Analysts upbeat on cement sector amid growth opportunities in 2024

Cynthia Ezekwe

CardinalStone Research, a financial research firm, has predicted that the Nigerian cement industry will experience growth opportunities in 2024, as government investment in infrastructure and construction projects is expected to boost demand for cement products.

In the report, ‘Nigeria cement rebounding from a tumultuous year,’ CardinalStone analysts pointed to increased budget allocations to critical sectors, as well as the Nigerian government’s ambitious infrastructure initiatives. The report states that the budget allocation of N1.32 trillion to infrastructure in 2024, accounting for 5 per cent of the total budget, is likely to stimulate demand for cement products and lead to a resurgence in the industry.

“As Nigeria’s cement industry reflects on a challenging 2023, characterized by demand-stifling events like the cash crunch orchestrated by a poorly executed currency redesign policy, the material currency devaluation, and bouts of heavy rainfall, its hope for a gradual recovery in 2024 feeds off the return to relative macroeconomic normalcy and early gains from tough policy reforms. 

Cement manufacturers, in response, are beginning to recalibrate their production strategies in the form of capacity expansion and improved efficiency to meet the anticipated rise in demand,” the report noted. 

The report also pointed out that cement manufacturers are already beginning to respond to the anticipated growth in demand by improving their production strategies and increasing their capacity. 

Despite the efforts by cement manufacturers to increase production capacity and efficiency, the report projects that the average price of cement in Nigeria is likely to remain relatively high in 2024. This is due to several factors, including increasing energy costs, high inflation, and the depreciation of the naira. While manufacturers may try to lower prices through efficiency gains, it is likely that the high cost of production will be passed on to consumers. 

“Barring a potential price war between players in response to BUACEMENT’s ex-factory price slash, we maintain that average cement prices would remain elevated in Q4’23E and FY’24E,” the report pointed out, adding that players aim to protect their margins from rising operating costs occasioned by still-high inflationary pressures and strong volatility in the foreign exchange, as prices would remain high in the year.