Hopes of lower construction costs by prospective homeowners may have been dashed, going by fresh increase in price of cement and related products.

The increase has already triggered ripple effect in the open market, where prices have gone up by as much as 60 per cent in recent weeks. The rising prices have also worsened construction costs in a sector, reeling under pressure from disruptive policies and ineffective housing supply.

The Guardian investigation revealed that the export of the product to neigbouring countries, despite huge domestic demand, may be responsible for the shortage.

The Federal Government recently granted Dangote Cement and BUA permission to transport products across the border, despite closure. Cement and by-products in neigbouring countries command higher prices.

Distributors hinted that there was increase of ex-factory prices due to economic realities, which prompted many dealers to change prices. For instance, Dangote Cement increased its ex-factory price to N3, 050 due to logistics and production cost.

However, other sources also attributed the scarcity to machine breakdown in one of the major player’s plant, which had been fixed, and industrial strike by cement truck drivers for improved welfare.

But the Executive Secretary, Cement Manufacturing Association (CMAN), Mr. James Salako, disagreed. He said no manufacturer had increased price of cement.

The Guardian investigation further shows that prices of cement and associated products, such as blocks, in many states, including Abuja, have continued to rise.

For instance, the price of a 50-kilogramme bag now goes for N3, 600 in Lagos and Cross River states; N4,000 in Enugu and Imo states; Rivers state N4,300; Abuja N3,200; Kano and Oyo states N3,500.

Until the last quarter of the year, cement was sold for between N2400 and N2500 in many of the states.

WHILE nine-inch block in Enugu is sold at N200, and six-inch block goes for N160 per block, in Kano, nine inches block sells for N170 and six inches for N160 as against the previous N150 and N140 respectively.

A cement dealer at the Kenyetta market, Enugu, Chief Donatus Eneh, told The Guardian two weeks ago that he paid for a full truck of Dangote Cement over four months ago but had not received the consignment.

“They have continued to promise on daily basis the product will be supplied to no avail. I don’t even have stock to sell at the moment.

“Last week, I had to buy from one of the dealers to enable me supply to one of the building sites. In some locations, developers have stopped building because cement is scarce,” he said.

Asked why the commodity suddenly became scarce, he said that Dangote, a major manufacturer had not been manufacturing and supplying optimally. Other manufacturers, he said, had not been able to meet market demand.

Also, Mrs. Uju Onah, who operates a block industry along One Day Road, Enugu, said high price of cement had seriously affected her business.

“Everything is on the increase. We cannot find cement to buy. We buy N4,000 per bag and mould. Initially, we were buying N2,400 but that is not possible any longer.

“They said, people are burning trucks belonging to the cement companies and that is affecting distribution,” she said.

Similarly, in Imo State, a major dealer, John Igwe, said: “We bought cement from the accredited dealers and are not making profit of more than N150 per bag. If we calculate the cost of transportation and labour, you find out that we are making little or no profit.”

In Cross River State, a cement dealer, Mr. Edet Edet, at Garden Street, a popular building materials market, said: “Cost of delivery by transporters has gone up though the cost from the factory in United Cement Company of Nigeria Limited (UNICEM), a subsidiary of Lafarge remains the same.

“So because of this, we have to transfer the cost to consumers. In addition, many people build in dry season and there is high demand.”

Cement dealers and consumers in Rivers State blamed the hike in price on monopoly in the industry.

A dealer, Mr. Ordu Godspel, told The Guardian government closed Eagle and Ibeto Cement from which he was making fortune as dealer and allowed only few to produce locally. “We were hopeful, thinking that the price of cement would come down from what it was at N1,500, but sadly, the manufacturers increased their prices to N2,400 in 2016 and since then, the price kept rising.”

“The current price is because Dangote stopped using his trucks to ship cement from its plants in Kogi and Benue to Rivers State. So, the distributors here now travel to those areas to load cement.

“Hence, all the logistics they incurred from hiring trucks, paying drivers, settling of security agencies are transferred to consumers, that’s why we the dealers get it at N4,000 and sell at N4,300.”

HOWEVER, the Marketing Director of Dangote, Funmi Sanni, who spoke in Port Harcourt recently during an award presentation to winners of Dangote Cement Bag of goodies, said, there was no plan to increase the price of cement, saying the management might reduce price if the economy improved.

