BUA's ₦3,500 cement price foiled by greedy middlemen and high energy costs

Abdul Samad Rabiu, Chairman of BUA Cement, has disclosed that the company's initial plan to reduce cement prices to ₦3,500 per bag was thwarted by greedy middlemen, or 'dealers,' and a lack of cooperation from other industry players.

He shared this information during the company's 8th Annual General Meeting on Thursday.

Rabiu also stressed that last year's naira devaluation and the removal of the fuel subsidy made the price reduction policy unsustainable.

Last September, BUA Cement Plc announced a price reduction for its cement, lowering it from N5,500 to N3,500 per bag, effective October 2, 2023. However, this price adjustment didn't scale. By December, Rabiu reaffirmed that BUA Cement would be sold at N3,500 starting in January 2024.

"We did sell at ₦3,500 for a long period of time but the dealers were selling double the price so a lot of people made a lot of money,"

"Some were selling at N7,000 and 8,000 per bag. They made a lot of money with a very high margin. I think we had sold more than a million tons at N3,500 before we realised what the dealers were doing,"

"And then, because of the issues that Nigeria faced at the time about the devaluation of the Naira last year and the removal of fuel subsidy, and the fact that for whatever reason, other manufacturers were not ready to bring down the price, we were left alone and couldn't satisfy the market at that level."

BUA is the second-largest cement producer in the Nigeria, with a total combined installed capacity of 17 million metric tons per annum (mtpa).

Rabiu noted that the price reduction could not be sustained as they did not want to end up subsidizing dealers. According to Rabiu, BUA Cement is now selling for about N6,000 to N6,500 per bag.

Discussing the company's expansion and commitment to servicing the entire country, Rabiu revealed that the South West region currently accounts for about 30-35% of BUA's total cement production.

To address the product scarcity in this region, BUA has ordered 400 trucks specifically for the South West, with plans to order more to further enhance logistics and service in the area.

He also mentioned that the company's new cement line at its Obu plant in Edo State will allocate around 150,000 tons exclusively for the South West region once it becomes operational.

In the financial statement presented at the meeting, BUA reported a strong 27.4% revenue growth, rising to N460 billion from N361 billion in 2022, attributed to its increasing market share.