Dreams of lower construction costs by prospective homeowners might have become a nightmare, going by fresh increase in the price of cement products by manufacturers.
The development has already triggered a ripple effect in the open market, with prices going up by about 44 per cent in few days.
Investigations revealed that operators under the Cement Manufacturers Association of Nigeria (CMAN) have raised prices of brands by N600 per bag in factories, including additional N100 cost for haulage. This has increased retail prices from N1,600 to N2,300 depending on location. In some areas, prices have shot up to N2,350 or higher.
Members of the CMAN include Dangote Cement Plc, which is emerging as a market leader and has factories in Gboko, Benue State; Obajana, Kogi State; and Ibeshe, Ogun State.
Others are: Lafarge Cement WAPCO Plc; Cement Company of Northern Nigeria Plc; Ashakacem Plc and Cross-River based United Cement Company.
Vice President, Nigerian Institute of Building, Kunle Awobodu, told The Guardian: “This is going to create crisis in the construction sector and bad blood between clients and contractors, as developers will make claims for fluctuations.
“Invariably, it will lead to upward reviews of contract sums. New and on-going projects will be delayed until there is agreement on the contract variations. It can also expedite construction activities because of the anticipation of further increase.”
According to an official in one of the cement manufacturing companies, the hike is not unconnected to difficult operating environment.
Many manufacturers have had to contend with dwindling capacity utilisation of their plants, due to disruptions in gas supply, while the high cost of Automotive Gasoline Oil (AGO), known as diesel, which used to sell between N110 to N130 per litre (now N200 per litre), has made alternative power supply unbearable.
The power sector in the second quarter had also been at the mercy of militants who blew up gas facilities and jeopardised supply to industrial layouts from the Transmission Company of Nigeria, undermining Federal Government’s plan to add another 6000mw.
Furthermore, a review of unaudited financial reports of many of the firms for the first half of 2016 revealed a struggle between balancing rising input cost pressures and passing the inflationary pressures on already constrained consumers by raising prices of some products during the period.
Some of the input cost pressures being encountered by many manufacturers border on foreign exchange losses on dollar loans, inability to access foreign exchange, high cost of production, as well as poor electricity supply and tariff hike.
Others are prolonged gas supply shortages, which forced companies to rely on more expensive backup, monetary policies, and constrained consumer purchasing power.
According to the reports filed with the Nigerian Stock Exchange (NSE), Dangote Cement Plc’s profit after tax for the period under review stands at N106.3 billion, representing a decline of three per cent from N123.1billion declared a year earlier.
The company attributed the loss to foreign exchange constraints in the country, which prompted it to reconsider the pace of its expansion. It now believes a five-year building programme is more appropriate.
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