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Abdul Samad Rabiu, chairman of BUA Cement, has disclosed that his company’s plan to reduce the price of cement from N4,500 to N3,500 per bag last year was thwarted by cement dealers and economic factors.
Speaking on Thursday at BUA Cement’s 8th annual general meeting in Abuja, Rabiu highlighted that despite the company’s efforts, the intended price cut did not reach consumers.
Rabiu explained that on September 16, 2023, BUA Cement announced a price reduction to support the federal government’s initiative to alleviate the suffering of Nigerians.
The company sold over a million tons of cement to dealers at the reduced price of N3,500 per bag, expecting the savings to be transferred to end-users.
However, dealers took advantage of this policy, selling cement for prices ranging between N7,000 and N8,000 per bag, thereby making substantial profits from the high margins.
BUA Cement had no control over market prices, allowing dealers to set their ratesindependently.
“The dealers, instead of passing the low prices to the customers, were selling at even double the price we sold to them,” Rabiu said. “Some were selling at N7,000 and N8,000 per bag. They made a lot of money with a very high margin. I think we had sold more than a million tons at N3,500 before we realised what the dealers were doing.”
Rabiu also pointed out that external economic factors such as the naira’s devaluation and the removal of fuel subsidies further complicated the company’s ability to sustain the price reduction policy.
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He noted that when the exchange rate shifted from around N600 to nearly N1,800 to the US dollar, the cost of maintaining the reduced cement price became untenable.
“We wanted that price to stay at that level, but dealers refused. So, we could not sustain that simply because we did not want to be in a situation where we were subsidising dealers,” Rabiu explained.
“I’m referring to the point when the foreign exchange rate moved from about N600 to maybe N1,800 to the US dollar. So, it became even more challenging for us to sustain that price policy.”
Despite these hurdles, Rabiu stated that BUA Cement still subsidised the product’s price to prevent drastic increases in line with the naira’s devaluation. He emphasized that, relative to the exchange rate fluctuations, cement prices have been kept in check.
“If you see the exchange rate then, and the exchange rate today, you will see that cement is cheaper today than what it was last year, the reason being that if the dollar was up, the costs go up by the same margin and the price of cement should be, maybe, N10,000 per bag,” Rabiu noted. “The price of cement, if you take the N4,000 that it was at the beginning of last year, and today’s N6,000, it’s only a 50 per cent increase.”
Rabiu also highlighted the impact of dollar-denominated costs, particularly in energy, on cement pricing. He noted that energy remains one of the largest expenses for the company, with gas purchases priced in dollars to power its plants.
“So, we directly pushed to ensure that the price of cement is not getting higher than what it is today,” he added. “But then again, you have areas where everything is dollar-dominated. Energy is the biggest cost. And our energy today is denominated in dollars.”
BUA Cement remains committed to finding solutions to stabilize cement prices and ensure that external economic factors do not overly burden consumers.
English (US) ·