Nigeria: FG clears air on importation of bagged cement

Byswb

Updated Wed, 08 Oct 2008 00:00:00 GMT

The Federal Ministry of Commerce and Industry has cleared the dust raised by what it termed misinformation and misleading statements in some print media, regarding the decision of the Federal Government to approve the importation of bagged Cement.

The statements according to the ministry had insinuated that the Federal Government had issued licenses to traders who were not stakeholders in the cement production industry in the country.

The ministry explained that at every stage in the process leading to the decision to allow temporary importation of bagged cement, all stakeholders including the Press were effectively carried along. This decision, the ministry noted would not in any way jeopardise Government's policy of encouraging the growth of local cement capacity, and making the commodity available at affordable price in the country.

"It would be recalled that in December 2007 the President approved the issuance of permits to thirteen cement manufacturers to import bulk cement for bagging in green field sites. The quota allocated to each manufacturer was strictly tied to their declared bagging capacity. The import permit was granted in response to the acute scarcity of the commodity, and the exorbitant prices occasioned by a demand level, which was far in excess of local supply. The essence of the import approval was therefore, to create availability of the commodity at affordable prices by bridging through temporary importation, the gap between demand and local supply," the ministry stated.

The ministry said it observed with dismay that after more than six months after the licences were issued to the beneficiaries, the price of cement shot up to worrisome levels, rather than move down. It explained that the inability of licence beneficiaries to deliver on their permits, and the continued boom in the construction industry accounted chiefly for this state of affairs.

The ministry explained that it carried out an investigation into the failure of licence beneficiaries to perform, and the result showed that a good number of the beneficiaries supplied misleading information regarding their bagging capacities, with the aim of obtaining higher allocations.

Based on this and the biting scarcity and outrageous prices, and in order to mitigate the hardship suffered by consumers, the Federal Government, according to the ministry, decided to intervene further by approving the importation of bagged cement as a one-off exercise, which is expected to elapse on 31st December 2008.

"In appreciation of the obvious adverse implications of liberalising cement importation, Government acted cautiously and responsibly to ensure that only those with verifiable investments in the sector benefited from the licence. At no time did Government contemplate granting licences to traders knowing fully well the catastrophic damage such a measure would do to local investments in the sector. Rather, in defiance of the opposition from a few stakeholders bent on creating a monopoly in the sector, government decided to extend licences to six new entrants in order to break the emerging monopoly. These are new investors, who satisfied the requirement of demonstrating ample evidence of having made significant commitment to backward integration in the sector.

By granting licences to only those with investment in the sector and designating the importation of bagged cement as a one-off exercise targeted to fill the demand-supply gap created by inadequate local capacity, Government was further demonstrating its commitment to encouraging the growth of local capacity in the sector," the ministry disclosed.

Explaining further, the ministry said that since it was not possible to grow local capacity overnight to meet increasing demand, the only viable stop-gap option capable of creating availability, while driving the process of stepping up local capacity, was to meet the interim shortfall through importation. "For a responsive and responsible Government, this interventionist measure taken in the wider interest of the Nigerian public, to arrest the chaotic situation in the cement market, was inevitable.

The arrival of consignments of both bulk and bagged cement, which is expected in the next couple of weeks, would when subsequently introduced into the distribution network; facilitate the process of driving the prices of the commodity down to acceptable and affordable levels," the ministry said with optimism.

The ministry, however, noted that the rise in cement prices was a global phenomenon, caused by the increasing boom in the construction industry worldwide, noting that it was not peculiar to Nigeria. It pointed out that the global shortage was acerbated by the temporary shut-down of some Chinese factories ahead of the Beijing Olympics, which constricted supplies. The ministry was, however, optimistic that, the ongoing new investments in the sector, and the expansion of existing facilities, would aggregate to inevitably bring stability to the market of the commodity, which it described as been direly critical to the structural growth of the country.