17th December, 2012
Arbitrary import of cement threatens local production and employment. Already, the Dangote Cement plc management has suspended operations at its Gboko plant and told the workers to stay at home
The Gboko plant of the Dangote Cement plc remained shut last week following its closure two weeks ago by the management over cement glut in the market, especially in the south-east and south-south markets which the plant largely serves. As explained by Mr. Anthony Chiejina, Group Head, Corporate Communications of the Dangote Group, the management decided to suspend production at the plant because a flood of imported cement is creating a glut so much as to affect the volume being churned out by local producers.
The Dangote Group bought over the old, decaying Benue Cement Company, Gboko, from the Benue State government in 2000 and had increased its production capacity from a low of about 800,000 million metric tonnes per annum, mtpa, to 4 million mtpa by this year in its drive to exponentially increase local production and drive down price. Late last year, the group invested a fresh N150 billion into the company, introducing modern and sophisticated machinery into the factory. It also spent about N140 million electrifying the communities in and around Gboko, has been providing an annual education scholarship worth over N10mn to students from the communities and provided over 23 boreholes. Other social responsibility efforts include N1.8mn monthly on security, construction of 14 blocks of classrooms and construction of dams.
Staff of the Gboko plant have since been milling around expecting a recall. The plant employs about 1,000 staff, 780 of which are Nigerians. Of the 30 management staff, 22 are from the local communities. Seventy-four per cent of the total staff of the plant are from Benue State, with 56 per cent specifically from the Gboko community.
Dangote Cement has been increasing production at all its plants in its strident efforts at meeting local demand, with room for export. It has a combined 20mn mtpa production capacity; besides the output from the Gboko plant, the Obajana plant produces 10mn mtpa while the Ibeshe plant turns out 6mn mtpa.
But policy somersaults by the federal government on cement importation have not been helping local producers, as is evident in the current glut problem. Government has not been firm on a particular position to stick to on local production of cement versus importation. It is always chopping and changing its policy, banning importation one minute and allowing it the next. In the 2012 budget, a ban of imported cement was proposed to reinforce its touted backward integration policy which seeks to encourage local production. But the product has been coming into the country, with the volume rising in recent times as to threaten local production. Critics who favour importation argue that local producers have not been able to meet the estimated local demand of 18mn mtpa. Kunle Awobodu, National Publicity Secretary, Nigerian Institute of Building, NIoB, advised government to ascertain local producers’ readiness to satisy local demand in concrete terms before stopping full importation. “The capacity to continuously supply cement to the market unintermittently should be verified in the interest of the public,” Awobodu said.
The builders’ spokesperson wondered why the price of cement has not crashed despite the local manufacturers’ claim that local production capacity now outstrips demand. A bag of cement sells for N1,800-N2,200, a price Awobodu still considers too high. But producers have been arguing that it is cost of production, rather than inability to meet local demand, that is affecting pricing. Bruno Lafont, chairman and chief executive officer of Lafarge, producers of Elephant Cement once told journalists that the cement pricing regime is purely a reflection of production cost. “The cost of production is relatively high compared to that in other countries. This is due to the fact that fuel is expensive, transportation is expensive, and power is expensive and difficult to get,” Lafont maintained.
The current glut in the cement market, analysts posit, may be proof that local producers are turning out a surfeit of the product from the plants. At the Gboko plant, there are tens of trucks loaded with cement delayed for distribution to the south-south and south-east markets because of excess supply there. Chiejina disclosed the production figure for the first 11 months of this year showed increased local production, with supply now surpassing demand. Total cement supply to the market by November ending showed a remarkable increased figure of 11.4 per cent, the highest ever. Chiejina was sad that despite the excess, government has allowed importation to continue, a situation that raises questions on government’s sincerity on its backward integration policy.
“With the dumping of subsidised imported cement in the south-eastern market, there is no way our Gboko cement plant can survive. In fact, staff have been put on forced leave pending when the situation improves. Inventory of finished products is beginning to build up at our plants. Don’t forget that projects from our investments of about N280bn in additional capacity are already on stream, with lines 3 and 4 at Ibeshe and line 4 at Obajana coming on stream early this year,” he noted.
—Tayo Odunlami