FG’s Commendable Effort to Support Local Industries
As part of government’s effort to support local industries, the Minister of Information and Culture, Lai Mohammed, recently went on a facility tour of BUA Cement Plant in Sokoto State where he outlined plans by the government to support Nigerian companies to boost employment. Oluchi Chibuzor highlights the minister’s visit
As the government continues to seek ways to support home grown industries across the country, especially those with labour multiplying effects, the need to boost average individual’s low per-capital consumption of cement has been identified as a critical factor to cushion the demand and supply forces and the racketeering margin made by middle men affecting price of product.
This is as most of the middlemen in the cement industry sell their product about 25 to 30 per cent above factory price across the country, which is largely because of underproduction of the product in Nigeria.
In view of this, the federal government is urging potential investors to take advantage of various window of opportunities like tax holidays to participate in the diversification initiatives aimed at growing more businesses.
Speaking in Sokoto, during a factory tour of the BUA cement production plant, Minister of Information and Culture, Alhaji Lai Mohammed, acknowledged that the country must encourage companies like BUA that are engaged in multi-billion naira investment projects.
According to him, “We are here today in continuation of our tour of public and private sector projects across the country that are impacting positively on the lives of the people that are beneficiaries of the conducive business environment created by the administration of President Muhammadu Buhari, under the auspices of the Presidential Enabling Business Environment Council (PEBEC).
“The result of such favourable business environment was the birth of new businesses such as the 5 Million tonnes per annum (mtpa) BUA Cement here in Sokoto; the $2.5 billion Dangote Fertilizer Plant that will produce 3 million tonnes of Urea every year; the 650,000 barrels per day oil refinery due to open later this year; the Lekki Deep Sea Port, one of the most modern sea ports in West Africa and the 5,000 barrels per day Modular Refinery in Ibigwe, Imo State.”
Commenting on the incessant rise of cement in the country, the minister noted that until supply exceeds demand the country will continue to witness rise in price.
He said, “Is about demand and supply; the demand for cement is so high and until we are able to ramp up supply we will not be able to have a reasonable price. For instance, if 100 people need cement, and we can provide only for 50, those in between will hoard and sell at their own price.”
Responding to this challenge, which has continued to deny so many Nigerians the opportunity to own a home, Mohammed agreed that the government must continue to support the industry through tax incentives to investors.
“We invite more investors to take advantage of our tax holiday programme, backward integration, tax incentives because to have one line of cement production you need a minimum of half a billion dollars, “he said.
Reducing Cost
Speaking, the Managing Director and Chief Executive Officer, BUA Cement Plc, Yusuf Binji noted that Nigeria’s low capital per consumption for cement usage remains a critical factor that must be addressed quickly to reduce the cost on the consumers.
For him, driving down the energy cost of the plant is another key factor adding that the government needs to intervene quickly.
The company, he revealed, bring in 20 trucks of Liquefied Natural Gas (LNG) from Port-Harcourt every day to keep the factory running to 90 per cent production capacity.
He added, “Now we are bringing NLG from Port-Harcourt about 20 trucks a day and energy estimates about 80 per cent of our production cost and definitely anything that is going to reduce energy is going to reduce the current cost in the open market. This will have a direct impact on the cost of cement in the country. The price of cement currently being sold in the open market is about N4000; this is about 25 to 30 per cent higher than factory price and we are selling far below that.
“Factors of demand and supply do influence the price and definitely Nigeria still has a very low per capital consumption of cement compared to some countries. In Nigeria now, per capital consumption is about 123 kilogramme per person which is less than two and a half bags. That is where we want to be as a country and this means there is still under production of cement in Nigeria because right now last year the consumption and demand was about 30 millions tonnes and we should be like 60 to 70 million tonnes even countries like Senegal, ivory coast, Egypt, they are all far above Nigeria in terms of per-capital consumption.”
However, the minister promised that the government would continue to encourage the usage of cement in road construction as part of its backward integration programmes.
Another key issue, which was raised includes the possibility of allowing the market to be more competitive, which Binti, opined would should drive innovation and quality in the country.
“We are a product of competition, there is nothing like competition, it is about service delivery to Nigerians. What we want to do is to bring our product to be available everywhere so that cement can be affordable because our processes are standard. The quality is good and is left for the consumer to make its choice.
“But like I said our per capital consumption is almost the lowest in the world. The world average is almost 650 kilograms per person that is 13 pound per person and if we are to get to that level with this kind of facility you have seen you need probably 10 more in Nigeria,” Binti stated.
