Abdul Samad Rabiu, Chairman of BUA Cement Plc, has emphasised that the cement price in Nigeria remains lower than in many other African countries despite the increased energy costs faced by the Manufacturing industry. At the company’s 2023 Annual General Meeting (AGM) in Abuja, Rabiu discussed the industry’s many challenges, highlighting energy consumption as the most pressing. During the Annual General Meeting (AGM), BUA Cement’s shareholders sanctioned a ₦67 billion dividend for the 2023 financial year, which translates to ₦2 per share.
This payout reflects the company’s financial success; rising operational costs, especially energy-related expenses, have made the business environment difficult for manufacturers. He emphasised that the energy costs associated with energy represent a challenge for the sector, which consumes billions of Naira each year. As this industry is highly dependent on energy sources, fluctuations in diesel, gas, and Electricity prices directly impact production expenses, complicating efforts to keep product costs affordable. The company has struggled with these challenges while balancing competitive pricing and sustaining profitability.
BUA’s cement cost reduction failed as dealers inflated prices.
However, despite these challenges, the company initially aimed to reduce its product cost for ordinary consumers across the country. Rabiu stated that the company provided its product to dealers at a discounted rate of ₦3,500 per bag, expecting these savings to reach the end users eventually. Moreover, some distributors disrupted these initiatives by raising prices rather than offering reduced rates to consumers. They sold the product at costs between ₦7,000 and ₦8,000 per bag, frustrating the company’s attempts to decrease public expenses.
The dealers’ actions, which took advantage of the lower factory costs to inflate their profits, resulted in consumers not benefiting from the intended cost reduction. Rabiu observed that more than one million tons of cement were sold at the lowered rate of ₦3,500 per bag until the company recognised that dealers were exploiting the system. In addition to the problems faced by the dealers, broader economic conditions in the country intensified the difficulties. Rabiu noted that the naira’s Devaluation and the removal of the petrol subsidy played crucial roles in the company’s struggle to uphold lower its product costs.
Fuel subsidy removal added extra financial pressure on the business.
Moreover, as the naira’s value dropped from ₦600 to about ₦1,800 per US Dollar over the last year, the company faced increasing difficulties sustaining its initial pricing policy. Moreover, removing the fuel subsidy added extra financial pressure on the business. The increase in fuel costs escalated transportation expenses, putting additional pressure on the production budget. The head of BUA remarked that under these circumstances, selling their product for the lowered cost of ₦3,500 per bag was no longer feasible, particularly since the company had primarily shouldered the price reductions without any customer advantages.
Furthermore, the company discontinued the dealer subsidy in response to these challenges, as this approach produced consequences. Rabiu emphasised that the company intended to lower the cost of its product, but the dealers’ actions and the country’s economic issues had rendered this intention impossible to fulfil. He explained that the organisation couldn’t afford to be in a position where it was essentially supporting dealer profits, especially given the currency devaluation and rising expenses in various company sectors. Rabiu’s remarks underscore manufacturers’ complex environment in the country, where market intermediaries and broader economic issues can undermine efforts to pass savings onto consumers.
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As a result, the company has maintained its position as a leading player in the market and continues to offer its products at the lowest prices across the continent. The firm is dedicated to navigating the challenging Market Environment while acknowledging the difficulties of managing costs amid an unstable economic situation. His remarks illustrate the successes and challenges of providing cost-effective products in a challenging market. Despite limitations in dealer behaviours, they remain focused on enhancing efficiency and competitiveness, allowing consumers to enjoy their products at a lower rate than in many other African countries.