After many years of waiting, Dangote finally knocks down the price of cement. The first and potentially a game changing salvo was fired last night in a new cement price war, when Dangote Cement Group crashed its price for the 50kg bag to just N1,000.
Industry watchers say this should bring relief to builders and force the hand of the competition similarly downwards. Devakumar Edwin, Dangote Cement’s group managing director said yesterday, that the company has pegged its 32.5 cement grade at N1,000 per 50 kg bag, while the higher 42.5 grade is to sell for N1,150 per bag. Cement prices were last in that range around 2005.
The new prices, exclusive of the Value Added Tax (VAT), represent a drop of about 40 percent on the prevailing market price of the product which currently goes for about N1,700 irrespective of the grade, across the country. Edwin said the price slash underscores the company’s commitment to support the development of infrastructure around Nigeria and boost ongoing efforts by the federal and state governments to reduce the near 20 million housing deficit in Africa’s largest economy. Industry watchers say the price slash is enabled by economies of scale, arising from increased capacity, and add that it should see demand and the margins of the manufacturers marking up.
“We recognize the need for a dramatic increase in the response to the huge infrastructure and housing deficit in the country, and one of the ways of addressing the issue, is bringing the price of building materials down to much more affordable levels, especially cement which is within our own control,” Edwin said. Since the commencement of the implementation of the backward integration policy for cement in the country over 12 years ago, the local production capacity of the product has risen from less than two million metric tonnes per annum to about 38 million metric tonnes per annum today.
During this period, over $20 billion has been directly and indirectly injected into the Nigerian cement industry, with Dangote Cement Plc accounting for 60 per cent of that spends. Edwin further stated that Dangote Cement would continue to ensure alignment of its corporate social responsibility with its strategic business initiatives, as well as evaluate its pricing regime in Nigeria’s best interest.
Meanwhile, the timing of the initiative has confounded industry watchers, who observe that the cement market is entering the high demand phase as the rainy season is tapering and the dry season which provides the opportunity for increased construction and building is setting in. Recently, in further compliance with the ongoing Standards Organization of Nigeria (SON) directive and regulation on the various grades of cement and their prescribed uses, Dangote cement launched its brand of the premium 32.5 cement grade, which has been restricted to plastering use only.
The company said the move was to develop a full bouquet of cement types to meet the varying needs of consumers for the different grades of cement. Dangote now produces the 42.5 cement grade for column casting, block making, decking and other general purpose construction work which require high strength, while also producing the 32.5 grade for rendering or plastering.
The company produces on demand the 52.5 grade for specialized construction of high strength structures such as bridges, flyovers, and sky scrappers, among others. The 32.5 grade of cement which has the lowest strength among the cement grades, was priced lower than the others, selling for N150 lower than the price of the higher strength 42.5, a price cut that is part of the announced price regime.
Rashidi Adebowale, the National President of the Block Moulders Association of Nigeria, said he was pleased with the development, especially what the price reduction holds for his members in Nigeria. Also, Okunola Abegunde, the Lagos State Chairman of the Block Moulders Association, said he had all along been looking forward to a time like this, when the price of cement would crash and allow the low income group to become house owners. Kola Ojewuyi, chairman, Coalition Against Building Collapse, said that the downward review of prices has confounded the critics of Dangote Cement, who had earlier condemned the campaign embarked upon by the company on the adoption of the 42.5 grade as a ploy to increase the price of the commodity. Bruno Niyi, president of the Nigerian Institute of Architects, hailed the decision by Dangote Cement Plc on the price reduction and urged the management of the company to sustain the new price regime and ensure it is not hijacked by the profiteers.
