As Nigerians battle low purchasing power occasioned by the harsh economic climate, there is an indication of a fresh increase in the price of Dangote Cement before the end of the year.
A Dangote Cement distributor who is familiar with the price increase told InsideBusinessNG that the company delayed the release of his allocation for which he has paid, and rather, asking for additional payment to bridge the difference between the payment and the anticipated new price.
“When I requested that the company supply the 600 bags of Cement I had earlier paid for, the Cement company asked me to go and pay an additional amount because the price has been increased. When I hesitated, I was told to go and quickly pay because the price would still go up before the end of the year”, said the distributor.
The distributor who lamented the effect of the frequent price increase on sales stated, “I used to sell two trucks of Cement (1,200 bags) weekly, but sales have dropped dramatically since the increase in September/October such that it is very difficult to sell a truck (600) bags a week”, stating that the supplies have tied down his capital.
In 2022 alone, the price of the commodity jumped thrice and the anticipated price will be the fourth increase this year.
The commodity was sold at N3,700 with delivery in August, the price jumped to N3,900 by October, and a bag currently sells for between N4,300 and N4,500 this November according to a seller.
The new price comes despite sourcing close to 90 per cent of the raw materials locally. The raw materials sourced locally include limestone, marl, calcite, shale, and gypsum amongst others according to a 2013 Economic Review of Manufacturers Association of Nigeria (MAN).
Limestone is found in Abia, Akwa Ibom, Anambra, Bayelsa, Benue, Borno, Cross River, Enugu, Imo, Nasarawa, Ogun, and Sokoto states among others. Gypsum deposits are spread across the country according to the Nigerian Investment Promotion Commission (NIPC) and can be found in Yobe, Adamawa, Bayelsa, Anambra, and many others
Tony Chiejina, Spokesperson for Dangote Industries did not respond to media inquiries on the new price increase which
the Distributor says the company will link to the rising inflation in the country.
Findings, within the Dangote Group, however, show that the price increase is to raise money for the ongoing construction of the Dangote Oil Refinery, a 650,000 barrels per day (BPD) integrated refinery project in the Lekki Free Zone, Lagos, which the rapidly increasing interest rate on facilities amounting to millions of dollars has impacted.
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Although inflation has constantly been on the rise this year and has quickened to 21.09 per cent in October, from 20.77 per cent in September 2022, sources within the company say increasing the price of Dangote Cement is one of the available options for funding the refinery project, which creditors have allegedly refused further rescheduling, and have started calling their funds.
Standard Chartered Bank led a consortium of local and international banks that secured a $3.3 billion financing in 2013 for a project initially scheduled for completion in 2016. The completion date has been moved about eight times.
The proceeds from the new price increase of cement, the source said, will be brought in to complement proceeds that are expected from the balance of the N300 billion bond Dangote Industries Ltd has finalised to raise.
It would be recalled that Dangote Industries Ltd, in October, said it was finalising borrowing the balance of the N300 billion bond under which it raised N188 billion last July, with the proceeds set to go into the construction of the refinery project. Afrinvest West Africa Ltd, the joint issuing house of the latest N112,415,455,000 bond, sent out a notice to investors in October on the launch of the Dangote Industries series 2. The tenor for the offer is 10 years.
Dangote Industries had on June 30 this year, issued a Series 1 Bond offer under its N300 billion debt issuance programme. The deal comprised two tranches of seven and 10 years. Each tranche was priced at the “higher range” of the initial price guidance, of 12.25 percent to 12.75 percent and 13.00 percent to 13.50 percent for each tranche respectively, according to Abiodun Keripe, managing director of Afrinvest Research and Consulting.
The bond was oversubscribed, with N10 billion demand for the seven-year tranche and N176 billion for the 10-year offering.
The Nigerian National Petroleum Corporation (NNPC) has also provided $3.8 billion as part of the federal government’s equity in the project, comprising $1 billion in cash, while the remaining $2.8 billion is in crude supply.
Although the Dangote refinery is yet to commence operations, the $2.5 billion petrochemical plant has been operational since March 22, 2022, and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), in a tweet in October said the facility is 97 percent completed, according to the 2022/2023 work plan presented by the Dangote Industries.
Wale Adewale, Proprietor of Ife Oluwa Blocks says, “We stick to Dangote cement because of its quality, otherwise, we would have shifted to other brands because of its arbitrary price increase”.
Ojo Collins, a bricklayer in the Ibeju-Lekki axis where several new estates are currently springing up, stated that the continuous increase in the price of cement has reduced the pace of construction work, pointing out that he remains idle most of the time.
A Dangote cement dealer, Bola Oguntolu, whose shop is empty recounted that she can’t request new supply because the continuous increase in the price has scared away buyers.
“After selling all my products, I could not buy more due to the swift increase in price. Nothing is moving at the moment because people want to feed first before building. I just have to divest”, she said.
