Background to the cement industry
The first cement industry in Nigeria was the Nigerian Cement Company (NIGERCEM), established in Nkalagu, Ebonyi State in 1957. Prior to this time, all cement consumed in Nigeria was imported. This company, which is now part of the Eastern Bulkcem Company Ltd, was one of the earliest attempts of government to introduce the so-called Import substitution Industrialization (ISI) strategy. Nigercem was followed in 1960 by the establishment of WAPCO at Ewekoro.
Several other cement plants came into being subsequently but due to various reasons including political, economic and social problems, many of the plants either shut down or were acquired by others.
Post 1980
As demand increased with growing economic prosperity following the oil boom, there was incentive for more manufacturers to come into the cement business. Accordingly, Benue Cement Co. PLC was set up in 1980. Thereafter, there was a lull in setting up such plants as no new plant came on stream until 2006 when the Dangote Group commissioned the 5mmt Obajana Cement Plant.
The last entrant to the market is the UniCem cement plant in calabar owned jointly by Flour Mills of Nigeria, Dangote, Lafarge and Holcim.
KEY PLAYERS
The following are the operational cement plants in the country. The plants are:
1. Lafarge Cement WAPCO Nigeria PLC – Ewekoro Works
2. Lafarge Cement WAPCO Nigeria PLC – Shagamu Works
3. Ashaka Cement Nigeria PLC (Lafarge Group), Ashaka
4. Obajana Cement Company, Obajana – Dangote
5. Benue Cement Company PLC, Gboko – Dangote Group
6. Cement Company of Northern Nigeria (CCNN), Sokoto
7. United Cement Company (UNICEM), Calabar
8. Purechem Industries Limited
9. Nigerian Cement Company (NIGERCEM), Nkalagu
AVA cement is still under construction in Edo State.
LAFARGE GROUP
The 200,000mt 1960 Ewekoro plant originally owned by WAPCO was bought over by Lafarge. This plant was old and weak until its refurbishment in 2003. It currently has an installed capacity of 1.2m metric tones. The group also acquired the WAPCO Shagamu plant which was commissioned in 1978. From on original 600,000mt the Shagamu plant now has an installed capacity of 900,000 metric tones per annum.
DANGOTE GROUP
The Dangote Group owns Obajana, the largest and most modern cement plant in Nigeria. This plant has an installed capacity of 5m metric tone, capacity utilization is currently at about 90 percent. Expansion work is going on at the plant to raise its installed capacity to 10m mt.
DAMNAZ
This group took over the Cement Company of Northern Nigeria in Sokoto. It has an installed capacity of 500,000 mt.
AVA CEMENT COMPANY LIMITED
AVA Cement Company Limited was incorporated in 2006. The company in partnership with a Chinese company 17 Metallurgical Construction Corporation Limited of China (17 MCC), has embarked on Engineering, Procurement and Construction (EPC) of a new factory with capacity of 2,500mt per day. In that regard, work on the Phase 1 of the project, designed to produce 1,200mt per day was already at advance stage, with most of the civil and structural engineering works completed. The project is located along KM 16 Igarra-Auchi Road, Egbigere Village, Akoko Edo, Edo State.
EASTERN BULKCEM COMPANY LIMITED
Eastern Bulkcem Company (EBC) Limited was incorporated in 1977 and commenced cement bagging in 1981. The company acquired the Nigercem plant in Ebonyi state and is currently in the process of refurbishing and restarting the moribund plant. EBC also has bagging facility at Rumuolumeni, Port-Harcourt, Rivers State. The bagging plant has an installed of 1.5m metric tone per annum in Port-Harcourt.
