In discussing the development of the Cement Industry in Nigeria, one must factor it in the develop ment of the Nigerian Economy as a whole. Cement Industry and cement as a building material rose from a position of oblivion in the sixties to one of national significance in the late seventies. This arise stemmed from the massive reconstructionn necessitated during the post civil war era and the growing pace of industrialization in the early seventies.

Subsequently cement gained
prominence as a major import commodity, culminating in the ce- ment armada of the mid-seventies. Developments in the cement industry will be discussed in three parts starting from the historical evolution of the industry, through the industry structure and the problems of the sub-sector. Finally we shall take a look into the future of the industry.

HISTORY

As indicated, the developments in the cement industry have been closely aligned to the developments of the national economy. As the central forces of the economy
moved from agriculture before the oil boom, to heavy dependence on crude oil, our economic fortunes also changed. Distortions introduced into the economy as a result of the shifts in emphasis, led to the Structural Adjustment Program (SAP) conceived as a corrective measure for the imbalances. Just as the whole economy was undergoing changes, the building materials sub-sector was not left behind.

The arival of westerm civilization brought an innovation into the building of houses. Bricks moulded
with mud were introduced and this caught up easily with local builders which also saw the introduction of rectangular-shaped buildings. The use of mud bricks and the subsequent discovery of limestone and the establishment of cement factories led to the introduction of cement as an important building material. The first cement plant established in Nigeria was in 1954 at Nkalagu. The success of this plant and the successful use of cement blocks for construction led to intensified exploration efforts for limestone deposits across the country.

The search gave rise to six other cement plants: WAPCO (Ewekoro & Shagamu) in 1959, Bendel at Okpella & Calabar in 1964, Sokoto in 1962, Ashaka and Benue Cement Company in 1974 &1975 respectively. These
eight cement works are the main ones in the industry today operatingat various leveis and with varying problems.

STRUCTURE OF THE INDUSTRY

Equity Ownership: Prior to the privatization program of the Federal Government, ownership of the cement works was as follows: FGN, 27.45%, State Govcernments, 36.45%; Nigerian Private Investors, 14.23% and Foreign Investors, 22.87%. The privatization program classified cement factories under par tial privatization whereby the Federal Government of Nigeria was to reduce its ownership in the individual cement companies to notmore than 30%.

Equity ownership after partial privatization of the industry shows significant increase in the number of Nigerian private investors. Of the 3 companies that were listed for partial privatization, two have already been handled with a consequent admission of over 50 thousand Nigerian investors as shareholders. Cement Company of Northern Nigeria in Sokoto is at the moment going through the privatization process by the TCPC. At the end of the privatization exercise, 5 out of the 7 cement companies will be quoted on the Nigeria Stock Exchange.

This will bring the market capitalization of the cement industry to close of N2billion. At the moment, the capi- talization is over N1.5 billion. Capacity: The installed capacity of the industry is 5.00 million tonnes per year as at 1991, and the average capacity utilization from 1981 -1990 stood at 50.36%. The combined cement works have 21 kilns of which 10 are in the dry process. Only one plant burms coal due to the proximity of coal mines while the rest use fuel oil.

The industry employs over 9,000 direct workers. Production Performance: The performance of the cement industry in the last nine years has been above national industry average though production has been on the decline since 1982. All but one of the cement works have sizable reserves of limestone on site from which they quary, and
all the plants rely wholly on imported gypsum, one of the main raw materials. The third essential raw material for cement production is kraft paper which is also largely imported.

Compared to other industries, acement manufacturershave a local raw materials inputs of over 95%. Consequently a relatively small amount of foreign exchange is ex-1 pended on raw materials by cement industries which is the 4.5 gypsum ratio that goes into cement production. A high level of foreign exchange is however required for spare parts and other imputs like
kraft paper and refractory bricks

PRESENT SITUATION OF THE
INDUSTRY

Cement, like iron and steel, is a key factor for the development of any country especially a develop- ing one like ours. The progress of the economy in this sector is as
sessed by the amount of per capita cement consumption. A country like Turkey, for example, which is
self sufficient in cement production has a per capital consumption of 328 kg. Nigeria has a per capita consumption of about 50kg, that is only one bag of cement! Nigeria’s overall consumption of cement has been decreasing in recent years. This fact epitomizes the deterioration in the provision of housing, shelter and essential civil infrastructure.

With the present administration’s emphasis on Rural dev elopment and rehabilitation of public buildings the role of cement in achieving these laudable objectives cannot be over emphasized. However, production and capacity utilization of cement plants has been unsteady due to reasons l will discuss below. It is worthy to note that cement production first rose in 1982 and slowed down later in 1983.until it stabilized around 3 to 3.5 million tonnes. Inspite of the present economic squeeze, the construction industry maintains a reasonable degree of activity. This will be accentuated with the recent Govemment’s emphasis on rural construction an maintenance/completion of public
projects.

