Victor EzejaA Cardinal Stone analysis has predicted that cement prices in Nigeria may likely remain on the high side in 2024.
The report titled ‘Nigeria cement rebounding from a tumultuous year’ attributed it to the government’s renewed emphasis on infrastructure and building projects. At the inception of the current administration, the Federal Government had through the Ministry of Works led by Engr Dave Umahi, insisted on adopting concrete for the construction of roads across the country instead of asphalt both for durability and cost.
According to the Cardinal Stone report, the poorly implemented naira redesign in 2023 which caused cash scarcity, currency devaluation, and severe rains in the third quarter, negatively impacted the country’s cement business.
It however, noted that demand is anticipated to be boosted and the industry will likely see a revival with increased budget allocations to essential sectors totaling N1.32 trillion to infrastructure, accounting for 5 per cent of the overall 2024 budget and other ambitious development plans such as the Infrastructure Support Fund (ISF) by the presidency among others.
The report further noted that challenges like high operational costs, foreign exchange volatility, and surging inflation would also contribute to sustaining high cement prices in 2024.
The report noted that the chances of having a price war between the competitors as a result of BUA Cement’s reduction of price is slim because the players battle to hedge against operating costs and protect their profit margins.
BUA, one of the major Cement producers in the country had in October 2023, slashed its price per bag to N3,500 against the N5,000, sold by others.
READ ALSO: Why We Reduced Cement Price To ₦3,500 – BUA
“Barring a potential price war between players in response to BUACEMENT’s ex-factory price slash, we maintain that average cement prices would remain elevated in Q4’23E and FY’24E as players aim to protect their margins from rising operating costs occasioned by still-high inflationary pressures and strong volatility in the foreign exchange,” the report emphasised.
The report also hinted at a possible reduction in operational costs if there is increased adoption of natural gas, which seems to be relatively cheaper, in powering production plants and distribution vehicles.
“We expect to see some of the current distribution cost pressure ease as players increase the adoption of the relatively cheaper natural gas to AGO, especially for distribution.”
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
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