BAGGING PLANTS
There are thirteen (13) bagging plants in Nigeria. These are:
1. Ibeto Cement Company
2. Dangote Terminals, Port-Harcourt – Terminals
3. Dangote Terminal, Lagos
4. Atlas Cement Company – Floating Terminal
5. Eastern Bulkcem Company Limited
6. Quacem Limited/Topcem Cement Company
7. Essettee Nigeria Limited
8. Gateway Portland Cement
9. WestCom Technologies & Energy Services
10. International Cement Company
11. Bua International Limited – Floating Terminal
12. Management Enterprises Limited
13. Flour Mills Nigeria PLC
14. BUA International Cement
15. Gateway Mining Company
Others include:
1. AVA Cement
2. Otedola Cement
3. Madewell Cement
4. Zane Cement Company
5. NICA Limited
6. Reagan Renaissance
7. Minaj Holdings
IBETO CEMENT COMPANY
The company has a bagging plant in Port-Harcourt with a capacity of 1.5m metric tones per annum. It is currently in the process of building a cement manufacturing plant in Ebonyi State under a technical partnership agreement with a Taiwanese company – Taiwan Cement Engineering Corporation (TCEC).
DANGOTE TERMINALS
Dangote Group has two bagging plants – one in Lagos and the other in Port-Harcourt. The Lagos terminal has two plants. Dangote group has a production capacity of 5m metric tones. Work is in progress to expand the Obajana plant and another project is going on at Ibeshi. The group is aiming at a combined capacity of 10m metric tones as these plants come on stream.
ATLAS CEMENT COMPANY
Atlas Cement Company is a floating terminal anchored at Onne Port. The plant has installed capacity of 500,000 metric tones per annum and bagged 485,000 metric tones in 2008. The company is principally owned by the Lafarge Group and thus handles all the cement import allotted to the Group.
EASTERN BULKCEM COMPANY LIMITED
Eastern Bulkcem Company (EBC) Limited was incorporated in 1977 and commenced cement bagging in 1981. The company has its facility on a water front at Rumuolumeni, Port-Harcourt, Rivers State. EBC has bagging plant with an installed capacity of 1.5million tones per annum in Port-Harcourt. The company bagged 900,000 metric tones of cement in 2008 at its plant in Port-Harcourt. EBC also produces cement paper sack for bagging of cement.
QUACEM NIGERIA LIMITED/TOPCEM INDUSTRIES LIMITED
These companies which were hitherto separate entities in cement industry had signed MOU with a view to pooling resources for establishing of a cement plant. The joint venture commissioned its bagging plant located in Ikot-Abasi, Akwa-Ibom State in 2008. The bagging plant has an installed capacity of 500,000 metric tones per annum. The company packaged 50,000 tones of cement in 2008. It has also acquired a quarry site in Akankpa, Cross Rivers State, where it planned to install a crushing plant to produce clinker.
ESSETTEE NIGERIA LIMITED
Essettee Nigeria Limited owns a bagging plant located in Oron, Akwa-Ibom State. The plant has not been commissioned and not operational. Under its medium term plan, the company was in the process of securing a limestone deposit, where a mini cement plant was to be sited. It was reported that the company is into partnership with Westcom Technologies in order to utilize its cement import allocation.
GATEWAY PORTLAND CEMENT LIMITED
Gateway Portland Cement located in Abeokuta, Ogun State was incorporated in 2002. The Company is currently engaged in bagging of buld cement with fully operational packaging facilities. The company has an installed capacity of 998,640 tones per annum and operated 10% capacity in 2008. The company had acquired a limestone deposit site at Oke-Oko in Ogun State and also secured a partnership with Transorga Ag International of Zurich for the development of acquired Greenfield site.
WESTCOM TECHNOLOGIES AND ENERGY SERVICES LIMITED
Westcom Technologies and Energy Services Limited was incorporated in 2003 and entered into cement business in 2007. The company is presently into terminal operation of bagging of cement. The bagging plant has an installed capacity of 900,000 tones and produce 150,000 metric tones in 2008. In its investment programme towards backward integration, the company has completed feasibility study of its cement manufacturing project and has also signed technical, production and supply agreement for the project..
