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Manufacturing

BUA explains why price of cement, sugar remains high

BUA Group says the price of cement and sugar is high because local production of these products could not cater to demand.

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Abdulsamad Rabiu_chairman BUA

The founder of BUA Group has pegged the high price of cement and sugar in the country on demand and supply dynamics in the Nigerian economy.

According to the company, the price of cement and sugar is high in the country today because Nigeria doesn’t produce enough, as demand for these products outstrips supply in the Nigerian market.

According to a report by Vanguard, the company explained that the sugar industry is battling with the same issue with the Backward Integration Programme (BIP) policy in place, as Nigeria has a situation where it has only three players and there is the BIP policy which states that unless you are seen to be doing a plantation you would not be allowed to do sugar refinery.

The company noted that Nigeria has a population of over 200 million people, while cement production last year was under 30 million tonnes. These numbers according to him do not support the assertion that Nigeria has attained a self-sufficient status in cement, and that the country can now start exporting cement.

What BUA Group is saying

While explaining the reason for the high cost of cement in Nigeria, BUA reiterated that Nigeria doesn’t have enough supply of the product.

“In Nigeria, every day people come up to say we are self-sufficient in cement and that Nigeria can now start exporting cement; it not true. Look at the numbers: Nigeria is over 200 million people today in terms of its population. If you look at the production of cement, last year, we were under 30 million tonnes. 

In fact, last year was higher than the year before, which means that in 2019, we were doing between 26 million and 27 million. I am talking about production, and not installed capacity, which is another thing entirely. I am talking about actual cement production,” the statement said.

To understand these figures, the metric that matters is – cement production to population ratio – which shows the amount of cement available to Nigerians per head. This figure, however, can be compared with other countries.

BUA noted that Nigeria has a cement production to population ratio of about 130kg per head. While some countries in Africa, with lower production levels, are doing between 170kg to 200kg per head. It stressed that Nigeria has the capacity to produce at least 300kg per head or about 60 million metric tonnes per annum – which is double the nation’s current production capacity.

With this metric, BUA Group noted that Nigeria is actually producing less than other countries in Africa, apart from maybe the Niger Republic, hence the reason why the price of cement is high.

What you should know

  • A few months ago, Nairamterics reported that the Management of BUA Cement Plc disclosed that the Company was set to sign a contract for the building of additional three production lines to be located in Adamawa, Sokoto and Edo States, with an installed capacity of 3 million metric tonnes per annum each this week.

Omokolade Ajayi is a graduate of Economics, and a certificate holder of the CFA Institute’s Investment Foundation Program. He is a business analyst, and equity market researcher, with wealth of experience as a retail investor. He is a business owner and a stern advocate of Financial literacy, who believes in the huge economic prospect of the Nigerian Payment channels and Fintech space.

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