Abdul Samad Rabiu, the chairman of BUA Cement, believes the price of cement should be around N10,000 per bag due to the falling value of the naira.
He mentioned this during BUA Cement’s 8th annual general meeting in Abuja on Thursday.
Rabiu explained:
“With the current exchange rate, cement is actually cheaper today than it was last year. If the dollar rate goes up, so do costs. This means cement could be N10,000 per bag.”
Currently, cement costs around N6,000 per bag, which is lower than what it could be if the naira’s full devaluation was accounted for in the price.
Dealers and Economy Affect Cement Prices
Rabiu said that BUA Cement tried to lower the price of cement from N4,500 to N3,500 per bag last year to help Nigerians.
But cement dealers sold it for much higher prices, from N7,000 to N8,000 per bag, making big profits and not helping customers.
He also said that the devaluation of the naira and the removal of the petrol subsidy made it too costly to keep the price low.
BUA Cement had already sold over a million tons of cement at the lower price before they realized dealers were not passing these savings to customers.
With the exchange rate jumping from around N600 to about N1,800 to the US dollar, it became hard to keep the price low.
Rabiu said:
“The dealers took advantage of us. Instead of selling at lower prices, they sold at double the price. Some even sold for N7,000 or N8,000 per bag. We sold more than a million tons at N3,500 before we noticed what they were doing.”
“When the naira’s value dropped and fuel subsidies were removed, we couldn’t continue our price policy. Dealers refused to sell at lower prices, so we couldn’t support them. When the exchange rate went from about N600 to N1,800 per US dollar, it became even harder to keep the prices low.”
BUA Still Tries to Keep Prices Down
Even with these problems, Rabiu said BUA Cement is trying to keep the price of cement from reaching N10,000 per bag.
“The cement price has only increased by 50% from N4,000 to about N6,000,” Rabiu noted. BUA Cement worked hard to keep the prices from going higher.
“Energy is our biggest cost, and it is priced in dollars,” Rabiu pointed out. Energy costs between N15 to N16 billion monthly, which is more than 60% of the company’s expenses.
To cut these costs, BUA Cement is building a small LNG plant to power its machines.
In 2023, the company’s revenue grew by 27.4%, reaching N460 billion, up from N361 billion in 2022. They used more of their production capacity, improving it from 59.8% in 2022 to 61.2% in 2023, which means they sold more cement and increased their market share.