INTERNATIONAL CEMENT COMPANY, LAGOS
International Cement Company was incorporated in 1992. Its mode of operation is terminal operation of bagging cement. It has an installed capacity of 1,500 metric tones per day. Machinery/equipment for its terminal bagging operation has been delvered and awaiting installation. The installed capacity of the bagging plant is 550,000 metric tones per year. The company has acquired a green field site for its investment programme towards backward integration. In that regard, it has concluded feasibility study on its green field, signed production agreement with its technical partner from China while negotiation for funding of the project is on-going. Land site preparations were in progress while the mining lease for limestone exploration has been secured.
BUA INTERNATIONAL LIMITED
The Bua Group is one of the new entrants that was issued import license in June 2008. In that regard, the company acquired a cement floating terminal for bagging imported buld cement. The Group’s cement products are being distributed from Lagos and Port-Harcourt ports due to that versatility of the floating terminal. The Bua Group has also identified areas in Kogi and Ebonyi States for citing of a cement manufacturing plant.
MANAGEMENT ENTERPRISES LIMITED
Management Enterprises Limited was incorporated in February, 1993 and entered into cement business in the same year. The company has not yet commenced operation of bagging of cement but has a complete platform of jetty for its terminal operation. It has acquired and installed a bulk bagging plant and facilities which have not been put to use since installation in 2005. The bagging plant facilities have an installed capacity of 1.2 million metric tones per annum.
DOMINANT FEATURES OF NIGERIA’S CEMENT INDUSTRY
The following are the key features of the cement industry in Nigeria:
Nigeria is now the third largest cement and clinker importer even though per capita cement consumption in the country is just 90kg.
• The market is dominated by two major groups. The Dangote Group and Lafarge remain the dominant operators and highest investors in the sector.
• The market is shared between manufacturers and bagging plants.
• Substantial expansion of capacity is going on both in the manufacturing and bagging plants segments.
• Demand is high and supply is short, leading to bridging by importation.
• Substantial foreign investment has been recorded in the sector in the past few years.
• Despite the narrowing gap, the price of cement continues to rise due to such factors as inflation, deficient infrastructure challenges and supply bottlenecks.
• Average price of cement has moved from N625.00 in 2002 to N2000.00 in 2008. It is for this reason that the Federal Government issued licenses in 2008 to some manufacturers and bagging plants to import cement.
• Of the 19.735m metric tones of licenses issued only 8.539m metric tones were imported.
• Curiously, many of the licensees were unable to exhaust their licenses due to many reasons including alleged delays in releasing the licenses, funding and such difficulties. This situation is untidy and creates room for manipulations.
• Out of the total sum of 14,728,318 metric tones of cement supplied to the market in 2008, local manufacturers accounted for 6,650,000 metric tones (or 45.2% of total market supply); while importation supplied 8,078,318 (or 54.8% of the total market supply.
Investment Environment for Cement Industry
• Key components of the 7 Point Agenda of the present administration, deliverables of the Millennium Development Goals as well as the imperatives of Vision 20:20:20 have significant implications for the cement industry in Nigeria.
• The committee studied extensively the industrial and trade policy thrusts of the Federal Government as they relate to the cement industry in Nigeria.
• Given appropriate enabling investment environment, huge investment opportunities exist and are being vigorously explored by investors.
• Between 2003 and 2008, over $2.8 billion have been invested in capacity expansion with Dangote Group investing about $2.4 billion for its Obajana Cement Plant, BCC Plant and Ibeshe Plant. See table attached.
Key Objectives of National Industrial Policy
The committee was guided by the relevant key objectives of the nation’s industrial policy:
• To place Nigeria among the ranks of most industrialized countries;
• To encourage the private sector to play pivotal role in the industrial development of the country;
• To increase industrial output and linkages for both domestic and export markets;
• To increase value addition by creating niches of competitive advantage;
• To increase capacities of entrepreneurship and technical skills in order to create more direct and indirect employment opportunities; and
• To increase competitiveness of made in Nigeria products in the local and international market.
