Tuesday, January 01, 2013/ Olufemi AWOYEMI, Proshare
On December 28, 2012, Thisday published a story that was more of a rebuttal of claims of a cement stock pile in the country.
It will help the public to know that the issue at stake is more about the overall economic development of Nigeria and not about these companies. For one, this is about a country that made a conscious and deliberate decision about backward integration as a national economic development policy. As far as I can recall, this has not changed and should not for we have an advantage in this area in Africa and beyond.
There is an obvious misinformation made available to the Ibeto Cement Company that prompted this story it would seem. For one, there is no turnaround maintenance ongoing or planned at the BCC Gboko plant that would have triggered a shut down of operations (and even at this time, there is ongoing work on the new lines being opened for the old cement factory). Second, Their is no LPFO shortage at the BCC Gboko plant as verifiable data reveals that it still has 20.7ml is stock on hand given that it fully runs on LPFO for obvious reasons - an expensive option.
Third, the issue goes beyond Ibeto Cement - quite frankly, the discussion is much more about plain sovereign economics - at any stage, other countries will have cost and import advantage over others (either as a function of economies of scale, resource or production cost) and in this case, it does not apply to cement alone - you can look at oil, cassava, tomatoes, fruit juice, cocoa, chicken etc and you will see why it can be easier to import than produce.... especially where you have to deal with significant infrastructural deficit cost in terms of haulage costs further accentuated by diesel prices, high vehicle maintenance costs due to bad roads, delays in efficiency, high LPFO cost relative to Gas, absence of coal as a commercially viable alternative and the duties on Gypsum and related staff cost.
As a country, we need to take three decisions that are critical - One, a conscious decision to own the value chain in raw materials that are God-given and available to us as a sovereign nation; two, to understand that we will only build on our competencies if we invest more in our capital budgets to upgrade, build and enhance our infrastructural capacity as a nation, and third; we must find a way to manage a parallel production/import regime with a terminal date for imports (well monitored to ensure that quotas are not exceeded) as a deliberate means of averaging out the economic cost to the end users and promote berth of new plants to explore, exploit and expand our limestone reservoir – all carefully skewed to attract higher taxes and duty up to a terminal date when it can become viable to produce and compete with other nature endowed producing nations.
This move will fit into the plans for power, rail transport, road network, gas and oil 'privatisation' and investment in infrastructural development. The argument should not be about Ibeto, Lafarge and Dangote, but about an economic ideology and philosophy that ensures Nigeria can maximize its potential. History must be carefully contextualized in order to derive the benefit of recounting it.
What we face is a clear existential choice between investments in sustainable value-chain extraction business or to be a sovereign that consumes and relies solely on imports. It is an argument that has been resolved by the actions of the USA, UK, USSR, India and other forward looking economies and Nigeria must not shy away from resolving its own. We have some many other sectors of the economy that can benefit significantly from the recalibration of the priorities, plans and position of the GON.
This is definitely not about a monopoly in the industry or about participants, who can and should co-exist with a clear transition plan that rewards first movers of the government economic policy and the price adjuster/monitor that now exist in the market. The local production industry is suffering at this time with a lot of investments at stake.
The current exchange is an excellent expose necessary to refocus the nations attention on what is required of the sovereign on a matter that is all about making a choice not on a dispute between two competing business interests but on what the nation wants to be - either a net value creating sovereign nation or a net consumer dependent nation.
We cannot afford to engage in distractions as the debate unfolds and we should all pull together to help the government appreciate the need to step in to resolve the problem. If anything, it is an opportunity to engage for which we will gladly contribute. Happy New Year!