This week Nigeria has caught attention with announcements of new cement capacity. Not only has Dangote Cement cut the tape on its US$1bn cement plant near Okpella in Edo State, but there has also been an announcement that new entrant Madugu Cement will establish a 5Mta greenfield cement plant in Gombe State. While the country is building its cement capacity at an astonishing rate, cement demand is still outpacing output and the extra capacity is not yet being reflected in lower cement prices. So, Madugu Cement may not be the last new entrant. 

The trio of existing Nigerian cement producers – Dangote Cement, BUA Cement and Lafarge Cement Africa (Holcim group) – account for all the domestic cement production. Dangote Cement has a 60.6 per cent domestic market share, while Lafarge Africa and BUA Cement account for 21.8 and 17.6 per cent, respectively.

Dangote Cement leads the market and currently has an installed domestic cement capacity of 32.25Mta, which is being boosted by the 6Mta expansion of the Okpella plant in Edo State. This project is being carried out in two 3Mta phases. Sinoma International Engineering Co Ltd is building the plant while Julius Berger carried out the construction of civil, building and infrastructure works at the site. The new plant is equipped with a 97m high preheater tower and is currently capable of 6000tpd of cement production.  

The industry leader is also planning to add a further 3Mta to the largest plant in Africa at Obajana. When both projects at Edo and Obajana are completed, Dangote’s domestic capacity will amount to 41.25Mta.

BUA Cement is similarly looking to expand its production base with expansion projects at Kalambania and Obu as well as a 3Mta greenfield plant at Guyuk. Still, the combined output of the established cement producers is not currently meeting rising cement demand.

Rising cement demand and prices
Cement demand is being driven by private investors, including house builders, rather than government projects, according to Michel Puchercos, Dangote Cement CEO. The housing deficit in Nigeria is vast at approximately 17m units, according to government reports. Cement demand is also being propped up by pent-up demand from previous years, as well as anticipation of a devaluation in the naira currency, which has encouraged some investors to move funds into real estate. This situation, along with barriers from African Continental Free Trade Area (AfCFTA) agreement, led Dangote Cement to halt the export of clinker for a period this year, as Mr Puchercos admitted that it would not be well perceived for the company to be exporting at a time of such strong domestic demand.

Dangote Cement is not the only cement producer to be found a little caught out by the unprecedented cement demand that has put pressure on prices. Dangote responded by increasing its ex-factory prices in April 2021, while BUA Cement reassured customers the same month that it would not look to raise its prices. However, BUA Cement has since succumbed to market pressures and has followed Dangote's price moves recently increasing its cement prices by NGN200 (US$0.48) to NGN4000 (US$9.72), according to Premium Times.

Alhaji Abdul-Samad Rabiu, BUA Cement's chairman, said: "The high price of cement is of great concern for me; the price is actually high. We are 210m or 220m people, 30Mt of cement per annum is actually low for us. No one can really control the price because it depends on demand and supply. We are trying hard to ensure the price is not as high as it is now."

New entrants 
Domestic cement producers are suggesting there is no quick fix to the cement demand situation. Even though the arrival of new entrants would mean increased competition, this is now seen as the best way to meet the market requirement. Alhaji Abdul-Samad Rabiu stated that only with additional companies can Nigeria expect to see cement prices come down. Moreover, Mr Rabiu urged the federal government to licence more cement manufacturers with a view to meeting local needs. 

Stepping into such a closely fought-over market with three dominant players has not deterred Madugu Cement, which announced its new integrated cement plant, to be located in Kembu and Kwali districts of Akko and Yalmatu Deba. The project will add a further 5Mta to the country's cement capacity and will be conducted in two phases with 2.5Mta being added in each project phase.

The Governor of Gombe, Muhammadu Unuwa Yahaya, recognised how important it is for the northern area of Nigeria to attract new investment of this kind. "Your coming [Sinoma International] here is very apt and we welcome you most profoundly because we benefited from the existence of the one and only cement company in the sub-region, in fact in the whole of the north we have only four cement plants, those of Obajana, Sokoto, then Gboko and that of Ashaka. So, anyone added to the already existing ones will only improve on our economic activities and improve on our infrastructure to the people of the sub-region."

Further capex projects from new entrants previously announced include Chicason Group, which intends to build a 1.5Mta cement plant in Sagamu Chicasun, and Southport Cement, which plans a 1.68Mta plant in Itori. Long-time importer IBETO Cement is also building two greenfield units in Effium and Enugu and is building a new line at Nkalagu 2, Ebonyi state.

ICR’s December 2021 issue will feature an exclusive report from EFG-Hermes on the Nigerian cement market.

Published under Cement News