Feyi Fawehinmi: Can Olusegun Aganga really stop the raging cement war?

by Feyi Fawehinmi

Where two or three Nigerian businesses are gathered, a cabal is soon formed.

In April 2012, the editor of the Financial Times, Lionel Barber, visited Nigeria and in the course of his visit he had dinner with some government officials in Abuja. According to him, one (unnamed) guest pointed out to him that ‘In Nigeria, business is the business of the state’.

The background to this gist is that something terrible has happened to our cement industry. The evil that is foreign cement has been allowed to be imported unchecked to the point where it is now threatening our nascent industry. On the patriotic side of the debate we have Dangote and Lafarge who have nothing but the greater good of Nigeria at heart as local manufacturers. It is a mere coincidence that they have conspired to give us the most expensive cement prices in the world. On the ‘enemy of progress’ side of the debate is Ibeto Cement, a company that imports bulk cement into the country to the detriment of our patriotic local manufacturers. Again, it is merely a coincidence that there is so much demand for this imported cement which is perhaps cheaper. The 2 sides to this debate are fighting like little children. It is into this playground that Mr Aganga has stepped into and decided to calm everyone down. ‘You are causing a cement glut in Nigeria and we are going to shut down our plants’ cried Dangote and Lafarge. ‘Is a lie!’ predictably retorted Ibeto.

Listen to Aliko Dangote:

Our group brought on stream 6.5 million metric tonnes per annum at Ibese in 2012. Also, in the same year, Lafarge brought on stream another 2 million metric tonnes per annum at its new plant in Ogun State.

“That is 8.5 million tonnes of new capacity. This is 8.5 million metric tonnes per annum in a market (South-west) that actually needs 3.5 million metric tonnes per annum.”

He said that in an ideal situation, Dangote Cement and Lafarge should be able to export excess capacity to Benin Republic and other neighbouring West African countries, but those countries have imposed all sorts of restrictions on cement imports from Nigeria, making it uncompetitive.

This is bad bad bad. Did Benin Republic not know that we planned to dump, sorry export our cement to them when they saw us building our cement plants? Do the Beninois not have access to Nigerian TV stations? Surely they must have seen our President going around the country commissioning factory after factory to produce cement? Did they think we were going to drink the extra 5m metric tonnes we didn’t need but produced anyway?

Lafarge also have similar complaints:

It is Ibeto Cement that is being dishonest. The company is dumping cheap cement in the market and is exceeding the import quota it is allowed by the Federal Government.
“We would have no concerns if the company was just bringing 1.5 million metric tonnes per annum. But it actually takes advantage of the loopholes in the system and brings in more than is permissible.

Ibeto Cement is doing this with the active collusion of the Nigerian Customs Service at the ports,” alleged the Lafarge official.

Why will Ibeto come and dump cement in Nigeria when the plan was for us to dump our own cement in Benin Republic? Who are the wicked Nigerians who are buying this cheap cement anyway? At this point, I will advice Mr President not to rule out any options including a ground invasion of Benin Republic. Ibeto should also be banned from everything in Nigeria. Anyone who offers Nigerians cheaper cement than what Dangote and Lafarge are selling it for is obviously a wicked person. It is not fair on a thief if everyone starts installing burglar alarms and iron gates in their houses. It makes stealing harder than it should be.

Where two or three Nigerian businesses are gathered, a cabal is soon formed. Ergo, the chairman of the Cement Manufacturers Association of Nigeria, Mr Joseph Makoju, also weighed by warning of the grave dangers of ‘unnecessary importation of cement’. If we are producing so much cement in Nigeria, why are people buying imported ones? Is it because it is cheaper? We are the ones killing ourselves in Nigeria.

You see in a rubbish free market system, if someone is making say a 30% profit margin on something and the opportunity cost of that investment is say 10% (what you can get by putting that money in a bank account to earn interest), that 20% extra profit will always attract outsiders. One fool will always say ‘well I don’t mind 15% instead of 20% so let me try my luck by reducing prices’. And so on until the profits reduce to the opportunity cost of 10% or slightly above it. We don’t want this kind of system of Nigeria where prices are just coming down and down and billionaires are sweating for the benefit of poor people to buy cheap cement. This is not good.

The correct way to do things is to allow the cement cabal come together and decide how much profit they want to make each on bag of cement taking into consideration target Forbes ranking, price of private jets etc. This profit is then added to the cost and then is announced to the consumers. God forbid a situation where cement prices will come down and Nigerians start using it for ridiculous things like completing the millions of abandoned buildings all over the country that stopped before or after it reached ‘decking’ level.

So how is this problem going to be solved? The answer is simple – Government! You see why my earlier quote was important? To protest this injustice, the patriotic cement manufacturers have gone ‘on strike’. The strategy is now yielding fruit.

According to the ThisDay report, Mr Aganga “last week reached out to the two warring parties and other stakeholders in the cement industry and invited them to a meeting in Abuja today”. This is a war and Mr Aganga has bravely entered it to call a ceasefire.

Why is it important for government to stop this war? Listen to Mr Aganga:

From being a net importer of cement, we have grown to the point that my ministry did not issue out any import permit for cement in the whole of 2012. We have also helped the country to save over N200 billion in foreign exchange that could have gone into cement importation.

More than two million jobs were created among a lot of other achievements. So I take the sector very seriously, I do meet with them regularly to make sure our objective for this industry is kept in focus,” the minister said.

Can you imagine how much armed robbery will go up by if those 2 million jobs that Mr Aganga personally counted were lost? Some idiots might make the argument that we embarked on the production of so much cement without taking into account global trends and now no one wants to buy our cement or allow us dump it on them. This is silly. What is the point of Benin Republic if we cannot sell cement to them?

You will recall that in December, the same Mr Aganga announced that sugar importation was going to be banned from this January. There is a sugar master plan in place and the plan is working. Glory be.

The end of the Konkere War is in sight. Mr Aganga, backed by the full powers of the Federal Government is going to put an end to it. What is more reassuring than hearing a government minister utter these immortal words;

   “I have heard the claims and counter-claims and I have engaged with all the stakeholders”?

According to Aganga, at the end of the entire review, the Federal Government would come up with a fresh strategic direction for the industry, which would have three major thrusts that include the enunciation of policies to help bring down the price of cement and make the commodity more affordable to Nigerians.

He said the second aspect is that he and his team are working on policies that will enhance the consumption of cement and lastly he pointed out that he is also working on policies that will open up the export market for cement produced in the country.

None of these plans can fail. No way. What you just read above is small sample of how awesomely powerful the Federal Government of Nigeria is. Not only is the government in power, it is also in charge. It can bring down prices, just because. It can also enhance the consumption of cement by Nigerians. Mr Aganga did not reveal whether this consumption will be enhanced by adding some of our new-found sugar to it but I am sure this is a pleasant surprise he is going to reveal to Nigerians soon…sweet cement to consume for all Nigerians.

But the most important thing to note here is that the awesome powers of the FGN are not confined to Nigeria. These powers can be used to open up other countries markets to the point where they are rushing our cement like Indomie. If you do not fear God, fear the Nigerian government. Please. For your own sake or else they might open up your market and sell you stuff.

If there are people out there who have been deriving some perverse pleasure from watching our patriotic manufacturers fight each other, I hate to break it to you, your entertainment is over. The Konkere Wars are coming to an end shortly.

Let us end with the quote with which we began – ‘In Nigeria, business is the business of the state’.


Feyi Fawehinmi is an accountant who writes in from London. He tweets  from @DoubleEph


Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija

One comment

  1. i wonder why we cannot suport indigenous company .what does nigerians stand to gain frm ibeto plc

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