![[ANALYSIS] Planned Economic Stimulus Could Be A Turning Point For These Cement Companies](https://nairametrics.com/wp-content/uploads/2015/10/Eko-Atlantic-City-Lagos.jpg)
Nigeria will rank among BRIC countries in cement production only if Africa’s largest economy invests massively in infrastructure, according to a new report by the investment firm, Chapel Hill Denham
The BRIC, an acronym invented by Jim O’Neil, an investment banker with Goldman Sachs, comprise of Brazil, Russia, India, and China.
Cement production per capital in Brazil and Russia are 349kg and 480kg respectively, according to the US Geological Survey (USGS) data, compared to 112kg for Nigeria.
“This indicates that Nigeria’s cement production per capita has to expand at a CAGR of 12.0 percent and 15.6 percent over the next 10 years for the country to meet the current production per capital of Brazil and Russia respectively,” said analysts with Chapel Hill Denham.
Analysts say one of the ways to boost cement production and stimulate the economy is by investing in infrastructure such as roads, housing, transportation, bridges, and renovations.
For instance, the 17 million housing deficits and rapid urbanization in Nigeria will undoubtedly drive the demand for building materials. According to the United Nations, Nigeria’s urbanization rate was estimated at 51 percent in 2012, which suggests that over 80 million people live in cities; the UN estimates that this number is growing at an annual rate of 3.5 percent.
As a country the country needs as much as $300 billion (N60 trillion) within the next 30 years to close its housing deficit. Analysts say investment in infrastructure aside from being a major driver for cement consumption will create employments and also lead to economic growth.
“In either case, we think government spending on infrastructure projects is the required catalyst to close the current gap between Nigeria and its emerging market peers,” said analysts at Chapel Denham Hill.
Analysts at Chapel Denham Hill added that for Nigeria to play a catch-up with India and China in cement production, its cement output has to accelerate at a CAGR of 14.1 percent in the next 20 years (for India) and 12.8 percent in the next 40 years (for China).
Cement makers in Africa largest oil producer and most population nation have a growth opportunity as government plans to create a $25 billion fund combining public and private financing to develop infrastructure.
“We think that the way out of this, what some have described as an impending recession, is actually to spend rather than to cut back in any way,” Osinbajo said in an interview on Tuesday in the capital, Abuja.
Nigeria has 4 dominant cement players that control over 80 percent of the market.
The cumulative sales of Dangote, Lafarge, Ashaka and Cement Company of Northern Nigeria (CCNN) increased by 13.02 percent to N378.40 billion in June 2015 as against N334.40 billion last year. Net income grew by 25.34 percent to N152.85 billion.
These firms may see less growth in the third quarter of the year as demand for cement faltered on the back of slow construction stoked by seasonal impact of rains and lack of policy direction on the part of government. Further, weak spending by government on capital projects as a result of dwindling oil revenue also dampened construction activities between the months of June to September.
“Nigeria needs to stimulate the economy by investing in infrastructure that will help the nation avoid recession,” said Kemi Adeosun, economist/Chartered Accountant and ministerial nominee.