DEMAND AND SUPPLY SITUATION
Macroeconomic Performance
High oil revenue have been at the heart of Nigeria’s economic performance over the past few decades. The economy has witnessed considerable growth, which has reflected on various indices of growth. From the macroeconomic point of view there is a direct correlation between growth of national output and cement consumption. The table below shows the macroeconomic performance of the economy during the past seven years
Nigeria’s Real Sector Performance
Nigeria has made substantial progress in her macroeconomic management efforts over the past seven years by posting a robust and fairly consistent economic performance. The Real Gross Domestic Product has grown steadily from 4.7 percent in 2001 peaking at 9.6 percent in 2003 before stabilizing at 6.2 percent in 2007 (WAMI 5:2008). These impressive growth figures have been achieved through a combination of factors. In particular, growing corporate profits, especially in the financial and telecommunication sectors, and rising demand for services has provided great impetus for growth.
The interesting feature of the growth recorded by the Nigerian economy over the review period is that it is broad-based and widespread. The three major sectors of the economy – Agriculture, Industry and Services grew by 7.7 percent, 9.9 percent and 14.2 percent, respectively. A positive aspect of the growth achievement is that the shares of the key sector of the economy, especially agriculture, also grew over time. Agriculture increased its share of the GDP from 32 percent in 2005 to 33 percent in 2007. Services also raised its from 11.1 percent to14.3 percent over the same period (WAMI 5: 2008). Widespread growth, as against one concentrated in a few sectors, has very important positive implications for employment, incomes and prices. This is more so for agriculture, which employs a majority of the people. The impressive growth in the latter years of the review period was driven by growing corporate profitability and investments, especially in the financial and telecommunication sectors, which have become dominant sectors both in terms of value creation and employment generation.
The External Sector of Nigeria
A number of structural reform measures implemented in Nigeria during the recent past have impacted positively on the external sector. The foreign exchange market became more efficient with the introduction of the Wholesale Dutch Auction. The steady implementation of the NEEDS and various confidence building measures embarked upon by the government have helped in restoring external confidence in the economy. The country witnessed rapid growth in its foreign reserves, which rose from USD42.3billion in 2006 to USD51.3billion in 2007. It is noteworthy however that the higher reserves accumulated in 2007 was not enough to pay for fewer months of imports (13.4) than the lower reserves of 2006, which covered 14.5 months of imports. This is a reflection of the growing import propensity of the country. Much of the growth in Nigeria’s foreign reserves at this time was due to rising oil prices. The result has been a strengthening of the local currency against all major international currencies. The Naira traded at N117 per USD at the end of 2007, compared to N128 to the USD in 2006, reflecting an appreciation of 7.7 percent (WAMI 5:2008).
Buoyed by developments in the international price of oil, the overall balance of payments, which was USD221.0 million in 2001 jumped to USD 9035.1 million in 2007. Nigeria’s efforts to reduce its foreign debt stock and the attendant huge debt service obligations yielded results in 2006, with the epochal exit of her Paris Club debt on April 21,2006 (WAMI 4:2007). As a result, Nigeria’s external debt stock dropped from USD 20,478.0 million in 2005 to USD 3,628.6 million in 2006. These developments culminated in positive outcomes in the country’s balance of payments position, which had been positive for the past four consecutive years.
DEMAND FOR CEMENT
It is a fairly challenging task to estimate demand for cement. The best practice approach which we adopted in this study is to estimate demand through actual consumption. Accordingly, we find that cement consumption in Nigeria has grown significantly.
To start with, Nigeria is now the third largest importer of clinker in the world, just after Russia. The United States remains the leading importer of clinker in the world. This is an indication of the demand for cement in the country. Table 2 below shows Clinker positions of leading importer in the world.