Banning importation
Commenting further, the minister stressed that the banning of importation of cement and backward integration would help interested companies make returns easily.
He said, “Because when you invest about $1 million in one line it takes about four to five years gestation period before you can even start producing and another 10 years for you to breakeven.”
Meanwhile, in the last five years, BUA said it has completed four new cement plants of 3 Million tonnes per annum line (IV), “and similar capacity in different parts of the country and we are set to complete two more plants soon.”
Binji stated that cement producers are still under producing with a demand of 30 million tonnes far below Ghana, Egypt, Senegal and Ivory Coast in terms of per capita consumption.
“We should be doing like 70 million tonnes instead of 30 million tonnes. Nigeria still has a low per capita consumption of cement when compared to Ghana. Our per capita consumption is about 123kg representing less than two and a half pounds while Ghana is about five pounds per person,” he said.
Impact of Railway
The minister assured that the Kano-Jibia Maradi railway line when completed, would help to crash the price of cement in the country.
According to him, the railway line will help reduce the cost of transportation and energy incurred by cement manufacturers since bulk of Liquefied Natural Gas (LNG) would be transported using railway transportation.
In his words: “By the time that section of the rail is completed, it will be cheaper to transport cement from Sokoto to all parts of Nigeria by rail. It will also help in bringing the cost of energy deployed in producing cement because it will bring bulk LNG to the plant. We are very confident that in a few years time, with the challenges in logistics addressed, we can be looking forward to a crash of the cost of cement.”
The Minister however stated that the conditions that have made BUA cement to flourish, especially since 2015 when the present administration assumed office, include the fact that BUA was granted Pioneer Status, the ban on importation of cement, government’s divestment from the cement industry and backward integration policy.
“Thanks to these conditions, BUA Cement has recorded a 300 per cent increase in production between 2015 and now. That is from 3.5 million tonnes per annum in 2015 to 11 million tonnes per annum now. For its part, the sokoto plant is operating at over 90 per cent of installed capacity,” he said.
He added: “Because of its location, which is just 100 kilometers to Niger Republic, the plant exports to Niger and Burkina Faso, earning Nigeria much needed forex. Please note that only excess is exported, especially during the raining season. Other facts include that the company produces all year round, loading between 250 and 270 trailers per day. The plant has 700 trucks for cement distribution.”
He noted that the three million tonnes per annum line (IV) of the BUA Cement facility takes the combined installed capacity of the factory’s lines 2,3 and 4 to 5 million tonnes per annum, stressing that this is one of the most modern cement plants anywhere in the world.
“It has gas analyzers used in regulating carbon emissions released into the atmosphere; air purifying mechanisms set up to enhance the quality of air released from the cement manufacturing process. In fact, the plant has filters capable of capturing 99.9 per cent of dust in order to make the environment healthy and conducive for the workers and customers alike,” he added.
He stated that the plant is the first cement plant in Nigeria to use LNG to generate 50MW of power, thereby replacing coal in its kiln, pointing out that this has made the plant environmentally friendly to also curbclimate change.
“I am sure when the AKK gas pipeline project is completed, it will drastically reduce the time and cost of transporting gas, which is currently being trucked from Port Harcourt to the plant. At least 20 trucks of LNG are brought here daily from Port Harcourt. Imagine the costs and the logistic challenges involved in this,” he said.
“Of course this plant is also a job creator. As the Managing Director said, there are 443 permanent staff and, together with all other ancillary jobs, the total is about 10,000 jobs,” he averred.
He commended the Chairman of BUA Cement, Abdul Samad Rabiu and his entire team for his undying belief in Nigeria, saying that there is no better indication of BUA’s support for the government’s economic diversification and job creation agenda than the company’s massive investments in Nigeria.
“In the last five years, BUA has completed four new cement plants of similar capacity in different parts of the country and is set to complete two more plants soon. It is expected that total production for BUA Cement will amount to 17 million tonnes per annum by 2023, “he added.
Earlier, Binji stated that that investing in the future, its strategic priorities would be to drive revenue and cost synergies across revenue and margin lines, harmonise sale and marketing strategy across its two plants, increase customer portfolio and capture new market areas including export, construct lines 3&5 at Obu and Sokoto plants respectively and deploy solutions that enhance customer experience.
He said the price of cement currently being sold in the open market at N4000 is about 25 to 30 per cent higher than the ex factory price
