MONOPOLISTIC OPERATION IN THE CEMENT INDUSTRY IS BAD FOR NIGERIA

Public Statement Issued by Ibeto Cement Company Limited.


The Ibeto Cement Company Limited has noted a series of misleading press reports and comments being orchestrated for the purpose of negating the very compelling reasons for which the Federal Government made the decision to reopen our cement bagging plant in Port-Harcourt and recreating adverse conditions that will frustrate the restoration of work on the plant.

These press reports mostly trade on sophistry and guile, in order to obfuscate the truth and confuse the very same Nigerians for whose benefit our plant is being reopened.

Quite obviously this calumnious press campaign is being orchestrated by the same monopolistic cartel that first contrived the closure of the plant but their statements of deception are easily exposed. We wish to refer specifically to the following newspaper publications:

a.   This Day newspaper of Wednesday July 25; a front page report titled “Cement prices set to crash”.
b.   Punch newspaper of Monday July 30; a back page report titled “Cement Importation; Nigeria May lose $647 million.”
c.   Independent newspaper of August 5; on page C1 titled “High Expectations, Cautious Optimism as Ibeto Cement Returns.”
d.   Punch newspaper of Friday August 10; on page 17, under the Business and Economy review, titled “Why Cement Prices Remain High.”

The above publications quoted copiously from statements issued by certain representatives of certain members of the Nigerian cement cartel, namely, Mr. Akin Adesokan, Managing Director, Dangote Cement; Mr. Joseph Okonmah, Corporate Affairs Manager, Dangote Group; Mr. George Lourandos, Managing Director, WAPCO of the Lafarge Group (Elephant and Atlas Cement) and Chief Emmanuel Ukpabi, Managing Director, Flour Mills of Nigeria (Burham Cement).

In response to the numerous untruths and contrived disinformation that are credited to the above-named persons and the organizations that they represent, for the benefit of the Nigerian public, it is necessary to present the incontrovertible facts. These are:

1.   The Ibeto Cement Company Limited has not been favoured with an exclusive right to import bulk cement into Nigeria. The truth is that about 80% of all the cement currently consumed in Nigeria is imported. It is also pertinent to note that there are only six (6) organisations in Nigeria with the capacity to import or manufacture cement. These are; the Lafarge Group, Dangote Cement, Flour Mills of Nigeria, Eastern Bulkcem (Eagle Cement), Ibeto Cement Company and the Cement Company of Northern Nigeria.

Among these, Dangote has been and remains the biggest importer of bulk cement into Nigeria, thanks to the Federal Government yearly allocation that favours Dangote with a quota of 6.5 million - 9 million MT per annum, against 3.2 million MT per annum shared out among the rest of the other four companies, excluding Ibeto Cement.

2.   The essential information regarding the operation of these  organisations are as follows:

a)   The Lafarge Group, comprising Ashaka Cement in Gombe State currently producing a mere 700,000 MT per annum; Ewekoro and Sagamu (WAPCO) in Ogun State with a combined production capacity of just 1.4 million MT per annum. This means that the total output of all three cement factories owned by the Lafarge Group in Nigeria is only 2.1 million MT per annum. The Lafarge Group also has a floating plant in Port-Harcourt (Atlas Cement), for bagging imported bulk cement which has a  production capacity of 2 million MT per annum.

Lafarge, a French company, had entered Nigeria some ten years ago, promising to invest heavily in the Nigerian cement industry. A grateful Nigerian government threw our doors open, enabling the company to pick up some very rich assets at rock-bottom prices. These included Ewekoro, Ashaka and Sagamu cement factories. Since these concessionary acquisitions, Lafarge has largely been reaping without sowing. Practically none of the expected expansions promised by the company in these plants have been realized. Instead Lafarge manoeuvred itself into becoming the Lease Manager of the Onigbolo Cement Factory, owned by the governments of the Benin Republic (51%) and Nigeria (43%).  Lafarge, which has no single share in this partnership, has become the main beneficiary of that investment. This is achieved through manipulating the loophole that allows Lafarge to import cement duty-free from Benin Republic, which is an ECOWAS member country. The Onigbolo plant has become a clever conduit for cement to be brought in from overseas and laundered through the Onigbolo plant and then pushed into Nigeria, duty free, under cover of the ECOWAS protocol. This is why Lafarge is able to import so much cement into Nigeria from this tiny Benin plant with the claim that the plant is producing at full capacity. The question should be asked, why is it that La Farge cannot perform the same miracle in its Nigerian factories which are all struggling on at very low capacity utilisation?

