BUA CEMENT PRICE REDUCTION: UNEASY CALM AMONG CEMENT MANUFACTURERS

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BUA Group, on Sunday, announced a reduction in the price of cement from N5,000 per bag to N3,500.

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The development is already heightening a price war in the building materials and infrastructure industry.

The Nigerian cement market had been dominated by Dangote, BUA Group and Lafarge, respectively.

BUA Group’s decision sent a shock wave to the building material and infrastructure industry.

The Minister of Works, Dave Umahi, had raised the alarm over the high cost of cement in Nigeria compared to other parts of the continent.

Meanwhile, more than 24 hours after the BUA price reduction announcement, its major competitor, Dangote cement, has kept mum.

When DAILY POST contacted the spokesperson for Dangote Group, Anthony Chiejine, on Monday, he did not say a word on the development.

It could, however, be recalled that earlier, Chiejine denied claims that circulated on social media a week ago that the price of Dangote cement price was reduced to N2,700 per bag.

Similarly, Lafarge cement, a major actor in the building materials market, is yet to react to the cut in price by BUA cement.

However, a survey of cement sellers- wholesalers and retailers in Abuja showed that the new price change by BUA is yet to be effected.

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In Dawaki, an area near Gwarinpa, Eze Onyekachi said his 50kg BUA cement price has remained at N5,000.

He said, “The price reduction for me is a media thing; as of today (Monday), we still buy at the same depot price and sell for N5000 per 50kg bag. I am saying come back here in a week; the price may remain the same.

“Several persons have called me on the price reduction thing for BUA cement, but we are yet to see it being effected.”

Abdul Adamu, a dealer, who plies his trade in Gwarinpa said he has yet to change his stock; hence, he still sells at the old price of N5,000 per 50kg bag.

“We are yet to get new stock at the moment; for now, we still sell at N5000 per bag”, he said.

The development has received both knocks and kudos.

Speaking with DAILY POST on Monday, Wumi Iledare, a Professor Emeritus in Petroleum Economics and Executive Director of Emmanuel Egbogah Foundation, stated that the situation may be relieving in the short run.

“That one seller in a market can single-handedly determine the cement price is worrisome. It shows the market is anti-competitive, and regulators must be watchful of such behaviour.

“To consumers of the product, cement, in this case, may seem very relieving in the short run.

“However, if it is a dominant cement firm, such a seller may drive others out of the cement market in the long run. Other than that, reducing the price of any raw material for productivity activity is good”, he said.

On his part, Kunle Olubiyo, the President of Nigeria Consumer Protection Network said the BUA cement price review would help reduce the 20 million housing deficit in Nigeria.

“The recent price war in the Cement Sub Sector is a welcome development in the spirit of market competition.

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“It is also good for the public, the off-takers and end users customers of the products.

“You recall that the Federal Government has recently demonstrated her interest in the deployment of cement materials in the construction of roads where cement is considered more valuable and appropriate, taking into consideration the divergence in climatic conditions of different parts of Nigeria where the use of bitumen may not be most suitable.

“This development, apart from reducing the cost of construction of road, housing and other products that require cement as feedstock, will help in reducing the housing deficits in Nigeria, create jobs, create wealth while at the same time bring about peace as the productive energy of idle youths population would be productively and constructively engaged”, he stated.

Also, Prof Godwin Oyedokun, President of the Association of Forensic Accounting Researchers said the development may lead to a price war and force other producers to reduce their prices to remain competitive.

“I can say that when one producer slashes its product prices, it may affect other producers in different ways depending on various factors such as the competition level, market size, product differentiation, and the availability of substitutes.

“In some cases, price slashing may lead to a price war and force other producers to reduce their prices to remain competitive, decreasing profit margins.

“On the other hand, it can also stimulate demand for the product and increase overall market size and revenue.

“Ultimately, the effect of price slashing will depend on many factors and the specific circumstances of the market.

“Sure, I know competitors will respond to this. I pray it brings a positive multiplier effect on the economy”, he said.

But, Bode Fadipe, a Global Power and Energy analyst, said that the reduction of BUA cement price is cosmetic and transient unless there is a corresponding review of other parameters required in the building industry.

“The recent reduction in cement price is cosmetic and transient unless a corresponding review of other parameters is required in the building industry.

“Cement is not the only item required to build a house. What is the cost of land and labour today? What about others like road, sand, wood, etc, which are composite?

“Will their cost also go down? Dangote and BUA are not just relations; they are businessmen. That Dangote has kept mum does not mean he won’t respond. Businessmen are very strategic people. They do everything to protect their business interest.

“What BUA has done is a sustainability strategy. I won’t be surprised to see a return to the old price because the macro and micro-economic indicators are major suspects.”

Idakolo Gbolade, Chief Executive Officer of SD & D Capital Management said the development may push BUA’s major competitors to cut cement prices.

He urged the government to provide opportunities for more competition in the cement industry.

“The recent announcement by BUA cement of a slash in the price of cement is a welcome development, and it shows that if more Nigerians are patriotic, we can start witnessing the change we desire.

“We expect that Dangote cement also needs to follow suit. This is the beauty of competition as against monopoly. I want the Nigerian government to give opportunities to more competition in our business space, as it has shown we can gain more by creating such an enabling environment.

“Cement is a major component in the building sector, and a reduction in its price will go a long way in reducing the cost of building and affect inflation positively,” he said.

About Dons Eze

DONS EZE, PhD, Political Philosopher and Journalist of over four decades standing, worked in several newspaper houses across the country, and rose to the positions of Editor and General Manager. A UNESCO Fellow in Journalism, Dr. Dons Eze, a prolific writer and author of many books, attended several courses on Journalism and Communication in both Nigeria and overseas, including a Postgraduate Course on Journalism at Warsaw, Poland; Strategic Communication and Practical Communication Approach at RIPA International, London, the United Kingdom, among others.

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