The House of Representatives in Nigeria has launched a much-anticipated probe into the relentless rise in cement prices, a development that has significantly impacted the construction industry and burdened ordinary Nigerians. Leading cement manufacturers, Dangote Cement Plc and Lafarge Africa Plc, found themselves in the hot seat as lawmakers sought explanations for the price hikes and explored potential solutions.
The investigation comes amidst growing public outcry. The cost of a bag of cement, a crucial material for construction projects large and small, has more than doubled in the past year, jumping from around N4,000 to a staggering N10,000 in some parts of the country. This dramatic increase has crippled construction projects, stalled renovations, and pushed the dream of homeownership further out of reach for many Nigerians.
Representatives Voice Frustration
Rep. Dabo Ismail (APC-Bauchi) pointed a critical finger at Dangote Cement Plc, highlighting the company’s continued profitability despite sourcing most of its raw materials locally. He noted that the company declared a profit of N524 billion in 2022, N553 billion in 2023, and has already raked in N166.4 billion in the first half of 2024. “Why is the price of cement still rising when the company keeps making significant profits?” Rep. Ismail questioned, echoing the concerns of many Nigerians.
Manufacturers Defend Their Actions
Facing the heat, representatives from both Dangote and Lafarge offered explanations for the price hikes. Mr. Arvind Pathack, Group Managing Director of Dangote Cement Plc, attributed the increase to a multitude of factors, primarily the over 220% devaluation of the Nigerian Naira against major currencies like the US Dollar between May 2023 and June 2024. He argued that 95% of the company’s production costs are either directly tied to imports or linked to foreign exchange fluctuations.
Mr. Pathack further emphasized the challenges of logistics in Nigeria. He cited the poor state of roads, leading to increased delivery times and higher truck maintenance costs. He also highlighted the difficulties in obtaining sufficient foreign exchange to settle trade obligations, resulting in forex losses estimated at N150 billion annually. Additionally, Pathack pointed to the high cost of borrowing, with interest rates hovering around 30%, further straining the company’s finances.
Lawmakers Remain Skeptical
While acknowledging the challenges faced by manufacturers, some lawmakers remained unconvinced. Rep. Nkechi Chukwu (PDP-Abia) expressed skepticism about the extent to which the Naira devaluation truly justifies the price hikes. She pointed out that the price of cement in Nigeria remains significantly higher than in neighboring countries, even when adjusted for currency exchange rates. “Rep. Chukwu argued [invalid URL removed],”When we compare the price of cement in Nigeria to countries like India, Kenya, and Zambia, we see a significant disparity. This raises questions about whether the companies are taking advantage of the situation to inflate their profits.
The Blame Game: Retailers vs. Manufacturers
The issue of pricing discrepancies between the ex-factory price set by manufacturers and the final retail price paid by consumers also emerged during the probe. Dangote representatives asserted that the company sets a recommended price, and any price gouging at the retail level is beyond their control. However, lawmakers expressed concerns about the lack of transparency and potential collusion within the distribution chain.
Seeking Solutions: A Collaborative Approach
The ultimate goal of the House of Representatives’ investigation is not simply to assign blame, but to find solutions that will bring relief to Nigerians struggling with the high cost of cement. Rep. Bamidele Kalu (APC-Lagos), chairman of the investigating committee, emphasized the need for a collaborative approach. “Rep. Kalu stated,”Our goal is to work together with all stakeholders, including the government, manufacturers, and distributors, to find solutions that will address the challenges in the housing sector and ensure Nigerians have access to cement at a fair price.”
Potential Measures on the Table
Several potential solutions were discussed during the probe. Some lawmakers suggested exploring alternative sources of raw materials for cement production to reduce reliance on foreign exchange. Additionally, improving the nation’s infrastructure, particularly the road network, could lower transportation costs for manufacturers. Streamlining the process of accessing foreign exchange and potentially exploring government intervention to stabilize the Naira were also proposed.
The Road Ahead
The investigation by the House of Representative is a positive step towards addressing the issue of soaring cement prices. However, the road ahead is not without its challenges. Finding a solution that balances the needs of manufacturers, the government, and ultimately, the Nigerian people, will require careful consideration and compromise.
Industry Transparency and Regulation
One crucial area for improvement is transparency within the cement industry. Lawmakers have called for a more transparent pricing structure, with clear delineations between ex-factory prices and retail prices. Additionally, stricter regulations could be implemented to prevent price gouging by distributors. The establishment of an independent body to monitor pricing structures could also contribute to a more transparent and fair market.
Government Intervention: A Delicate Balance
The role of government intervention in the market is a delicate one. Excessive price controls could stifle production and limit investment in the sector. However, on the other hand, leaving it entirely to market forces has resulted in the current situation, where ordinary Nigerians are bearing the brunt of the cost increases.
The government could explore various options to stabilize the price of cement. These could include:
- Tax Incentives: Providing tax breaks to manufacturers who invest in local raw material sourcing or infrastructure development could encourage a more sustainable and cost-effective production process.
- Subsidies: Targeted subsidies on specific inputs used in cement production could help to mitigate the impact of foreign exchange fluctuations. However, careful planning would be required to ensure that such subsidies are utilized efficiently and do not create distortions in the market.
- Anti-Trust Regulations: The government could also consider strengthening anti-trust regulations to prevent potential collusion within the industry. This would foster greater competition and potentially lead to lower prices for consumers.
The Consumer’s Voice
While the government and industry grapple with potential solutions, it is also important to empower consumers. Public awareness campaigns could help educate Nigerians about fair pricing practices and empower them to make informed decisions when purchasing cement. Additionally, fostering a culture of consumer protection would ensure that Nigerians have legal recourse against any instances of price gouging.
The House of Representatives’ probe into the rising cost of cement has shone a light on a complex issue with no easy solutions. However, through collaboration, transparency, and well-considered government intervention, stakeholders can work together to achieve a more sustainable and affordable cement market for Nigerians. Only then can the dream of homeownership and a thriving construction industry become a reality for many.
