The Chairman of BUA Cement, AbdulSamad Rabiu, has explained the reasons behind the high cost of cement in Nigeria, attributing it to the actions of dealers and broader economic challenges. Speaking at the 8th Annual General Meeting of the company in Abuja, Rabiu revealed that his company’s plan to sell cement at N3,500 per bag last year was thwarted by cement dealers who took advantage of the policy for their gain.
Rabiu disclosed that BUA Cement had sold over a million tons of cement to dealers at the reduced price of N3,500 per bag, with the expectation that the dealers would pass on the benefits to consumers. However, the dealers instead sold the cement at prices ranging between N7,000 and N8,000 per bag, significantly inflating the cost for end-users.
“So, a lot of the dealers took advantage of that policy. Rather than pass the low prices to the customers, they were selling at even double the price we sold to them. Some were selling at N7,000 and N8,000 per bag. They made a lot of money with the very high margin,” Rabiu lamented. As a result, BUA Cement had to abandon the policy to avoid subsidizing the dealers, as the company had no control over market prices.
Rabiu further explained that external factors, including the devaluation of the Naira and the removal of the fuel subsidy last year, also contributed to the unsustainability of the price reduction policy. He noted that the significant drop in the value of the Naira, coupled with increased costs due to fuel subsidy removal, made it impossible to maintain the lower prices.
“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 are subsidizing dealers,” Rabiu said. He added that the drastic increase in the exchange rate, which saw the Naira plummet from about N600 to nearly N1,800 per US Dollar, made it even more challenging to keep prices low.
Despite these challenges, Rabiu assured stakeholders that BUA Cement is working to ensure that cement prices do not escalate in line with the full percentage increase of the Naira devaluation. He highlighted that, considering the exchange rate fluctuations, cement prices today are actually lower than they could be, given the cost pressures.
Rabiu pointed out that energy costs, which are denominated in dollars, represent the largest expense for the company. “Energy is the biggest cost. And our energy today is denominated in dollars. We buy gas to power our plants mainly. And gas is priced in dollars,” he explained. He revealed that the monthly energy bill for one of BUA’s plants has soared to about N15 billion or N16 billion, up from N3 or N4 billion previously.
According to the financial report presented by BUA Cement’s Board, the company recorded a strong revenue growth of 27.4%, rising to N460 billion in 2023 from N361 billion in 2022, driven by its increasing market share. However, the company faced significant cost pressures due to the Naira’s devaluation and growing inflation, which increased production costs by 39.5% to N276 billion, up from N197.9 billion in 2022.
Despite these financial challenges, BUA Cement reported a net profit after tax of N69.5 billion and declared a N2 dividend per share. The company also recorded a net foreign exchange loss of N70 billion, with N52.5 billion attributed to finance costs.
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