Areas of high cement consumption include buildings, roads, bridges etc. Qn the whole the country will require an estimated 7.5 million tonnes of cement per annum at peak demand in the early 1990s. Unfortunately, total local production is far from meeting thhe demand.

PRICING

This discussionwill not be complete without a mention of the current industry situation especially with regards to pricing. Over the years, cement prices had followed the general economic trend prevalent in the country by increasing steadily. The arrival of the Foreign Exchange Market (FEM) however exacerbated the situation, and open market prices shot up astronomically.

Unfortunately, the price hikes have been beneficial to cement distributors only. They (distributors) have had great for- tunes through profit margins that are far beyond those of the manufacturers. Blame for the high market price of cement has been apportioned to various groups.

Some blame the situation on the greed of the middlemen, while others blame it on the distribution system of the manufacturers. What we see how ever is the rule of supply and de mand at work and of course the exploitative natura of the Nigerian attitude. It is noteworthy that cement prices world over are not much better than Nigerian pices. More over, increasing consumer demands Engineering Focus, April-June, 1992
and high domestic utilization, have become key factors in cement pro duction in overseas cement industry.

In 1988 alone, over 1.3 million tonnes of cement were imported in
the U.K In West Germany, local price of cement ranges from US $66.21 per tonne. This gives a price in naira of N1191/tonne. This compares with the average price per tonne in Nigeria of about N1200 in the industry. In Hong Kong, price per tonne ranges between US $55.0-60 while the range in China is between US$46-$50. Pricewise therefore, the Nigerian Cement Industry is doing fine, considering international standard.

A carefully analysis of the cement industry will reveal that the root cause of the problem goes deeper than just manufacturing costs. The
gap between the demand and supply of cement is very instrumental to the pricing problem. It is notworthy however that if plant idleness is remedied, supply of
cement from existing plants could be virtually doubled and thereby meet up vith the estimated national demand. Most of the plants continue to face problems of equipment breakdown, spareparts and finance.

A combination of factors such as tight monetary policy and fiscal measures of government depreciation of the naira and poor state of vital public utilities make it impossible for the cement fims to produce at rated capacity, and thereby find it very difficult to finance the importation of spare parts and the five per cent of its raw materials, which at present, cannot be obtained locally. Any meaningful efforts to salvage the situation will be welcome considering the importance of ce ment to the economy, and the huge capital investment in the industry.
Fortunately, govermments in the past, have always felt concerned about the situation and made attempts to correct it. It is in this spirit that we set out here to consider various options for salvaging the situation.

Palliative Efforts during the year 1988, the Federal Military Government, concemed about the high cost of cement in the market, tried to remedy the situation through importation of cement. This solution was unsuccessful due to various problems, most important of which was unavailability of foreign exchange and its cost. Again Government has tried importation as a solution. The recent budget announcement making importation of cenment duty free has not succeeded either. The only solunon Hes tn tncreased capactty ultzaton of extstng plants.

Two other options for solving the problem discussed below are expansion of existing plants and may be building of new cement plants. Each of these possible options is examined and the factors for evaluating their costs, value added and industrial growth.
Increase.

Capacity Utilization of Existing Plants

The most feasible option to mitigating the rising cost of cement in the market is to boost supply by considerable increase in the productive capacity of existing plants. Several factors constitute a bottleneck to enhanced capacity utilization of cement plants. These have at various fora been presented to appropriate authorities through the Cement Manufacturers’ Association of Nigeria (CMAN).

The major problems have been the unavailability of required spare parts for effective maintenance and scarcity of foreign exchange to purchase the parts. Our technological base has not matured to the stage where needed spare parts are fabricated within the country. Most capital internsive industries have to continually rely on imported parts for maintenance
purposes. With the accentuating Scarcity of foreign exchange, spare parts acquisition is becoming more
problematic and consequently, productive capacity is declining. Necessarily and as a matter of urgency, steps should be taken to stem this tide. Other inputs into industrial production also witness irregularity of supply.

Utilities such as water, electricity, communications are generally very deficient, and these
contribute in no small measure in plant stoppages and down time. It is only by frontally tackling these problems that industrial productive capacity will be increased.

Expanding Existing Plants

Problems here are identical with those of building new plants.
Moreover, where most of the existing cement works are not producing at full installed capacity, expansion should not be the first step In order that any expansion program or new construction of plants would be meaningful, the existing plants should be first made to produce at full installed capacity.

