gigantic cement silos each having a capacity of 75,000 metric tonnes and 60 per cent of the workers are indigenes of Kogi State. The staff categories are mostly junior and senior staff. But the staff strength of the company is around 1,286.
There are a host of other cement manufacturing companies scattered across the country. There is the Cement Company of Northern Nigeria, the Benue Cement company owned by Dangote, Edo Cement Company owned by BUA Group, the UNICEM consortium in Cross River State, Lafarge's Ewekoro I and Shagamu plants, Ashaka Cement managed by Lafarge among others.
All these cement investments would never have materialised without the deliberate effort of government to encourage local production through the backward integration policy.
Moving Forward
Now that these investments have come into the country, for them to be sustained, government needs to take the next courageous step; brave the odds and allow only local cement manufacturers feed the Nigerian market with locally manufactured cement.
The reason for this is simple; local output of cement, now around 28 million metric tonnes, far outstrips local demand, which stood at about 18 million tonnes in 2011.
Therefore, the August date line picked by the federal government for the termination of all forms of cement import may have been perfectly timed and should not be reneged.
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