Inflation, Weak Naira Bite as Cement Makers’ Cost of Production Hits N3.64trn

Kayode Tokede 

Following the rising inflation and the depreciation of the naira that made foreign exchange more expensive, major cement makers in Nigeria spent an estimated N3.64 trillion on cost of production in 2024, about 72 per cent increase over N2.12 trillion reported in 2023 financial year.

The major cement markers are Dangote Cement Plc, Lafarge Africa Plc and BUA Cement Plc. 

THISDAY analysis of their audited result and accounts for the period ended December 31, 2024 showed increasing production cost of sales, administrative expenses and distribution expenses (Operating Expenses).

In the period under review, Dangote Cement posted an estimated N2.48 trillion production cost of sales, administrative expenses and distribution expenses, about 65.9 per cent over NN1.5 trillion in 2023.

As production cost of sales closed 2024 at N1.65 trillion from N1.01 trillion in 2023, OPEX moved from N491.64 billion in 2023 to N839.2 billion in 2024. 

BUA Cement announced N6641.13 billion cost of production, administrative expenses and distribution expenses in 2024, up by 102 per cent from N317.41 billion in 2023, while Lafarge Africa announced N510.62 billion cost of sales, ost of production, administrative expenses and distribution expenses in 2024, representing an increase of 67.7 per cent increase over N304.4 billion declared in 2023. 

One of the key drivers of this cost of production was soaring inflation, which made high-value goods, such as raw materials, more expensive. 

Nigeria’s headline inflation rate hit a nearly three-decade high in 2024, reaching 34.8 per cent in December compared to 34.6 per cent in November. On an annual basis, average inflation stood at 33.2 per cent in 2024, a sharp increase from 24.7 per cent recorded in 2023.

At the same time, the depreciation of the naira further complicated the cement production, making it significantly more expensive to produce. 

The official exchange rate between the naira and the United States dollar closed in 2024 at N1,535, reflecting a 40.9 per cent depreciation from N907.11 against the dollar at the end of 2023. In the parallel market, the naira depreciated by 26.8 per cent, trading at N1,660 against the dollar from N1,215 against the dollar at the close of 2023.

In addition, the policy in the oil & gas sector also impacted on energy consumption in 2024 as Dangote Cement expenses on fuel & power consumed stood at N679.94 billion last year from N399.21 billion in the corresponding period of 2023. 

BUA Cement’s energy consumption closed 2024 at N282.48 billion, about 129.2 per cent increase over N123.27 billion in 2023, while Lafarge Cement’s spent N158.74 billion fuel/power in 2024, up by 109.79 per cent from N75.66 billion reported in 2024. 

Analysts at Cordros Research in a report stated, “Despite strong top-line growth, significant cost pressures heavily impacted profitability, eroding margins and slowing profit growth.”

Despite challenges, these cement companies generated N5.15 trillion revenue in 2024FY, representing about 68 per cent increase over N3.07 trillion declared in 2023 financial year, with Dangote Cement contributing 69.4 per cent.

Cordros Research stated further that cement  manufacturers reported robust revenue growth in 2024, already surpassing  2023FY figures. 

The firm explained, “This performance was primarily driven by substantial price  increases, with average retail prices rising by 70per cent y/y, as industry players  adjusted product prices to offset the impact of increased costs due to the  challenging economic environment characterised by high energy costs, naira  depreciation, and elevated interest rates. 

“Specifically, average cement prices  ranged between N7,500 – N9,500 per 50kg bag in 2024 (2023FY:  N4,500–NGN5,500), peaking at N13,000 during the year. We also attribute  the surge in revenue growth to modest sales volume growth driven by the recovery in construction activities following last year’s slowdown caused by the cash crunch and the general elections. 

“Manufacturers also implemented various strategies aimed at enhancing operational performance. Precisely, Dangote Cement improved plant efficiencies, driving domestic volume growth (+9.5per cent y/y to  13.16mt) while also scaling up export activities with a 75.5per cent y/y increase to  873.00kt; BUACEMENT leveraged their expanded production capacity following  the launch of new production lines in their Edo and Sokoto plants to drive  volumes growth; and WAPCO launched innovative products, including  WaterShield, ECOPlanet, and SupaWhyte cement variant.”

The Chief Executive Officer, Dangote Cement, Arvind Pathak in a statement said: “Despite macroeconomic challenges, both globally and domestically, we remained committed to innovation and value creation, delivering strong returns for our stakeholders. 

“Group revenue grew by 62.2per cent to N3,580.6 billion, driven by a combination of volume growth and price adjustments to reflect inflationary trends. As a result, EBITDA reached a record high, surpassing the N1 trillion mark for the first time at N1,382.0 billion, while profit after tax (PAT) grew by 10.5 per cent year-on year, totaling N503.2 billion. 

“By leveraging our strong export-to-import strategy, Dangote Cement achieved a record 31 clinker shipments from Nigeria to Ghana and Cameroon, driving a 69.1pr cent increase in Nigerian exports and strengthening our commitment to Africa’s cement self-sufficiency. We also made significant strides in sustainability, particularly in alternative fuel investments. 

“Our Thermal Substitution Rate (TSR) improved to 10per cent, with 11 alternative feed systems installed across our plants, enabling greater flexibility in energy sourcing. Recognizing our sustainability efforts, the Carbon Disclosure Project (CDP) upgraded Dangote Cement’s rating to B across both climate and water categories.”

The CEO of Lafarge Africa, Lolu Alade-Akinyemi, in a statement said, “I am excited to report our record-breaking revenue of N697 billion and PAT of N100 billion for full year 2024, a testament to our strong market positioning, operational efficiency, cost management and dedication to value creation. 

“Despite a challenging business environment, we have remained resilient, leveraging innovation and green growth in line with our sustainability ambitions, while also delivering value to our stakeholders. 

“Lafarge Africa remains committed to strengthening its leadership position in offering environmental friendly building solutions, while driving long-term profitability. I would like to thank our esteemed customers, employees and all other stakeholders of Lafarge Africa for their commitment despite the macroeconomic headwinds being experienced in the industry.” 

In addition, the Managing Director/ CEO, BUA Cement, Mr. Yusuf Binji, in a statement said “Indeed, we are  pleased with this performance because of the various headwinds we had to contend with from the turn of  the year. More notable, was the further depreciation of the Naira, which impacted our cost profile – operating  and financing, and our slow start to the year. 

“Our slow start was due to the customer backlog resulting from  the October 1, 2023, price cut, which delayed our ability to adjust pricing amid the Naira’s depreciation.  In spite of the slow start, our quality and support offerings continue to endear us to customers, enabling us  to surpass our volume figures for 2023 and attaining a record high.  To address the issue of rising costs, we  have adopted certain measures. I am confident that the benefit of the measures taken will record positive  outcomes from 2025.”