Mr. Rabiu Umar is the Chief Executive Officer, AshakaCem Plc. In this interview with ABIOLA ODUTOLA, he speaks on why cement is costly despite the fact that the demand for it is higher than supply. He also harps on other industry challenges, key of which is multiple taxation. Excerpts:
Critics argue that since cement manufacturers produce more than the demand, the cost of cement should not be this high. What’s your take on this?
I wouldn’t want to go into that. It is very controversial because there is an emotional part of it and the real part of it. And typically, we tend to be more emotional. I don’t want to go into details but it is not quite true that all our raw materials are locally sourced. You can find out how much cement is in Chad and Niger in dollar and make the comparison.
What is the relationship between the cost of cement and cost of housing? Is it true that the increasing price has made it difficult for government to build low-cost houses?
Cement is less than 20 per cent of the total cost of building construction. The global average is six per cent; this is a verifiable and scientific information. Depending on the building practices, for instance, not everyone uses hollow blocks; some use the formwork. That way, there is a lot of saving. So, there is a lot of building practices that help to bring down price but when you look at the price of blocks and cement, the global average is six per cent. In Nigeria, it may be seven per cent, but I don’t think it is up to eight per cent. Typically, people think if the price of cement is half of what it is today, it increases affordability or the number of people that can afford to build their own homes. In a sense, you can say yes, but it is only six per cent. The rest of the 94 per cent is in the finishing. You can build and finish the carcass of your building and you are just 30 per cent of the way, including the concrete, beam and all. You find out that the cost of one door will probably build the walls. That is where most of the costs go.
On November 4, 2014, our plant was attacked by the insurgents. Obviously, they were trying to find explosives. Exactly one month after that, there was another attack. Of course, the default thinking was for the company to shut down during that period until things calm down, but the management of LafargeHolcim took a decision to keep it open
How are government policies impacting on your business?
I think there are two levels to it. Government policies in a sense have helped us to operate because without a framework, you cannot run. But is there room for improvement? Of course, there is. One of the key things that are really confusing is multiple taxation. There is the federal, state and local government tax regimes. And sometimes, when you stack up everything, it is a bit confusing to understand at what level it stops. Multiple taxation is one of the key problems affecting business, that every business owner talks about in the country. It also brings about uncertainty; you plan something you want to do this year and suddenly, something comes up that is not in your plan, but can have an impact on your planning and result.
What does the cement industry contribute to the GDP?
It depends on the level you take it from but it’s between N18bn and N20bn a year; it depends on the demand. It was a little higher the previous years but it has now dropped.
How did the lull in the property market affect cement sales during recession?
Nigeria went into recession and anybody who lives in Nigeria knows the impact. The cost of anything that has any correlation with foreign exchange has doubled. That is the reality. The income left for a typical Nigerian company, after having taken care of basic needs, is thus infinitesimal, and naturally, there is no way it won’t have an impact on certain sectors that are not immediate, like food. And then of course, the economic situation means that the market is not growing as fast as expected and I think that’s a publicly available information.
How were you able to cope at the height of Boko Haram hostilities in the North East?
On November 4, 2014, our plant was attacked by the insurgents. Obviously, they were trying to find explosives. Exactly one month after that, there was another attack. Of course, the default thinking was for the company to shut down during that period until things calm down, but the management of LafargeHolcim took a decision to keep it open because as you may know, stopping and starting an operation of this magnitude is not really a day’s job. So, even if we shut down the operations, the staff are still here; you can’t have 700 people suddenly pack their bags to go somewhere.
Looking at the post-insurgency era, how are you contributing to the redevelopment of the Northeast region?
To start with, we make cement and most of the destructions in the area were civil in nature. That is aside from the psychological and socio-economic aspects. So, naturally, we are contributing in that regard. If you remember, there were more than two million people who were displaced by the insurgency and by virtue of keeping this operation running, we are helping to make sure there is enough economic activity in the area.
Sometime last year, you singed an MoU with some communities. How far have you gone with the implementation of that agreement?
The implementation is ongoing. We ran into some misunderstanding. Everywhere you operate a mining activity, you must have a community development agreement, which defines the basics of what you must do; but you don’t limit yourself to only what is in the agreement. We ran into some hitches but the agreement is being implemented, while we are trying to do more. It is not everything we do that is in black and white. The medical thing I talked about earlier is not part of the plan but we have been implementing it. The MoU contains a five-year programme, but what we try to do is make sure that whatever we want to do within a year, we do it before the year runs out, so that the community can start enjoying the benefit.
