The Nigerian cement market has been rattled by an alarming surge in prices, defying government interventions and skyrocketing to an astonishing N14,000 per 50kg bag.
In a span of just six weeks, from January to February 2024, cement prices surged from a modest N4,500, representing an unprecedented increase of up to 150 per cent.
Recently, the Nigerian government and major cement manufacturers in the country agreed to bring down the price of the product. Sequel to that meeting, major cement manufacturers in Nigeria – Dangote, BUA and Lafarge – agreed that the price of a bag of cement will not exceed between N7,000 and N8,000.
However, NATIONAL ECONOMY’s investigation as of weekend revealed that depending on the brand, the prices of cement range from N11,000 and N14,000. This is a giant leap compared to the price barely three months ago.
The surge in cement prices in Nigeria, skyrocketing from N5000 to N14000 per bag in one quarter, is poised to have profound ramifications on the nation’s affordable housing scheme, exacerbating existing challenges faced by homeless Nigerians, escalating inflation, and posing significant hurdles for developers.
The real estate sector has been particularly hard-hit by the recent escalation in cement costs, triggering a surge in property abandonment. Supply chain disruptions and heightened demand have compounded the situation, placing immense strain on property developers and homeowners.
Property developers are grappling with the dilemma of absorbing additional expenses or passing them on to consumers through inflated property prices. This exacerbates existing affordability issues, potentially deterring prospective homeowners and widening the housing deficit gap.
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Homeowners, burdened by escalating maintenance costs, now face the stark choice of investing in costly repairs or abandoning their properties. The financial strain of upkeep is outweighing the perceived value of homes, leading to a proliferation of abandoned properties across communities.
The impact of these price surges on the construction sector is palpable, with some developers halting ongoing projects and renegotiating contracts with clients. This disruption in construction projects threatens to exacerbate the housing deficit gap, as the cost surge renders construction projects economically unviable for many.
Dangote Cement’s group executive director in charge of strategy, portfolio development, and capital projects, Devakumar Edwin, had recently attributed the high cost of cement in Nigeria to the global rise in demand for cement as a result of the COVID-19 crisis.
“Nigeria is no exception as a combination of monetary policy changes and low returns from the capital market has resulted in a significant increase in construction activity. To ensure that we meet local demands, we had to suspend exports from our recently inaugurated export terminals, thereby foregoing dollar earnings,” he said.
Managing director of Fame Oyster & Co. Nigeria, Femi Oyedele, said since cement constituted about 50 per cent of the constituents of building materials and building elements in Nigeria, the increase would lead to an abandonment of properties.
“It has been difficult as we had to stop all works for renegotiation purposes, all building materials are gone up. The confusing part is that most of the components of cement are sourced locally; I do not know why the impact of the dollar is so huge on the increase,” he said.
In response to the escalating prices, stakeholders, including the Real Estate Developers’ Association of Nigeria (REDAN), have called for urgent discussions with cement manufacturers to mitigate the hardships faced by Nigerians. However, the outcome of these negotiations remains uncertain, with developers expressing skepticism over the affordability of negotiated prices.
The president of the association in the state, Igwe Ukaegbu, had lamented that the continuous rise in cement price was negatively affecting the production output of and income of members of the association, urging the federal government to intervene in the situation by granting more licences to industrialists to produce cement.
“The challenge we have is the cost of cement and even sand. Everything is now costly. We are not making sales as we used to; so, we are suffering. We are praying for the government to help us by bringing down the prices of cement and other materials,” he said.
Furthermore, the surge in cement prices has sparked concerns about its inflationary effects. As cement constitutes a significant portion of building materials, its price surge is anticipated to drive up overall construction costs, subsequently impacting rental values and property developments in the market.
The surge in cement prices also poses a threat to the affordability of housing for low-income earners. With cement prices soaring beyond reach, many prospective homeowners may hesitate to embark on construction projects, further exacerbating the housing crisis.
This uptick has already set off a chain reaction in the market, leading to over a 100 per cent increase in prices within a short time. As a result, some property developers have ceased their construction projects, and individuals constructing their residences are pursuing variations in their contracts.
A cement dealer in Ikeja, Lagos, Sola Ogunleye, pointed out that the increasing transport expenses and the devaluation of the naira were key factors behind the surge in prices. He highlighted the limited authority that dealers possessed in determining pricing.
By implication, in 2024, the hopes for reduced construction expenses for aspiring homeowners might turn into a distressing reality, considering the recent surge in cement prices initiated by producers.
Dr. Gbenga Omotosho, an economist, noted that there is a contagion effect rubbing on the cement industry. He said although not much of the components that constitute cement are imported, there are other costs that affect the prices of the product, including the increased cost of energy for production due to increased price of fuel to run their plants and transportation costs. He also alluded to the host of illegal levies on Nigeria’s roads from the law enforcement agencies and thugs.
He said these and other costs are low-hanging actions to take to nip the rising prices of cement in the bud.
As the nation grapples with the housing deficit estimated at 28 million units and the challenges posed by escalating cement prices, there is a pressing need for comprehensive interventions to address the root causes of the crisis. Efforts to explore alternative building materials and enhance local production capacities are crucial steps towards achieving sustainable solutions to Nigeria’s housing challenges.
