Is Dangote Cement Overpriced? – Omosehin Omolade
On a recent journey back to school, I overheard a fascinating conversation between two passengers debating the cost of Dangote Cement.
The discussion began as we traveled from Egbe, Yagba West LGA, Kogi State, to Anyigba, Dekina LGA, Kogi State, and heated up as we passed through Iluhagba, Ijumu LGA, where a new cement factory, MANGAL Cement Factory, has been established. This factory is seen as a potential competitor to the longstanding Dangote Cement Industry, raising questions about pricing and competition.
One of the passengers, a contractor with insights into global cement prices, suggested that the entry of MANGAL Cement Factory might challenge Dangote Cement’s market dominance. Despite Dangote already facing competition from BUA Cement Industry, located in Okpella, Edo State, the contractor noted that these factors have not significantly influenced Dangote’s pricing strategy within Kogi State.
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Intrigued by their conversation, I began to wonder: if Dangote Cement sources its raw materials locally, shouldn’t the price be more affordable within its manufacturing state? To explore this, I conducted an impromptu survey among the passengers.
One passenger argued that Dangote’s higher prices stem from the need to import production tools. Despite local raw materials, the cost of importing equipment and the unfavorable exchange rate necessitates higher product prices to cover these expenses.
Another passenger countered that if import costs influence local prices, they should similarly affect the pricing in other African countries where Dangote exports. He noted that Nigerian contractors sometimes prefer imported cement, finding it cheaper than Dangote’s offerings.
A different perspective came from a passenger who suggested that location-specific challenges, like transportation difficulties and regional accessibility, impact cement prices. She highlighted that transportation from Obajana to accessible areas like Kabba might be cheaper than to remote areas like Mopamuro or Isanlu, where poor infrastructure and security issues drive up costs.
This view was contested by another passenger, who argued that transportation costs should be factored into the export prices as well, thus keeping domestic prices competitive.
Further research revealed public discontent over Dangote’s pricing. In August 2023, Nigerians criticized Aliko Dangote on social media platform X (formerly Twitter) for allegedly offering lower prices to other African nations than domestically. In response, Dangote Cement PLC stated that their prices in Nigeria are comparable to or lower than those in other West African countries, attributing discrepancies to retailer markups and inflationary pressures.
By February 2024, major Nigerian cement manufacturers, including Dangote, BUA, and Lafarge, agreed with government officials to cap cement prices between ₦7,000 and ₦8,000 per 50kg bag, depending on the location. This agreement aimed to stabilize the market and make cement more affordable.
In conclusion, while Dangote Cement’s pricing may seem high, several factors contribute to this perception. These include import costs for production tools, regional transportation challenges, and market dynamics.
To ensure fair pricing, cement manufacturers should implement a price monitoring mechanism and sanction non-compliant retailers or distributors. This would help balance the interests of manufacturers and consumers, fostering a more transparent and competitive market.
