Cement Costs Surge in Nigeria, Outpaced by Prices in Neighboring Nations

Nigeria’s cement industry faces mounting challenges as production costs soar by 121%, driven by naira devaluation and rising inflation. This steep increase may soon push domestic cement prices higher. Manufacturers also grapple with widespread smuggling, which limits their ability to offer competitive prices to Nigerian buyers.

In nearby Chad and Cameroon, a 50kg bag of cement sells for $120 to $150. At the current exchange rate of N1,600 per dollar, this equates to N240,000 to N270,000 per bag. This stark contrast with Nigeria’s N8,000 per bag highlights the vast price gap across the region.

BUA Cement’s CEO, Kabiru Rabiu, stressed that illegal cement smuggling to neighboring countries is straining Nigerian producers. Smugglers can fetch $150 to $270 per bag across borders, far exceeding local prices. Rabiu noted that much of the cement headed to northern Nigeria likely ends up smuggled, despite the area’s numerous distributors. This suggests cross-border smuggling is overshadowing local demand.

Financial reports from Nigeria’s top three cement makers—Dangote Cement, BUA Cement, and Lafarge Africa—reveal the impact of rising costs. In Q1 2024, their combined revenue jumped 84.5% to N1.116 trillion, up from N604.9 billion in Q1 2023. However, this impressive growth was offset by a 121% surge in production costs, climbing from N264.9 billion in Q1 2023 to N586.6 billion in Q1 2024.

This cost spike has hit profitability hard. The three major cement firms saw their combined pre-tax profit drop 4.1%, falling from N204.8 billion in Q1 2023 to N196.4 billion in Q1 2024. This decline underscores the growing pressure on the industry’s bottom line as costs continue to rise.

The cement sector’s struggles highlight broader economic challenges in Nigeria. As production costs climb and smuggling persists, manufacturers face tough choices. They must balance the need to maintain affordable prices for local consumers with the pressure to remain profitable in an increasingly difficult market. The situation also raises questions about border control and regional trade dynamics, as the vast price differences create strong incentives for smuggling.

As the industry grapples with these issues, it’s clear that finding sustainable solutions will require cooperation between manufacturers, government agencies, and regional partners. Addressing smuggling, stabilizing currency fluctuations, and managing inflation will be key to ensuring the long-term health of Nigeria’s cement industry and maintaining affordable access to this essential building material for the country’s growing population and infrastructure needs.

Rabiu detailed the specific issues driving up production costs. He noted that costs for production and mining, the only local material expenses, have jumped over 30%. Energy costs, making up 40% to 50% of total production costs and mostly priced in dollars, have also risen. The spike in gas prices, essential for running cement plants, along with the unstable exchange rate, has further strained cement makers financially.

The mix of higher production costs, smuggling problems, and naira devaluation poses major hurdles for Nigeria’s cement sector. These factors not only threaten cement affordability for local buyers but also impact the overall profits and sustainability of key cement producers in the country. As the industry tackles these complex issues, finding ways to cut production costs and stop smuggling will be vital for keeping