Mixed responses to the 30% price drop by BUA Group in the cement market

On Sunday, BUA Group stated that the cost of cement would drop from N5,000 per bag to N3,500.

According to OBASANJO NEWS24, the development has already intensified a price war in the construction and infrastructure sectors.

Dangote, BUA Group, and Lafarge had, respectively, held the majority of the market share in Nigeria for cement.

According to OBASANJO NEWS24, BUA Group’s choice stunned the construction and infrastructure sectors.

The high cost of cement in Nigeria in comparison to other regions of the continent had been brought up by the Minister of Works, Dave Umahi.

Dangote cement, the company’s main rival, has been silent for more than 24 hours following the announcement of the price decrease by BUA.

Anthony Chiejine, the Dangote Group spokesperson, was unavailable for comment on the development on Monday when OBASANJO NEWS24 called him.

However, it may be noted that Chiejine had previously refuted allegations that had been making the rounds on social media a week earlier that the cost of Dangote cement had been cut to N2,700 per bag.

Similar to this, Lafarge cement, a significant player in the building materials market, has not yet responded to BUA cement’s price reduction.

However, a survey of Abuja’s wholesalers and retailers that sell cement revealed that the BUA’s new price rise has not yet taken effect.

Eze Onyekachi stated that his 50kg BUA cement price in Dawaki, a neighbourhood close to Gwarinpa, has maintained at N5,000.

The price cut, according to him, is a publicity ploy; as of today (Monday), we continue to buy at the depot price and sell for N5000 per 50kg bag. I’m telling you to come back in a week; the pricing might not have changed.

“Several people have called me about the price reduction for BUA cement, but we haven’t seen it take effect yet,” the source said.

Abdul Adamu, a dealer who conducts business in Gwarinpa, claimed that because he hasn’t updated his inventory, he is still charging N5,000 for each 50kg bag.

“We are still selling at N5000 per bag at this time because we haven’t received any new stock,” he stated.

The development has drawn praise and criticism.

The scenario may be alleviating in the short term, according to Wumi Iledare, a professor emeritus of petroleum economics and executive director of the Emmanuel Egbogah Foundation, who was speaking with OBASANJO NEWS24 on Monday.

“It is concerning that a single seller in a market may solely control the price of cement. It demonstrates how the market is anti-competitive and requires regulators to keep an eye out for such behaviours.

“In this scenario, cement may initially appear to be quite relaxing to product users.

“However, if it is a powerful cement company, such a seller may eventually force out rivals from the cement market. In addition, lowering the cost of any raw material is beneficial for productivity activities, he added.

The 20 million housing need in Nigeria will be helped by the BUA cement pricing review, according to Kunle Olubiyo, President of the Nigeria Consumer Protection Network.

“In the spirit of market competition, the current price war in the cement subsector is a positive development.

The general public, product off-takers, and end-user customers will benefit as well.

You may recall that the Federal Government recently expressed interest in using cement materials to build roads, as cement is thought to be more valuable and appropriate given the varied climatic conditions found throughout Nigeria, where using bitumen may not be the best option.

“This development will help to reduce the housing deficit in Nigeria, create jobs, create wealth, and bring about peace as the productive energy of the idle youth population would be productively and constructively engaged,” he said. In addition to lowering the cost of building roads, housing, and other products that require cement as a feedstock.

The move may spark a pricing war, forcing other producers to lower their prices to remain competitive, according to Prof. Godwin Oyedokun, President of the Association of Forensic Accounting Researchers.

“I can argue that depending on numerous circumstances including the level of competition, market size, product differentiation, and the availability of replacements, when one manufacturer lowers the price of its products, it may influence other producers in different ways.

“In some circumstances, price cuts may trigger a price war and push rival firms to lower their prices in an effort to compete, so reducing profit margins.

“On the other side, it can also boost product demand, expanding the market’s overall size and income.

The impact of price cuts will ultimately rely on a variety of variables and the unique market conditions.

Yes, I am aware that competitors will react to this. I hope it has a virtuous ripple effect on the economy,” he remarked.

However, Bode Fadipe, a Global Power and Energy analyst, claimed that the decrease in the price of BUA cement is just superficial and temporary without a comparable evaluation of other criteria necessary in the construction sector.

“Unless a matching evaluation of other factors in the building industry is required, the current fall in cement price is superficial and temporary.

“Building a house requires more than just cement. How much do labour and land now cost? What about other composite materials, such as wood, sand, and roads?

Will their price decrease as well? Businessmen, Dangote and BUA are more than just relatives. Dangote hasn’t said anything, but it doesn’t mean he won’t. Entrepreneurs are very strategic individuals. They take every precaution to safeguard their commercial interests.

“What BUA has done is a strategy for sustainability. As a result of the main questionable status of the macro- and micro-economic indicators, I won’t be shocked to see a return to the previous pricing.

According to Idakolo Gbolade, CEO of SD & D Capital Management, the development might force BUA’s main rivals to lower cement pricing.

He asked the government to open up the cement business to wider competition.

“The recent announcement of a reduction in cement prices by BUA cement is a wonderful step, and it demonstrates that if more Nigerians be patriotic, we may begin to see the change we desire.

“We anticipate Dangote cement will need to do the same. This is the advantage of competition over monopolies. Since it has been demonstrated that we can benefit more from building such an enabling environment, I want the Nigerian government to provide possibilities for more competition in our economic arena.

“Cement is a major component in the construction sector, and a reduction in its price will go a long way in reducing the cost of building and affecting inflation positively,” he said.