Federal Government Mediates in Dangote, Ibeto Cement War

Insideafrik
NEWS, NIGERIA

The Federal Ministry of Trade and Investment has stepped in to mediate in the battle between Dangote Cement Plc and Lafarge Plc, on the one hand, and Ibeto Cement Company Limited on the other, over the control of the nation’s cement market, THISDAY investigations have revealed.

For the past few weeks, local cement manufacturers led by Dangote Cement and French multinational Lafarge, and an importer of bulk cement, Ibeto Cement, have been at daggers drawn.

Dangote and Lafarge have accused Ibeto Cement of causing a crippling cement glut, which has led to the closure of the Gboko plant run by Dangote Cement and might force cement producers to lay off workers.

But Ibeto Cement has vehemently dismissed the claim, accusing them of being economical with the truth and insisted that the company’s five per cent share of the market could not have induced a glut.

It maintained that a glut would have resulted in a fall in the price of cement, which has not happened, and accused Dangote Cement of deploying a deceptive strategy to chase Ibeto Cement out of the cement market in a bid to strengthen its stranglehold on the market in all the regions of the country.
However, THISDAY gathered that the Minister of Trade and Investment, Mr. Olusegun Aganga, last week reached out to the two warring parties and other stakeholders in the cement industry and invited them to a meeting in Abuja today.

The objective of the minister is to mend fences between producers and importer(s) in order to protect the significant progress so far made in the cement industry through the Federal Government’s backward integration policy.

THISDAY gathered that as the battle between the two parties grew messier, Aganga reached out to both parties to encourage them to put a lid on the media warfare and join him in a meeting today to resolve their differences.

Speaking to THISDAY on the issue, Aganga said the meeting today is part of the regular consultations he holds with stakeholders in the sub-sector he described as a “key industry” in the economy.

“We meet and talk regularly, it is a growing sector and we are proud of what we have done in the sector. From around two million metric tonnes per annum in local cement production capacity, we have grown it to over 20 million metric tonnes per annum between seven and 10 years.

“From being a net importer of cement, we have grown to the point that my ministry did not issue out any import permit for cement in the whole of 2012. We have also helped the country to save over N200 billion in foreign exchange that could have gone into cement importation.

“More than two million jobs were created among a lot of other achievements. So I take the sector very seriously, I do meet with them regularly to make sure our objective for this industry is kept in focus,” the minister said.

Addressing the contention between Dangote Cement and Ibeto Cement, he noted that he had seen the varied publications of claims and counter-claims in the media and as the minister in charge of the sector he had since acted to bring the issue under control.

“I have heard the claims and counter-claims and I have engaged with all the stakeholders. My team is carrying out an independent assessment of the entire industry, which started just before the holiday season. We already have an interim report, which will be part of our discussions at the meeting,” he said.

According to Aganga, at the end of the entire review, the Federal Government would come up with a fresh strategic direction for the industry, which would have three major thrusts that include the enunciation of policies to help bring down the price of cement and make the commodity more affordable to Nigerians.

He said the second aspect is that he and his team are working on policies that will enhance the consumption of cement and lastly he pointed out that he is also working on policies that will open up the export market for cement produced in the country.
Also commenting on the meeting, a source close to Dangote Group said it was just a stakeholders’ meeting over which participants do not have much information until the meeting actually kicks off.

When contacted, the President of Dangote Group and Chairman of Dangote Cement Plc, Alhaji Aliko Dangote, also confirmed that he was aware of the meeting but had not been informed what would be on the agenda.

He, however maintained that the cement glut is real because of the expansion projects embarked upon by manufacturers in recent years.

Pointing to the South-west market as one example, he said: “Our group brought on stream 6.5 million metric tonnes per annum at Ibese in 2012. Also, in the same year, Lafarge brought on stream another 2 million metric tonnes per annum at its new plant in Ogun State.

“That is 8.5 million tonnes of new capacity. This is 8.5 million metric tonnes per annum in a market (South-west) that actually needs 3.5 million metric tonnes per annum.”

He said that in an ideal situation, Dangote Cement and Lafarge should be able to export excess capacity to Benin Republic and other neighbouring West African countries, but those countries have imposed all sorts of restrictions on cement imports from Nigeria, making it uncompetitive.

“Our government is in talks with the Minister of Trade in Benin Republic over this issue because when they were exporting cement into Nigeria, we did not impose similar restrictions because of the ECOWAS treaty on trade. So we hope that this can be resolved quickly,” he explained.

Dangote also provided insight on costs in the industry, explaining, “Our costs are fixed, irrespective of how much we produce. We incur the same cost to produce 1,000 bags of cement or 1 million bags. So even if we had to export to our neighbour, we would still have to discount our cement due to the high fixed costs incurred in the course of production in Nigeria.”

On the claim made by Ibeto Cement Company that it controls less than 5 per cent of the market in the South-east and should not pose a threat to local manufacturers in the region, Dangote said the nature of cement importation is such that the product is dumped in the country.

“Cement export is like a dumping process. Imported clinker is actually cement without 3.5 per cent gypsum, so it is much cheaper than cement manufactured locally. This means that by the time an importer is dumping cheap clinkers in the country, he makes it impossible for local producers who have invested heavily in Nigeria to compete,” he added.

Collaborating Dangote’s position, a source at Lafarge informed THISDAY that contrary to claims made by Ibeto Cement that it imports just 1.5 million metric tonnes per annum, accounting for 5 per cent of the cement market, Ibeto actually brings in more that 1.5 million metric tonnes annually.

“It is Ibeto Cement that is being dishonest. The company is dumping cheap cement in the market and is exceeding the import quota it is allowed by the Federal Government.
“We would have no concerns if the company was just bringing 1.5 million metric tonnes per annum. But it actually takes advantage of the loopholes in the system and brings in more than is permissible.

“Ibeto Cement is doing this with the active collusion of the Nigerian Customs Service at the ports,” alleged the Lafarge official.

However, a source at the Ibeto Group, who also confirmed that a meeting had been summoned by the Ministry of Trade and Investment, stated that it was upon receipt of the invitation that the company decided to suspended its campaign for justice in the court of public opinion.

The Ibeto source said the company was a law abiding one that would not do anything to hurt the nation’s economy, but stressed that it would not seat idly by and watch a Nigerian take away their right to engage in the lawful business of their choice in a free economy that is supposed to be open to anyone and everyone - both indigenes and foreigners.

Meanwhile, the Cement Manufacturers Association of Nigeria (CMAN) has warned that Nigeria risks losing considerable investment as a result of the unnecessary importation of cement.

The Chairman of CMAN and Consultant to Dangote Cement Plc, Mr. Joseph Makoju, was quoted as saying: “Energy cost accounts for over 35 per cent of production cost in Nigeria, whereas it is 10 per cent in China.

“In Nigeria, the price of LPFO jumped from N25 per litre to N107.76 per litre as at November 2012, an increase of 331 per cent. Haulage is another factor that is out of the control of manufacturers.

“Haulage costs alone accounts for between 20 and 25 per cent of the open market price of cement. All bulk products are affected by this factor due to the deplorable state of Nigerian roads.”