Abdul Samad Rabiu, chairman of BUA Cement, has stated that the price of cement should be around N10,000 per bag, considering the significant devaluation of the naira.
He said this at BUA Cement’s 8th annual general meeting held in Abuja on Thursday.
The BUA Cement chairman said: “If you see the exchange rate then, and the exchange rate today, you will see that cement is cheaper today than what it was last year, the reason being that if the dollar was up the costs go up by the same margin and the price of cement should be, maybe, N10,000 per bag.”
Rabiu emphasized that the current market price of cement, which stands at about N6,000 per bag, is far lower than what it could have been if the full impact of the naira devaluation were passed on to consumers.
Dealers, economy hamper lower cement price policy
Rabiu explained that BUA Cement had initially aimed to reduce the price of cement from N4,500 to N3,500 per bag last year as part of its efforts to support the federal government’s initiative to ease the financial burden on Nigerians.
However, this move was undermined by the actions of cement dealers, who instead sold the cement at much higher prices, ranging from N7,000 to N8,000 per bag, reaping substantial profits at the expense of consumers.
He further highlighted that the policy became unsustainable due to the naira’s devaluation and the removal of the petrol subsidy, which increased operational costs.
The chairman revealed that BUA Cement had sold over a million tons of cement at the reduced price of N3,500 per bag before realizing that dealers were not passing these savings on to consumers.
With the exchange rate soaring from about N600 to approximately N1,800 to the US dollar, the company found it increasingly challenging to maintain the lower price.
Rabiu said: “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,” Rabiu said.
“Some were selling at N7,000 and N8,000 per bag. They made a lot of money with a very high margin. I think we had sold more than a million tons at N3,500 before we realised what the dealers were doing.
“And then, because of the issues that Nigeria faced at the time about the 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 were subsidising dealers.
“I’m referring to the point when the foreign exchange rate moved from about N600 to maybe N1,800 to the US dollar. So, it became even more challenging for us to sustain that price policy.”
BUA still committed to lower prices
Despite these pressures, Rabiu noted that BUA Cement continued to absorb some of the costs to prevent the price of cement from escalating to its potential market value of N10,000 per bag.
Emphasizing the company’s efforts to shield consumers from the full impact of the economic changes, he noted “The price of cement, if you take the N4,000 that it was at the beginning of last year, and today’s N6,000, it’s only 50% increase. So, we directly pushed to ensure that the price of cement is not getting higher than what it is today.
“But then again, you have areas where everything is dollar-dominated. Energy is the biggest cost. And our energy today is denominated in dollars.”
Rabiu also pointed out that energy costs, which are a significant part of BUA Cement’s operational expenses, have been heavily impacted by the devaluation, as they are denominated in dollars. The company spends between N15 and N16 billion monthly on energy, accounting for over 60% of its operating costs. In response to these challenges, BUA Cement is building a mini-LNG plant to power its machines and reduce production costs.
The company’s financial report for 2023 highlighted a 27.4% growth in net revenue, reaching N460 billion, up from N361 billion in 2022. Capacity utilization also improved to 61.2% in 2023 from 59.8% in 2022, reflecting an increase in cement volumes dispatched and a corresponding rise in market share.