BUA Cement’s Plan to Lower Prices to ₦3,500 Foiled by Greedy Middlemen, Rising Costs
Rabiu reiterated BUA Cement's commitment to making its products more accessible and affordable for all Nigerians, despite the challenges posed by market conditions and the activities of profiteering dealers.
Abdul Samad Rabiu, Chairman of BUA Cement, has revealed that the company’s initial plan to reduce cement prices to ₦3,500 per bag was undermined by greedy middlemen and a lack of cooperation from other industry players. Speaking during BUA Cement’s 8th Annual General Meeting (AGM) on Thursday, Rabiu explained that the company’s price reduction strategy, aimed at making cement more affordable, was thwarted by profiteering dealers, the devaluation of the naira, and the removal of the fuel subsidy, which ultimately made the policy unsustainable.
Price Reduction Plan Foiled by Profiteering Dealers
Last September, BUA Cement announced a substantial reduction in the price of its cement, lowering it from ₦5,500 to ₦3,500 per bag, effective October 2, 2023. The company reiterated its commitment to maintaining this reduced price into 2024, with Rabiu confirming in December that the new price would take effect in January 2024. However, the plan did not go as expected.
“We did sell at ₦3,500 for a long period of time, but the dealers were selling double the price, so a lot of people made a lot of money,” Rabiu stated during the AGM. “Some were selling at ₦7,000 to ₦8,000 per bag, pocketing huge profits with very high margins. I think we had sold more than a million tons at ₦3,500 before we realized what the dealers were doing.”
Rabiu emphasized that the price reduction could not be sustained as the company did not want to end up subsidizing these profiteering dealers. As a result, BUA Cement is now selling for about ₦6,000 to ₦6,500 per bag, reflecting the challenges faced in implementing the price reduction policy.
Impact of Economic Changes on Price Reduction
Rabiu highlighted several factors that made it difficult for BUA Cement to maintain the reduced price. The devaluation of the naira last year and the removal of the fuel subsidy significantly increased operational costs for the company. Additionally, a lack of cooperation from other industry players left BUA Cement as the sole manufacturer attempting to reduce prices.
“Because of the issues that Nigeria faced at the time about the devaluation of the naira and the removal of the fuel subsidy, and the fact that, for whatever reason, other manufacturers were not ready to bring down the price, we were left alone and couldn’t satisfy the market at that level,” Rabiu noted.
Efforts to Address Product Scarcity and Improve Distribution
Despite these challenges, BUA Cement remains committed to expanding its market reach and ensuring consistent supply across the country. Rabiu disclosed that the South West region currently accounts for about 30-35% of BUA’s total cement production. To tackle product scarcity in this region, the company has ordered 400 trucks dedicated to servicing the South West, with plans to acquire more trucks to enhance logistics and distribution.
Additionally, Rabiu revealed that a new cement production line at the company’s Obu plant in Edo State will allocate approximately 150,000 tons exclusively for the South West region once it becomes operational. This move aims to address the ongoing scarcity and improve the availability of cement in the region.
Financial Performance Amid Market Challenges
Despite the hurdles in implementing the price reduction strategy, BUA Cement reported a robust financial performance for 2023. According to the financial statement presented at the AGM, the company recorded a strong 27.4% growth in revenue, rising to ₦460 billion from ₦361 billion in 2022. This growth is attributed to BUA Cement’s increasing market share and efforts to expand its production capacity and distribution network.
Rabiu emphasized that the company’s commitment to expansion and its strategic investments in logistics are key factors contributing to its impressive financial performance. The chairman also expressed optimism about the company’s future prospects, highlighting ongoing projects and plans to enhance its production capacity further.
Moving forward, BUA Cement aims to focus on expanding its market presence and ensuring a steady supply of cement across Nigeria. The company’s plans include increasing its production capacity, improving distribution networks, and mitigating the impact of external economic factors such as currency devaluation and rising energy costs.
Rabiu reiterated BUA Cement’s commitment to making its products more accessible and affordable for all Nigerians, despite the challenges posed by market conditions and the activities of profiteering dealers. “We are determined to continue serving our customers and contributing to Nigeria’s economic growth, even in the face of these challenges,” Rabiu concluded.
BUA Cement’s attempt to lower prices and provide affordable cement to Nigerians has faced significant obstacles, from middlemen exploiting the price reduction to broader economic challenges affecting the entire industry. However, the company remains committed to its expansion plans and improving logistics to better serve its customers. As the cement market in Nigeria continues to evolve, BUA Cement’s efforts to navigate these challenges will be crucial in shaping the industry’s future.
