Nigerian cement war affecting prices

Nigerian cement war affecting prices
24 July 2006

A fight among the cement industry’s major stakeholders over bulk cement import allocations has forced government to cancel the importation of some 2.5Mt of cement, and may have resulted in local prices soaring to an unprecedented N1500 (US$11.74) per 50k bag around Lagos and Abuja and over N1700 (US$13.30) in other parts of the country – local reporters claim.

With local production, and import supplement totaling 6,940,000t, which is apparently far short of national demand approaching 10Mt, it is believed that the cement price will further rise except urgent measures are taken to boost supply into the market to force down the price.

This debate which arose from the high-wire politics of bulk cement imports, of which permission and approval of allocation now rests on President Olusegun Obasanjo, has led to the cancellations of import allocations which were earlier granted some companies to import around 2.5Mt of bulk cement.

Meanwhile, cancelled along with the 2.5Mt was Ibeto Cement’s share of 800,000t, which had reportedly been ordered for and as result of which some eight ships conveying the consignments had arrived the shore and were being discharged when the hammer fell on Ibeto. This development, industry watchers said had led to the rising price of cement in the markets.

These allocations were supposedly granted to local investors with facilities to bag the products locally, to bridge the gap between local production and demand, bring down the sky-rocketing price and the bulk cements are to be bagged locally, since government has placed a total ban on importation of bagged cement so as to encourage local productions.

Sources revealed that the cancellation of the import allocations was not unconnected with a petition made to President Obasanjo by a rival local company, presumably Dangote or Lafarge, alleging that Ibeto group was abusing the government policy by not expressing the desire to build a cement factory as tasked the operators in the industry.

The president, whom stakeholders say acted in the larger interest of Nigeria and the Nigerian economy, revoked the allocation on the conviction that there was not much on the ground to justify the Ibeto group was not taking government for a ride on its proposed local manufacturing facility.

In the petition dated September 19, 2005, and signed by the company’s Regional President for Africa, the petitioner alleged that Ibeto has been circumventing the policy of allocation as regards the bulk cement import by obtaining permission to import unlimited quantity of cement for 10 years.

The petitioner claimed to have made huge investment in the cement industry running into millions of dollars in its local plants further alleged that Ibeto has not shown proof of investment in local cement manufacturing or have any factory under construction as being bandied by its management.

On the strength of these allegations, President Obasanjo was said to have raised an inter-ministerial committee to move round the country to access and ascertain the claims of the investors on the basis of which the import allocations were granted in the first place.

Curiously, in doing this, the President further descended on the Ibeto group and through the Customs Area 1 in Port-Harcourt last November 18, ordered its’ N20 billion bagging plant in Port Harcourt shut in addition to the stoppage of further off-loading of the consignments, while forcing the remaining vessels yet to be discharged to be stranded and accumulate demurrage.

Sources informed that, the Chairman of Ibeto, Chief C Ibeto made appeals through the then Chief of Staff to the President, to allow the eight ships that had arrived to be discharged to save his company from mounting demurrage which then had accumulated to the tune of US$2.6m (about N322.4 million).

Interestingly, President Obasanjo via a letter dated December 13, 2005, insisted that on no account would Ibeto be allowed to import cement into Nigeria because the company deceived him that it had eight ships that had berthed while in actual fact reliable sources told him, only five were on queue waiting or are being expected.

Jolted by the claims of Mr. President, Chief Ibeto told reporters that he replied by giving the names, number, date and time of arrival of the eight vessels and the three that were even on the way on the high sea, which eventually arrived but had to be turned back. Besides, the Ibeto chairman requested the President to institute an independent panel of enquiry to investigate or mandate the EFCC to do the investigation to ascertain the veracity or otherwise of the situation.

He described the allegations against his company as mere fallacies, arguing that his company had only imported 527,205t  of bulk cement which is less than the 800,000t allocation given it. He wondered how this could be termed to mean unlimited import allocation as claimed in the petition.

Furthermore, he explained that his company had gone into a partnership with Ebonyi government to build cement factory and that work had already begun. According to him, the state government even wrote President Obasanjo with proofs of this to dispel the insinuation that “we are not ready to embark on cement factory construction so as to produce locally.”

Chief Ibeto who restated his belief in the Nigerian economy and reform policies of the present government, cited the report of the inter-ministerial committee headed by the Minister of Industry, Ambassador Fidelis Tapgun that was raised to assess the investors in the industry as having confirmed that Ibeto has the most modern bagging factory. “They also visited our green field cement project site in Ebonyi last March and confirmed our initial US$16m letter of credit, all of which demonstrated our irrevocable commitment to local manufacture of cement.

Ibeto urged the President to consider the job of over 400 Nigerians in the Niger Delta area of Port-Harcourt whose means of livelihood has been threatened since the company’s trouble started.

“With the greatest sense of responsibility, I make this solemn promise that if Mr. President will revisit this issue of the stalled cement shipments and resolve it in a manner that will enable me to avoid utter ruin, I shall employ all that is salvageable from my cement concerns, to focus attention on the work going on towards the actualisation of my planned cement project in Ebonyi, to ensure that the factory is completed in record time”, he pledged. (Abstracted from Sun News Nigeria).

Published under Cement News