‘Dangote, BUA, other cement producers will benefit from AfCFTA’
The African Continental Free Trade Area presents opportunities for Nigerian cement manufacturers to increase production and penetrate new markets, the Financial Derivatives Company Limited has said.
The Lagos-based FDC, led by Mr Bismarck Rewane, said the Nigerian cement industry had experienced substantial growth over the past few years.
“With a population of about 200 million people and a population growth rate of approximately three percent per annum, the demand for and consumption of cement is expected to increase,” it said in its latest monthly economic update.
The FDC analysts said increased government infrastructural projects and maintenance, coupled with urbanisation growth, would likely drive the growth of the market.
They said, “The demand for cement is driven by infrastructure, commercial and residential real estate development. The government, especially at the federal level, is usually the major driver of cement demand in Nigeria with an estimated 50 percent of total cement consumption.
“The frequency of road and bridge reconstruction as well as rehabilitation of social infrastructure emphasizes the government’s continued patronage of the industry. The increase in government expenditure on infrastructure will also spur private construction.”
With Nigeria currently the largest cement producer in Africa, the FDC said cement manufacturers had identified an opportunity in the existing infrastructure gap, estimated at 35 percent of GDP relative to 70 percent for larger economies.
It said, “The use of cement roads has a higher initial cost but lower maintenance cost and relatively longer life span (27 years vs. 17 years for asphalt roads).
“The sector is also expected to benefit from the commencement of AfCFTA. Cement manufacturers will be faced with the opportunity to produce more in order to compete with member nations and penetrate new markets.”
According to the report, the cement industry is expected to post an impressive performance in 2021, driven by the anticipated W-shaped recovery of the Nigerian economy and faster global economic growth.
It said, “There are significant opportunities available to cement manufacturers, which will facilitate the industry’s growth potential. These include the wide infrastructure gap in Nigeria ($100bn annually) and Africa ($60-108bn annually), widespread affordable housing projects that are being embarked upon by the government, etc.
“In addition, the AfCFTA presents opportunities for expansion and a readily available market, which Dangote Cement is poised to benefit from due to its pan African strategy.”
The FDC said Dangote Cement’s expansion plan and fertiliser investments would open new trade routes for the company and Nigeria under the trade deal.
“This move is essential for Africa to deliberately improve its per capita cement consumption to aid infrastructure development by stimulating further demand, which will help reduce the cost of cement,” it added.
