Onome Amuge
BUA Cement, one of the country’s largest cement manufacturers, has alleged that its attempt to make cement more affordable for the everyday Nigerian was undermined by intermediaries who have seemingly turned the market into their personal playground. According to the company, these opportunists, driven by their own greed, bought cement at the low wholesale price of N3,500 but then hiked the price to N8,000, leaving the company’s efforts to bring the benefits of its cost-saving measures directly to consumers in tatters.
Abdul Samad Rabiu, BUA Cement chairman, delivered a worrisome account of the factors hindering the company’s efforts to lower cement prices during the company’s 8th annual general meeting held recently in Abuja.
As one of Nigeria’s leading cement producers, BUA Cement boasts an impressive 17 million tonnes of production capacity across its plants in Edo and Sokoto states.
According to Rabiu, the decision to sell at a lower rate was further undermined by several external factors, including the depreciation of the naira, currency volatility, and rising operational costs due to the removal of fuel subsidies by the federal government. He explained that these forces combined to create an environment that effectively negated the company’s attempts to provide relief for consumers, making it difficult to deliver on their promise to reduce the price of cement.
The industrialist stated: “We were selling cement at N3,500 with the expectation that the dealers and the retailers would pass the benefits of the low price to the end-user customers.
“It’s such that whatever price you sell cement at, you pay. It doesn’t matter what happens if the price doubles or triples if it’s less than that. So, we didn’t actually have that price.
“So, a lot of the dealers took advantage of that policy. Rather than pass the low prices to the customers, they were selling at even double the price we sold to them.
“Some were selling at N7, 000 and 8 000 per bag. They made a lot of money from.the very high margin. I think we had sold more than a million tonnes, yes at N3,500 before we realised what the dealers were doing.”
“And then, because of the issues that Nigeria faced at the time about devaluation of the naira last year and the removal of fuel subsidy, we could not continue that policy.
“We wanted that price to stay at that level but dealers refused. So, we could not sustain that simply because we did not want to be in a situation where we are subsidizing dealers.”
In addition to the external factors that hampered their efforts to lower the price of cement, Chairman Rabiu bemoaned that a lack of cooperation from other cement manufacturers also contributed to the failure of the initiative.
According to Rabiu, BUA Cement was alone in their efforts to offer affordable cement to Nigerians, while other producers were unwilling to make similar reductions in price. This reluctance from competitors meant that the market could not be adequately served at the lower price point, leading to a perpetuation of the high prices that have been a burden for consumers.
Rabiu opened up about the profound sense of frustration and disappointment that permeated the BUA Cement team after their attempt to deliver lower cement prices to Nigerians was cut down by greedy dealers who profiteered off of the reduced wholesale price, reselling the product at N7,000-8,000 per bag, ignoring the company’s reduced wholesale cost of N3,500 per bag.
The BUA Cement chairman also highlighted the critical issue of energy costs, which has had a significant impact on the company’s finances, consuming N15-16 billion monthly and representing over 60 percent of its operating costs.
According to Rabiu, this massive expenditure is directed towards the purchase of diesel, LNG, and spare parts, leading to an untenable drain on the company’s revenues. He pointed out that external factors beyond the control of BUA Cement, including energy costs and logistics issues, have significantly contributed to the increase in the retail price of cement, making it challenging to reduce prices for consumers.
In response to the substantial drain on its revenues due to high energy costs, the business mogul revealed that the cement manufacturing firm is taking decisive steps to address this issue by building a mini Liquefied Natural Gas (LNG) plant to generate power for its machinery. Rabiu stated that this ambitious initiative is part of the company’s broader strategy to lower the cost of production, thereby allowing them to bring down the price of cement for consumers.
Despite the challenges faced by the company due to external factors, BUA Cement’s financial performance for 2023 reflects notable growth, with net revenue increasing by 27.4 percent from N361 billion in 2022 to N460 billion in 2023. The rise in revenue is attributed to an improvement in capacity utilisation, which rose to 61.2 percent from 59.8 percent in 2022, driven by increased cement volumes dispatched and an expansion of market share.
On the flipside, the company faced substantial pressure on costs in 2023. The devaluation and depreciation of the Naira in June 2023, coupled with rising inflation, contributed to a significant increase in total costs, which rose by 39.5 percent to N276 billion, compared to the previous year’s figure of N197.9 billion.
Moreover, the company recorded a net foreign exchange loss of N70 billion in 2023, with N52.5 billion accounted for by finance costs.
Amid the various economic hurdles encountered in 2023, BUA Cement can take pride in its performance as it successfully achieved a net profit after tax of N69.5 billion and declared a dividend of N2 per share to its shareholders.