The truth is that there is no be miracle being performed by La Farge at Onigbolo that is in any way beneficial to Nigerians and the Nigerian economy. What is going on there is that La Farge is engaged in trickery utilizing that plant to smuggle imported cement into Nigeria. Money lost to Nigeria and gained by this foreign company, Lafarge, through its many ploys is in excess of $500 million US. dollars per annum. This situation requires to be fully investigated by the appropriate agencies of our government, especially, the Economic and Financial Crimes Commission (EFCC) and Nigerian Customs Service. This is especially important because of the fact that there is no evidence that the duty waiver so far enjoyed by Lafarge has translated into lower prices for the Nigerian consumer or substantially the improved welfare for the company’s Nigerian workers. It is noteworthy that just before he left office, President Obasanjo directed the Bureau of Public Enterprises to transfer to the Dangote group the Federal Government’s shareholding in this tiny Benin Republic Cement plant. Could it be that the La Farge and Dangote monopoly-promoting and strategically mutually beneficial  relationship in Nigeria is being exported to the cement plant in the Benin Republic?

Meanwhile Mr. George Lourandos, the Greek Managing Director of Lafarge’s WAPCO subsidiary, prefers to be cunningly economical with the truth. He appears to take delight in deceit and influence peddling by manipulating public opinion and government policy with false statistics. Mr. Lourandos may want to explain to Nigerians by what magic he intends to produce 5.7 million MT of cement in one year, from the figure of 2.1 million MT that his three plants (Ashaka, Ewekoro and Sagamu) are actually producing. A good example of this foreign company’s manipulative ways was, in the recent past, manifested in their success at contriving with President Obasanjo to shut down Ibeto Cement – a setup by the vicious cement cartel of which Lafarge is an important arrowhead.

b)   Dangote Cement, comprising Benue Cement purchased from the Bureau of Public Enterprises in  2001 and still struggling at a meagre production level of 350,000 MT per annum; Obajana new cement plant hurriedly commissioned by President Obasanjo with a claimed capacity of 5 million MT per annum which in reality is producing less than 500,000 MT per annum. Dangote Cement has been in the business of bagging bulk cement since 1995, over 12 years ago, using Nigerian Ports Authority infrastructure and buildings. It was only this year, in May 2007, that Dangote finally commissioned a cement manufacturing plant of its own initiative.

Dangote, Nigeria’s largest importer of bulk cement, has four bagging plants in the country:  the Lagos Cement Terminal at Apapa Port,  the Aliko Inland Terminal at Lagos, one in Onne/Port Harcourt and one in NPA Area 1 Port Harcourt  with a combined production of 3 million MT per annum. With its overriding influence on the Obasanjo regime, Dangote Cement always managed to seize cement import quotas of between 6.5 and 9 million MT per annum. Keeping hold of so much import quota enabled Dangote to limit what was available to other operators. Dangote regulated how much of their cement import quota to use and when to use it and so  has successfully been manipulating market prices.

Dangote Cement did not only tyrannize other producers but also succeeded in frightening away would-be new entrants into the cement industry with bogus claims. These claims included wild production and expansion figures that were never met but were accepted by the Obasanjo government as a basis for the issuance of import quotas.

One wonders at the reasons for the company to put the cost of its 5 million MT capacity plant at Obajana at One Billion US dollars, when Ibeto cement is building its own plant of the same capacity for less than 300 million US. Dollars. We believe that the only discernible reason is that Dangote is acting to frighten away prospective investors and thereby reduce competition. More ominously, one would want to know if these claims on plant costs and investment costs would be accepted by the Securities and Exchange Commission without question in giving value to the company’s shares if and when the company decides to go public. We believe that the most viable strategy for achieving cement security for our dear country via local manufacture lies in implementing public policies that encourage more investors to enter the cement industry with plants of all sizes, some costing just about 20 million US. Dollars, as is the case in China which has over 120 cement factories.

