Dangote Cement, Africa’s largest producer of the building material, has cut prices of cement in its home market Nigeria in an attempt to boost cement consumption.
The price cuts to its 3X cement brand by N6 000 ($30.23) per metric tonne, translating to N300 reduction per 50kg bag, allows Dangote to still achieve strong returns, CEO Dangote Cement, Onne van der Weijde, said in a Lagos.
Meanwhile, a survey across the country revealed that distributors and retailers are beginning to implement the new price regime, resulting in gradual decline in the price of cement across the country.
A retailer in Benin City, Edo State, Sebastian Iwemgiwe, noted that the essential building which was sold at N1,850 per 50kg bag has, since last week, come down to N1,650 per bag and is likely to decline further.
The claim of price reduction was corroborated by other retailers, including Opeloyeru Eniola in Ojodu area of Lagos State, who said: Although I am still selling his old stock, I am aware that the price for the next supply has been reduced.
While analysts believe that the on-going African operation expansion must have given Dangote cement a leeway to bring down domestic price of the product, the cement giant is also reportedly hoping the lower prices will help increase export sales to neighbouring nations where it has no presence yet.
Team head, Chapel Denham, Tajudeen Ibrahim, had in reaction to the reports of price reduction by Dangote Cement said: “We expect the other cement producers such as WAPCO, UNICEM and AshakaCem in the Lafarge Africa Group and Cement Company of Northern Nigeria, to cut cement prices, being price-takers in the industry,”
“The sales volumes of the cement industry may however not rise on the back of the price cut, as the relationship between price and consumption is weak,” said Ibrahim.
According to the analyst, the drag in infrastructure developments due to government’s weakening fiscal strength and pressured consumer wallets will slow down the demand for building materials, industry watchers say.
Gross domestic product expanded 2.35 per cent on an annual basis, compared with 3.96 per cent a quarter earlier, according to data from the National Bureau of Statistics, (NBS).
“Competition has no choice but to bring down the price because Dangote is the market leader,” said Pabina Yinkere, head of research at Lagos-based Vetiva Capital Management.
The latest earnings update showed the four major players in the industry are in a growth spurt, despite the economic doldrums bedeviling consumer goods firms.
Industry players expect the rapid urbanisation to increase the demand for building materials.