BUA: Expanding Nigeria’s Cement Production Capacity

Obinna Chima writes on the fresh $500 million recently secured by BUA Cement Plc for the expansion of its production lines

BUA Cement Plc last week secured a $500 million financing package from the International Finance Corporation (IFC) and its partners.

The facility saw the IFC making its largest-ever investment in northern Nigeria by providing a financing package alongside African and European partners to BUA Cement Plc, to help the company part-finance and develop two new, energy-efficient cement production lines that would create up to 12,000 direct and indirect jobs.

A breakdown showed that the financing package included a $160.5 million loan from the multilateral agency’s own account, a $94.5 million loan through the Managed Co-Lending Portfolio Program (MCPP), and $245 million in parallel loans from syndication partners; the African Development Bank (AfDB) – $100 million, the Africa Finance Corporation (AFC) – $100 million, and the German Investment Corporation, Deutsche Investitions- und Entwicklungsgesellschaft (DEG) – $45 million.

The financing, announced during the recently held 2023 Africa CEO Forum in Abidjan, Cote d’Ivoire, would allow BUA, Nigeria’s second largest cement producer, to develop new production lines in Sokoto State. The plants would run partly on alternative fuels derived from waste and solar power. Each would produce about three million tons of cement annually when complete, serving markets in Nigeria, Niger, and Burkina Faso.

According to the IFC, investing in northern Nigeria remains integral to its strategy to promote sustainable development in underserved regions. This includes areas with limited opportunities and a need for increased private sector engagement. The investment in BUA was part of IFC’s strategy to promote diversified, inclusive growth and job creation in Nigeria, where IFC supports the manufacturing agribusiness, healthcare, infrastructure, technology, and financial services sectors. IFC has an active investment portfolio of $2.3 billion in Nigeria.

The new BUA Cement plants would provide local developers with a reliable and affordable source of cement, and bolster the construction of essential infrastructure, fostering economic growth and prosperity for the region.

Additionally, the project is expected to create about 1,000 direct jobs and 10,800 indirect jobs. Direct jobs include those in manufacturing, engineering, and advanced automation systems, it explained, adding that indirect jobs included those in the cleaning, maintenance, mining, and transportation sectors.

The facility comes about 17 months after the inauguration of BUA Cement Plc’s ultra-modern three million metric tonnes per annum Sokoto line four factory and the groundbreaking of the company’s line five. The unveiling of the plant and groundbreaking ceremony were conducted by then by former president, Muhammadu Buhari.

The price of cement remains high in Nigeria because the few producers are not able to meet the country’s huge demand. It is expected that the new facility would enable BUA Cement ramp up production and lower the price of the product.

Commenting on the new facility secured by his company, the Chairman and Founder of BUA Group, Abdul Samad Rabiu said: “BUA is delighted to partner with IFC and other esteemed institutions in securing this $500 million facility to develop energy-efficient cement production capacity and strengthen our equipment and logistics capabilities in northern Nigeria.

“In line with our commitment to sustainability and ESG principles, this investment will create jobs and contribute to economic and infrastructural development within Nigeria and the greater Sahel region.

“We are particularly pleased to have successfully gone through the rigorous process with IFC, AfDB, AFC, and DEG, which validates our responsible business practices. By focusing on greener fuels and enhancing our equipment and logistics platform, BUA Cement is building a foundation for sustainable infrastructure growth and a more inclusive society.”

Speaking further, the company’s chairman: “This has been going on for about a year and finally we have signed and we are really very excited. Sokoto state is where we have this plant and BUA Cement is the largest cement producer in the northern part of Nigeria. We have two plants there and we are going to have a third one and the fourth one and by the time we are through, it will be eight million tonnes. “What it does is that with the additional lines that we would be having, we would be able to export cement to Burkina Faso and to Niger. And again, one of the DFIDs mentioned that they looked at it to ensure that this is going to be all green and we are not going to be using fossils at all. It is going to be gas that we are transporting from Port Harcourt. “

He said the project gives BUA Cement the opportunity to expand its production lines. Secondly, in the northern part of the country, the company is the only cement producer that has the capacity of more than one million tonnes and by the time it is done with its expansion drive, it would be having about eight million tonnes.

“What that does is that somebody buying cement in Sokoto is going to be paying same price as those that are in Lagos, Port Harcourt or Calabar. So, it is a huge deal which ordinarily if you don’t have this plant, it will be costing you maybe an additional 1000 or 1,500 tonnes on each bag, just for transportation.