Numerous Chinese businessmen have approached Nigerian investors with offers for turnkey cement projects, at the above-mentioned price and even lower, but the monopolistic trends in the industry have proved too discouraging for these Nigerian investors. Recent efforts by the Yar’Adua government to create a level playing field in the country are most commendable and should be supported by all true patriots.

c)   Flour Mills of Nigeria Plc (Burham), the nation’s second largest importer of bulk cement has only facilities for bagging imported bulk cement, which they have been operating for over twenty-five years without any known operational cement factory in place in Nigeria. This company owns four 55,000 MT DWT ships dedicated to bringing bulk cement into Nigeria for the past 25 years. The plant has a production capacity for bagging 2 million MT per annum. All the claims the company makes about developing a cement factory in Calabar are based on the existence of a company called UNICEM in which it is a minority shareholder in partnership with the following companies; Dangote (22%), Holcium and Orascom. So much for the claims of its Managing Director, Chief Emmanuel Ukpabi of having invested the sum of $800 million on cement production facilities. All these false claims are just to keep Ibeto Cement, a bona fide competitor, out of business.

d)   Eastern Bulkcem (Eagle Cement) which has a bagging plant in Port-Harcourt with a capacity of 600,000 MT per annum. The company purchased Nigercem Nkalagu from the BPE and is working hard to reactivate it, despite problems with shareholders and labour. This company also suffered victimization during the Obasanjo era for failing to join in the plot against Ibeto Cement. It was shut down for 9 months and three of its cement vessels were prevented from discharging their cargoes.

e)   Ibeto Cement Company Limited, operating a bagging plant in Port-Harcourt with a production capacity of 1.5 million MT per annum commissioned in July 2005. This plant, erected on virgin mangrove swamp in downstream Port Harcourt reclaimed by Ibeto Cement, was certified by the Federal Ministry of Industry as the best bagging plant in the country. Other operators of bagging plants are utilizing developed NPA facilities. The company is also developing a 5 million MT per annum cement factory in Ebonyi State, in partnership with the government of that state. These two projects were grounded in November 2005 after only four months of the operation of the bagging plant, by the order of the former President, Chief Olusegun Obasanjo, applying an executive fiat that was not supported by any discernible rationale, except for the spurious claim by a foreign company, La Farge, that Ibeto Cement was not supporting government industrialisation efforts by not instantaneously  completing a local cement manufacturing factory prior to operating the bagging plant which the Federal Government had given it permission to erect.

This charge was duly debunked by investigations carried out by the Federal Ministry of Industry which found that Ibeto Cement was very seriously engaged in establishing a cement manufacturing plant in Ebonyi State. Based on the findings of the Inter-ministerial Committee (made up of Ministry of Industry, Ministry of Finance, Ministry of Solid Minerals Development, all cement manufacturers and bagging plant operators, Standards Organization of Nigeria), the former Minister of Industry recommended to the President to reopen the Ibeto Cement factory. To the consternation of most operators in the industry, except of course, the monopolists who had instigated President Obasanjo’s earlier decision to close down the factory, this recommendation was turned down by the former President.

f)   Cement Company of Northern Nigeria, manufacturing 300,000 MT per annum in Sokoto State. This company is the only producer that is fully dedicated to manufacturing as it does not engage in importation of bulk cement for bagging.

3.   Concluding Remarks

With all the facts and figures on the ground especially when all cement plants in Nigeria are still importing bulk cement, it is obvious that the closure of the Ibeto Cement plant was ill-motivated and unjust. It was definitely not in the best interest of the generality of Nigerians.

We believe that it was grossly unfair, malicious and wicked of those who had enjoyed the right to import and bag bulk cement for 10 to 30 years before venturing into manufacturing, to insist that Ibeto Cement must first build a cement manufacturing factory, before being allowed to  operate its own bagging plant. We believe that there is no justification whatsoever in shutting down a 12 billion Naira factory after just four months of operation on the basis of pressure from monopolists, especially  when, with all the records available to the Federal government  that approved all the applications to set up that bagging plant by Ibeto Cement before the company commenced the project Moreover the Federal Government, through its relevant officials (including the person of the Head of that Government, Chief Olusegun Obasanjo), was constantly briefed on progress of work  as the plant was erected on that very challenging virgin mangrove swamp.

For the same people who contrived to shut down Ibeto Cement plant to continue in the same vein in an effort to frustrate the wise  decision of President Yar’Adua, made after due process of consultation with all relevant government ministries and agencies, to reopen the plant, is simply unpatriotic and selfish. They are all better advised to desist from their efforts at eliminating competition by all means and concentrate on making their operations more efficient. This is the sure way to survive competition in Nigeria’s emerging democracy.

Finally, we wish to assure the Federal Government and all Nigerians that, while running our bagging plant in Port Harcourt, we will assiduously and relentlessly continue with the realization of our green field cement manufacturing project in Ebonyi State and will do everything possible to fast-track its completion and commissioning.



Dr. Ben You.C. Aghazu
Director ( Projects and Public Affairs)
Ibeto Cement Company Limited
17th June 2007