The recent surge in production costs for cement in Nigeria has soared by 121%, driven by Naira depreciation and high inflation, leaving little hope for a reduction in cement prices. This dramatic increase in production expenses has also contributed to a 4.1% decline in manufacturers’ profits.
The high production costs are compounded by a rise in smuggling activities. Cement is being illicitly exported to neighboring countries where prices are significantly higher. For instance, in Chad and Cameroon, the price for a 50kg bag of cement ranges between $120 and $150. At the current exchange rate of N1,600 per dollar, this translates to approximately N240,000 to N270,200 per bag. This is substantially more than the local price of about N8,000 per bag in Nigeria.
Kabiru Rabiu, Group Executive Director of BUA Cement, confirmed that illegal smuggling to countries like Cameroon and Chad is prevalent. He noted that the cement smuggled across the border often sells for $150 to $270, which is much higher than the local price. This situation has led to a significant portion of Nigerian cement being diverted to these markets, particularly through distributors in the North East and Maiduguri, who seek the substantial profit margins offered.
An analysis of the financial performance of Nigeria’s top three cement manufacturers—Dangote Cement Plc, Lafarge Africa, and BUA Cement Plc—revealed that while their combined revenue increased by 84.5% to N1.116 trillion in the first quarter of 2024 (Q1’24) from N604.9 billion in Q1’23, this revenue growth was overshadowed by the 121% rise in production costs. The production costs surged to N586.6 billion in Q1’24, up from N264.9 billion in the same period the previous year.
