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Published On: Wed, Nov 19th, 2014

Did Dangote really crash cement prices?

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DangoteBy Etuka Sunday

Just recently, Dangote Cement, a leading cement producer in the country announced a massively crashed cement prices in the market. News that brought a sigh of relief to cement users across the country especially those who have been struggling to erect a structure of their own but couldn’t because of the exorbitant price of the products.

The company while announcing the new price regime through its Group Managing Director, Edwin Devakumar pegged the 32.5 cement grade at N1,000 per 50kg bag, while the higher 42.5 grade is to be sold for N1,150 per bag.

According to him, the new prices exclusive of the Value Added Tax (VAT), represents about 40 per cent discount on the prevailing market price of the product which is currently sold for N1, 700 irrespective of the grade across the country. Edwin said the move was in line with the company’s commitment to the nation’s dire need for the development of infrastructure and to boost the federal and state governments’ ongoing efforts to reduce the near 20 million housing deficit in Africa’s largest economy.

While expressing happiness that Dangote Cement is leading the new price revolution, he stated that what Dangote cement has done was the first over his forty years in the cement sector. “I am satisfied with what is happening now.”

“Gone are the days of scarcity when the price would be skyrocketed and far beyond the reach of the people. But today we are celebrating a price cut which has never happened before. This is possible because of increase in the production capacity which has made Nigeria to be self-sufficient with opportunities for export to other countries. It is on record that Dangote cement led this efforts and he deserves commendation.”

However, there was a sharp contrast in our findings as cement distributors defied the new price cut and are now selling between N1, 600 and N1, 700 respectively.

Peoples Daily checks in Abuja, Lagos and Ogun revealed that cement distributors still sell at old rates. Some of the distributors emphatically declared that those waiting for cement to be sold at the rate of N1000 are merely hallucinating since they were not buying from Dangote cement at that rate, insisting that even when they are buying at the rate of N1000 from the company, the cost of transportation and other logistics would definitely force them to sell above the recommended prices.

A distributor who pleaded anonymity said, “let me tell you my brother, all what they are saying are lies. We are not buying at that price from them so don’t expect us to sell at that price. This is business, if you buy something at the rate of N1000 will you sell at that rate, please be sincere?

Others complained that the cement company did not inform them of plans to slash prices before announcing it to the public. They lamented that old stocks are still in the market and would be sold off at price purchased from the company despite the slashed price.

Although the company has assured it would evolve a monitoring process that would ensure that profiteers do not hijack the new price cut so that it would benefit the end users of the commodity, but how possible will that be and when will that take effect?

Again, Nigerians are confused about the new price regime, as to whether the new prices so announced are wholesale prices or unit. A better clarification of the cement price cut is therefore pertinent from the company to settle the dust that was raised in the market by the announcement-the fight between the distributors and the ordinary Nigerians who were not well schooled on this before the announcement.

Obviously, for those who have been currently following the cement market trends in the country, it would be deduced that the high market competition was created by the Standard Organization of Nigeria (SON) in its bid to proffer solutions to the consistent building collapses in Nigeria. It was SON early in the year that gave classification directives to manufacturers and urged them to label each cement grade for easy identification by consumers. It then approved the 42.5MPA grade for general use.

As it were, the SON directives created some storm. While other cement manufacturers were hell-bent in churning out only the 32.5MPA, the Dangote Group was already producing the superior 42.5MPA. The Dangote Cement was however later vindicated by a National Assembly Public Hearing.

Piqued by the continuing use of the low grade cement and collapsed building, SON had issued a directive that 52.5m be used for bridges, 42.5MPA should be used for casting of columns, beams, slabs and making blocks(multipurpose), while the low grade 32.5MPA was restricted to plastering. SON warned that it would implement to the letter the new guidelines of the cement standardization both with the manufacturers and other stakeholders connected with the product. “We will sanction and punish those who do not adhere to the guidelines and educate where necessary because some infractions could be as a result of ignorance and not deliberately.”

However, speaking in Lagos while unveiling its new cement bags redesigned in line with the demand of the Standard Organization of Nigeria (SON), the Group Managing Director of the Company, Mr. Devakumar Edwin, explained that the new price regime was introduced in the best interest of Nigeria and her citizens who have all along been looking forward to it as manufacturers continued to increase their production capacities to meet and surpass national consumption need.

He said the price crash is as the company’s contributions to supporting the Federal Government’s quest to reduce the overwhelming housing deficit in the country and assured the hope that the development would go a long way into assisting in this regard. Edwin pointed out that reduction in the price of building materials, particularly cement, which is within the company’s control is one of the strategies of reducing housing deficit.

He debunked the claim in some quarters that the new standardization in the cement sub-sector will lead to job loss pointing out that if anything it would lead to job creation. “We were not producing 32.5 before but because of the standardization, which comes with the need to offer all our customers the benefit of choice from out bouquet of products, we have introduced it. That is more work for more people.”

Nevertheless, with the Nigeria’s total national cement production in the region of 39.5 million metric tonnes now, and with Dangote Cement plc controlling over 60 percent of the output and market equity, it is important that greater attention is paid to the cement market trends to ensure that Nigerians are not defrauded at the end.

 

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