BUA blames high cement prices on middlemen | Prestige Real Estate News  

The Chairman of BUA Cement, Abdul Samad Rabiu, has attributed the high cost of cement to the exploitation of consumers by middlemen within the supply chain.

Rabiu noted that the activities of those intermediaries undermined his company’s policy to maintain a N3,500 per bag price in 2023.

He made this disclosure at the 8th Annual General Meeting of the company recently in Abuja.

According to Rabiu, while BUA Cement sold over a million tonnes of cement to dealers at N3,500 per bag, intending that the benefits would be passed on to end-users, the dealers sold the cement to consumers at prices as high as N7,000 to N8,000 per bag.

In a bid to ensure housing affordability in Nigeria and address the country’s housing deficit, the government has implemented several measures, including stakeholder engagement.

However, many of those interventions seem out of reach for the average citizen, with the high unit cost of houses often blamed on the rising cost of inputs.

The International Human Rights Commission reported last year that more than 28 million Nigerians lack access to decent and affordable housing.

In May 2023, the average price of cement was N4,300 per bag, rising to between N7,500 and N8,000 per bag in May this year, depending on the brand, representing a 74.42 per cent to 86.05 per cent increase.

The recent surge in housing costs has sparked concerns among experts that it may force more Nigerians to settle for subpar living conditions.

With rents having doubled on average over the past four years in major cities, property owners with unfinished buildings may be tempted to occupy them without essential amenities to avoid the escalating rental fees, further exacerbating the issue of inadequate housing.

Rabiu explained that BUA Cement had to discontinue its low-price policy as it was not intended to subsidise dealers.

He noted that the company could not control the prices in the open market, where dealers were making substantial profits from the high margins.

He further added that the devaluation of the naira last year and the removal of the fuel subsidy also contributed to the unsustainability of the policy.

“We were selling cement at N3,500 with the expectation that dealers and retailers would pass the benefits of the low price to end-user customers, but some were selling at N7,000 and N8,000 per bag, making a lot of money from the very high margin. I think we sold more than a million tons at N3,500 before we realised what the dealers were doing.

“Because of the issues Nigeria faced at the time, such as the devaluation of the naira and the removal of the fuel subsidy, we could not continue that policy. We wanted the price to stay at that level, but dealers refused. So, we could not sustain it because we did not want to be in a situation where we were subsidising dealers,” he said.

A quantity surveyor, Adekunle Ebenezer at Anchor University, Lagos, noted that building materials account for 50-65 per cent of construction costs, and with the current surge in prices, developers would inevitably pass on the costs to buyers.

“Once the cost of building materials goes up, the construction cost will also increase.

“Investors and developers are mindful of their capital and profit, and they want to recover it within a short time frame. Therefore, the rental and sales prices will be high,” he added.

Adekunle also expressed concerns about the growing stock of unsustainable buildings in Nigeria, citing the need for a more holistic approach to building material selection.

“Choices of building materials should not be based on economic factors only. We need to consider the interplay of environmental and social factors also,” he explained.

However, he noted that sustainable building materials with low carbon emissions were often imported, making them expensive due to high importation costs.

He noted that the lack of adequate knowledge and technology, combined with the current energy crisis, made it challenging to produce sustainable building materials locally.

“Property owners may continue to use the available alternatives they can afford, which may not necessarily be of acceptable standards or quality,” he added.

Adekunle warned that this trend could lead to a proliferation of substandard housing units, exacerbating the country’s housing challenges.

The President of the Council for the Regulation of Engineering in Nigeria, Sadiq Abubakar, stated that frequent building collapses in the country had been linked to the arbitrary increase in cement prices by producers.

He stated this in May at an investigative hearing organised by the House of Representatives Joint Committee on Solid Minerals, Industry, Commerce, and Special Duties to probe the recent price hikes in cement.

“You will agree with me that an increase in the price of cement is one of the key culprits of building collapse. I am trying to connect the hike in the price of cement with the standardisation in our building and the direct connection to building collapses,” Abubakar said.