Building New Plants

Considering the availability of the major raw material, limestone, in the country this option is very attractive. However, the cost of construction is not similarly attrac- tive. At the present exchange rate ofthe naira, the cost of constructing a 500,000 tonne plant in the country will be over N2.40 billion, at current international prices. The cost of one million tonne plant will be well over four billion naira.

Notice that all the equipment and technology will be inmported and thus require foreign exchange, thereby not contributing to the economy. Furthermore, construction time cannot be less than three years, during which the existing plants would have produced over 9 million tonnes with less foreign exchange inputs.

Recently, there have been calls for the development of mini-cement plants that would produce 200 tonnes per day or about 73,000 tonnes per year. While this option
appears attractive, our local raw materials are not amenable to the required processing as is the case in other third world countries, where the idea is beirng experimented. The cost of constructing a mini- plant capable of producing 10,000 tonner per annum is quoted at over NS.6 million in China. But this is because, all the equipment for such plants can be manufactured within
that country.

It is noteworthy that elsewhere in the developed world, no new plants are being constructed. Old plants are being refurbished, and the emphasis is on proper maintenance of existing plant for maximum production. The reason is the probitive cost of constructing new plants.

Economkc Deficiencies

Generally, there are inherent weakness in the cement industry that derive from the economy. These need to be touched urgently i.e. energy consumption for cement production is very high in the region of 100 to 110 kwh/tonne of cement produced. The industry requires 367.5 million kwh of energy to produce 3.5 million tonnes of cement annually. Increasing from 3.5 to our installed capacity of 5.0 million tonnes of cement per annum, the industry would require an estimated 400-520 million litres of fuel ot, a commodity which ironically is vanishing from our refineries.

The industry relies on electricity supply for 28 per cent of its energy consumption, while fuel oil provides 72 per cent. The present trendis an increasing diversion of fuel oil from the local market which together with the 58 per cent increase in price compounds the energy supply problem of cement manufacturers. Because of the high temperatures in the production system, cooling systems must also be very efficient. Thus cement production requires plenty of process watertor cooling Unreliable water supply from public utilities imposes additional costs tor cement manuractures in attempis to provide water for their cooling systems.
PROBLEMS

The preceding discussion amply illustrates the need for the continuous availability of cement in order for laudable govermment projects to be executed. Providing sufficient cement cannot be done through importation. In fact this source of cement must be discouraged for various reasons. The vagaries of international politics, the scarcity of foreign exchange aņd other related problems make such an option inappropriate for a developing nation.

Many nations that have the necessary resources for cement manufacture therefore make efforts towards self-sufficiency in cement production. The development of the cement industry has not been and cannot be smooth for now. Several reasons can be adduced for such a state of affairs. First, there exists a very poor concept of industrial and technological development in the country. The machinery and expertise to run the industries abound but the operations of the compa- nies are in many cases politicized. This leads to low nmorale and pro- ductivity or even total collapse of the companies in some cases.

Apart from the political reasons, the Structural Adjustment Program (SAP) also took its toll on the cement industry. The rapid depreciation in the exchange rate ot the naira has been most serious impediment to the growth of the cement industry. In order for the nation to achieve self-reliance in cement production, the industry must be protected especially. Given the over 95% local raw material content, the size of the capital investment, the contribution to the wealth of the nation, the employment generation and its multiplier effects

CONCLUSION

As earlier stated, two major strategies that will improve cement production are the refurbishing of existing plants to produce to ca pacity and the expansion of exist. ing plants. Establishing new plants is very expensive as the industry is highly capital intensive. Moreso the prevailing economic situation does not permit embarking on such a project. Another factor to improve the performance of existing plants is the restructuring of their financial structure. Capital restructuring by the shareholders will help provide funds for expansion programs. In this light the Government’s partial privatization of the industry has
helped.

For any industry to progress, efforts must be made towards research and development. The cement industry cannot be left our in this regard given the fast developments in technology. Standardization of equipment in the industry will enhance the development of the industry. The Cement Manufacturers’ Association of Nigeria (CMAN) is already very active in the formulation of areas of co-operation along these lines. Finally, I wish to reiterate the fact that no nation can develop industrially without a strong fnternalspare parts supply base.

As long as we depend on overseas supply of our spare parts and machinery, which at present is over 90%, we cannot hope to attain appreciable industrialization. The Iron and Steel industry is the only solution. This industry must be well developed if the cement and other industries are to grow. Our ambition at self-suf ficiency will always be stalled if our industries do not have the requisite supportive machinery and machine tools readily available from local Sources. Long machine break downs
and consequent loss of production shall be with us as long as overseas Sourcing of machinery and spare parts persists. We have the potential resources.

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