“If you look at Sokoto, you will know that the impact of this plant is huge and positive because you are empowering the community, we are creating thousands of jobs and we are creating wealth for our shareholders. I am really glad because for a company to be able to get $500 million facility from the IFC is a validation and this to me is very important. That goes to show that we are a responsible organisation and we are going to do whatever it takes to make sure that we deliver,” Rabiu added.

BUA Cement Plc is the result of a merger between CCNN Plc and Obu Cement Company Plc (formerly Obu Cement Company Limited). Cement Company of Northern Nigeria (CCNN) was incorporated in 1962 and commenced operations in 1967, with an installed capacity of 100,000 mtpa at Kalambaina, Sokoto State. In 1985, a Line-2, with an installed capacity of 500,000 was commissioned; though the Line-1 was eventually decommissioned a year later due to its uneconomic mode of operation. In 2000, the federal government under its privatisation programme divested its majority shareholding to Scancem International ANS of Norway, as core investor in CCNN. Focused on strategic re-positioning, Scancem divested its holding to Damnaz Cement Company Limited in 2008.

In 2010, BUA International Limited acquired Damnaz Cement Company to become majority shareholder and technical partner in CCNN. In 2014, Obu Cement Company Limited became Obu Cement Company Plc, commencing operations in 2015 with coming online of the Greenfield Line-1 (3 million mtpa) plant at Obu, Okpella, Edo State, Nigeria.  These world-class plants are strategically positioned to providing our value brand cement to the Nigerian and African cement market while contributing to the development of related sectors including housing and construction.

With a combined installed capacity of 11mmtpa (Obu plant, 6mmtpa and Kalambaina plant, 5mmtpa), BUA Cement Plc is the largest cement producer in the North-West, South-South and South-East regions of the country and is currently the second-largest producer of cement in Nigeria with its commissioning of the 3 million mtpa, line-4 at Sokoto State in January, 2022. 

Rabiu is also the founder and Chairman of BUA International Limited – a foods, mining and infrastructure conglomerate which he established in 1988 with business interests in cement manufacturing, sugar refining and plantations, rice, flour milling & pasta production, oil and gas, construction, real estate and logistics. Rabiu studied Economics at Capital University, Columbus, Ohio, USA and he holds the Nigerian National Honour of ‘Commander of the Federal Republic’ (CFR).

Also commenting on the fresh facility secured by BUA Cement, IFC’s Managing Director, Makhtar Diop said: “We are pleased to join with our partners to support BUA with an investment that will boost industrialization, create jobs and deliver economic growth in northern Nigeria, a region with significant economic potential.”

The financing package announced by IFC and its partners would also allow BUA to replace some of its diesel trucks with vehicles that are run partly on natural gas, over time producing fewer emissions.

As part of the project, the IFC would also advise BUA on developing a gender inclusive workplace strategy that creates more opportunities for women across its operations.

“Following an initial $200 million investment in BUA Group in 2021, we are proud to play another key role in this landmark manufacturing project set to transform the construction sector in northern Nigeria and the entire country.

“By investing in this project, we are sustainably building Nigeria’s local manufacturing capacity, empowering local communities and creating employment opportunities.

“AFC is committed to working with our partners to accelerate development impact through infrastructure solutions that support value addition, industrialisation, and job creation throughout Africa,” CEO & President of the AFC, Samaila Zubairu said,

Also, the Vice President – Private Sector, Infrastructure and Industrialisation, AfDB, Solomon Quaynor said: “The AfDB is pleased to be partnering with IFC and BUA on this expansion project as it is aligned with our priority strategies of industrialising Africa and improving the quality of lives of Africans through the increase in cement production which will lead to the development of additional affordable housing and critical infrastructure in Nigeria and neighboring West African countries, while supporting the use of cleaner energy at BUA’s Sokoto facility.”

To the Senior Director at DEG, Gunnar Stork, “DEG’s mission is to be a reliable partner to private sector enterprises as drivers of development and creators of qualified jobs.

“We are pleased to contribute to this transaction together with our development finance partner institutions. Together we support BUA in its transformation towards a more sustainable production by implementing innovative technology. The significant reduction of CO2 emissions and the creation of decent jobs in a region with many vulnerable households are key factors for DEG’s financing.”

While domestic cement demand has been growing rapidly, it is expected that this new financing and BUA Cement expansion drive would in the long-run help in reducing the cost of the product.