The Nigerian cement industry is forecasted to experience a positive growth in 2024, according to financial experts at CardinalStone Research. They believe that renewed government attention towards infrastructure development and construction initiatives will greatly contribute to an increased demand for cement products. In their comprehensive report titled ‘Nigeria Cement Rebounding from a tumultuous year‘, the analysts have outlined the positive outlook for the Nigerian Cement Sector in 2024. As the budget for crucial sectors and ambitious infrastructure projects sees a noteworthy rise (₦1.32 trillion allocated to infrastructure, comprising 5.0% of the total FG 2024 budget), it is predicted that the construction industry will witness a remarkable revival.
In 2023, Nigeria’s cement industry faced numerous obstacles that affected its demand, such as a poorly implemented currency redesign policy leading to a cash crunch, devaluation of the material currency, and heavy rainfall. However, in 2024, the industry is looking towards an optimistic recovery driven by a return to relative stability in the macroeconomic environment and initial benefits from rigorous policy reforms. According to the report, cement producers are now readjusting their production methods by increasing their capacity and enhancing operational effectiveness, all in an effort to cater to the projected surge in demand.
Government might intervene with the rising cement price.
Moreover, the analysts expressed a sense of careful optimism about the future of Nigeria’s cement industry in 2024, acknowledging that there may still be obstacles to overcome. However, they believe that there are opportunities for growth as the industry enters a recovery phase. One noteworthy development highlighted by the analysts is BUA Cement’s decision to lower their ex-factory price to ₦3,500 in October 2023. This move could potentially lead to price competition from other competitors, according to the analysts. There is a possibility that the government might intervene to alleviate the high cost of cement in response to public outcry regarding the increasing prices of cement in the nation.
According to the analysts the cumulative impact of the above-mentioned factors has the potential to raise demand, subsequently influencing the quantity of cement produced. The analysts highlighted that President Bola Ahmed Tinubu’s administration has unveiled the Infrastructure Support Fund (ISF) as a part of several initiatives aimed at stimulating the economy and mitigating the inflationary repercussions from the removal of petrol subsidies. Nigeria anticipates that the ISF will aid in the revitalization of transportation systems, enhance the connectivity of farm-to-market roads spanning different regions, and cater to the funding requirements of crucial sectors such as healthcare, education, power, and water initiatives.
A favorable impact on cement consumption is expected.
All the anticipated growth is expected to be witnessed in FY’24E, fueled by the augmented financial allocation towards infrastructure in the Budget, as stated by experts. The focal point highlighted by analysts concerning the new Minister of Housing and Urban Development is the proposition to elevate the minimum capital for the Federal Mortgage Bank of Nigeria (FMBN) from its prior amount of ₦250 billion to a substantial ₦500 billion. While there is no specific information yet, it is expected that there will be some favorable impact on cement consumption in the foreseeable future.
They anticipate that the FMBN recapitalization process will enhance the availability of funds for builders and bolster cement usage in FY’24E and beyond. It is also believed that the ongoing involvement of the private sector in the RITC scheme established in 2019 could continue to bolster the demand for cement. As the scheme is anticipated to end a decade after it starts, it is likely that additional private sector actors will seize the opportunity to utilize the scheme in order to reap the benefits of the related tax advantages.
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It was emphasized by the experts that the complete engagement of Nigeria in the AfCFTA would have a positive impact on cement exports from companies such as Dangote Cement and BUA Cement. Furthermore, they mentioned that BUA Cement has already generated approximately €7.0 million in export revenue as of 9M’23 and is actively focusing on expanding its presence in African markets. Based on historical records, it is indicated that cement producers generally experience higher performance during the first half of the year. This is primarily influenced by seasonal factors that promote increased building and construction endeavors.
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