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Nigeria cement industry outlook for H2
Nigerian cement manufacturer, Dangote cement recently announced plans to issue a 50 billion0-naira series one and two notes under the company’s 150 billion commercial paper program. Funto Oluwasegun, Cement Analyst at Stanbic IBTC joins CNBC Africa to discuss the outlook for the cement industry as the second half of the year.
Thu, 19 Jul 2018 08:06:04 GMT
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AI Generated Summary
- The reasons behind the relatively high cement prices in Nigeria compared to other African markets
- Dangote Cement's dominance in the Nigerian market with a 67% market share and plans for additional capacity
- The untapped potential of the Nigerian market and opportunities for regional exports in West Africa
Nigerian cement manufacturer, Dangote Cement, continues to dominate the local market with a 67% market share and ambitious plans for further expansion. In a recent CNBC Africa interview, Funto Oluwasegun, Cement Analyst at Stanbic IBTC, discussed the company's financial strategies and the outlook for the cement industry in the second half of the year. Dangote Cement recently announced plans to issue a 50 billion-naira series one and two notes under its 150 billion commercial paper program, signaling a move to address financing costs and potentially strengthen its market position. Oluwasegun highlighted the reasons behind the relatively high cement prices in Nigeria compared to other African markets. He explained that the level of infrastructure required by cement producers in Nigeria, including providing their own power, roads, and transportation, justifies the current price levels. Dangote Cement, along with Bua Cement, are seen as companies with higher margins that could potentially absorb a price cut, unlike competitors in South Africa, which operate in a more mature market with lower margins. Nigeria, being a relatively new market for local cement production, enjoys higher margins compared to South Africa due to less competition and lower infrastructure development. The market in Nigeria is mostly an oligopoly, with three major players dominating the industry. Dangote Cement stands out as the largest player with plans to build additional capacity of 6 million tons, further solidifying its position as the dominant player in Nigeria. Despite concerns of oversupply in the market, Oluwasegun emphasized the untapped potential of the Nigerian market, characterized by a significant infrastructure deficit, favorable demographics, and low consumption per capita compared to other African countries. This indicates a strong growth potential for the market, with demand likely to catch up with excess capacity over time. In light of the Africa Continental Free Trade Area agreement, there is an opportunity for Nigeria to position itself as a regional cement producer for West Africa. Dangote Cement has already planned to start exports by building a Clinker export terminal, with La Farge and Bua Cement also eyeing export opportunities to neighboring countries. The expansion of capacity in Nigeria not only serves the domestic market but also aligns with the broader strategy of producing for the West African region. With Dangote Cement leading the pack in terms of capacity and market share, the company seems poised to maintain its dominant position in Nigeria and leverage its strength for regional exports in the near future.
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