A recent report by Cardinal Stone has forecasted that cement prices in 2024 will remain high, despite a reduction in prices by BUA Cement in October of the previous year.
The report, titled “Nigeria Cement Rebounding from a Tumultuous Year,” highlighted the challenges faced by the country’s cement industry in 2023. These challenges included issues like the poorly executed naira redesign, leading to cash scarcity, currency devaluation in June, and adverse weather conditions during the third quarter.
Regarding pricing, the report suggests that cement prices will continue to be elevated in 2024. This is attributed to producers aiming to offset operational costs, volatility in the forex market, and persistently high inflation.
However, the report also projects a rebound in the sector’s performance in 2024. Factors contributing to this rebound include an increased infrastructure budget for 2024 amounting to N1.32 trillion, the establishment of the Infrastructure Support Fund (ISF) by the Presidency, active implementation of the African Continental Free Trade Agreement (AfCFTA), and increased production capacity.
While acknowledging the possibility of a price war in response to BUA Cement’s price reduction in October 2023, the report deems it unlikely but not impossible.
It stated, “Barring a potential price war between players in response to BUACEMENT’s ex-factory price slash, we maintain that average cement prices would remain elevated in Q4’23E and FY’24E as players aim to protect their margins from rising operating costs occasioned by still-high inflationary pressures and strong volatility in the foreign exchange.”