The Federal Capital Territory, and its environs also experience high cost of cement prices. One of the dealers of Dangote cement, Chibuzo Favour, said they bought at N3, 050 per bag and sold at N3, 200 to customers.

Favour identified hike in electricity tariff, pump price of fuel, and closure of borders as reasons for the high cost of the product.

Chairman, Association of Cement Traders in Kano, Alhaji Aminu Dan-Maraya, told The Guardian that the sudden price increase was due to low productivity by manufacturers.

Dan-Maraya explained that, despite the high demand for cement in Kano, production capacity had drastically dropped, leading to price increase.

He equally attributed the situation to supply of the commodity to neighbouring countries despite high demand in Nigeria. “The major challenge is short supply. We hardly get the quantity required from the manufacturers and the demand keeps going high. So the price will naturally go up.

“ Another challenge is the new preference of the manufacturers for neighbouring countries. Despite the high demand in Nigeria, especially Northern Nigeria, manufacturers will prefer moving products to Niger, Cameron, Chad republic,” Dan-Maraya said.

He appealed to Federal Government to ease the challenges.

The President, Nigerian Institute of Building (NIOB), Kunle Awobodu, said price increase in the inputs to construction without corresponding increase in citizen’s purchasing power would reduce construction activities meant to rejuvenate the economy.

“Construction contracts in a regime of skyrocketing and unstable prices will witness many fluctuation claims with the potential for disputes and project abandonment. A cycle of project failures may start when prices are beyond the reach of clients and developers.

“All the cement manufacturing plant have been existing in Nigeria before the lockdown. We acknowledge that there may be need to maintain and repair, it is our view that this, however, is not enough justification for the astronomical increase in cement prices.”

MEANWHILE chances of consumers paying cheaper prices for 50kg bag of cement may not come soon, except issues bordering on foreign exchange rates, pricing of gas and haulage are addressed.

According to the Manufacturers Association of Nigeria (MAN), the cost of gas and haulage fees is being passed on to consumers, despite huge deposit of limestone in the country.

Before the lockdown at the end of March, a 50kg bag of cement sold for between N2,600 and N2,700, with the dollar exchanging for N360 at the parallel market. With the naira depreciating in value after the lockdown, the cost of many products has maintained a high inflation rate, with a bag of cement now selling for at least N3,600 in many stores in Lagos.

Unlike in many other African countries, where local cement producers are connected to the grid, thus reducing their production costs, Nigerian manufacturers depend mostly on alternative and independently generated power, one of which is gas.

Of all the sub-sectors surveyed in December by the Central Bank of Nigeria (CBN) under its PMI report, the cement sector reported contraction in terms of production.

Corporate Affairs Manager of MAN, Chuma Oruche, told The Guardian that bad roads had also increased haulage costs, even as producers grapple with rising gas prices. Natural gas traded yesterday at $2.67.

In the new gas regulation, pricing is based on export parity of oil, which is the price paid to the upstream producers by the Nigeria Liquefied Natural Gas Company (NLNG) in line with the market dynamics.

To the downstream, the pricing reflected the upstream prices alongside transportation and marketing costs. Considering an upstream price of $1.25/scm, the cost of transportation and marketing will not exceed 80cents; thereby making gas available to the downstream at about $2.30.

With an increase in global price of natural gas, local producers have also had to pay more for power generation.

Analysts at Cordros Securities explained that the imposition of lockdown measures dampened activities in Q2-20 as construction companies, and unskilled workers had to comply with shelter-in-place orders.

According to them, the suspension of activities on major construction sites and increased government focus on healthcare sector left negative imprint on the construction industry and by extension, demand for cement.

They noted that price increment was inevitable, going by higher input costs associated with dollar-linked cost items, adding that further devaluation will exert downward pressure on margins as industry players may be unable to pass on the full cost to consumers in the form of higher prices.

“Aside pandemic-induced slowdown, we believe subdued demand for residential properties, partly due to shrinking real incomes, the higher cost of building materials due to devaluation of the local currency, and the reduced availability of building materials due to supply chain disruptions also contributed to the weakness in the real estate sector.