IPPA Nigeria &AfricanRoundtable.com Invites You to a Luncheon Roundtable on:Will Importation of Cement Drive Down Prices?
Featuring
Dr. Damilola Olajide University of Aberdeen, United Kingdom
Senior Fellow, Initiative for Public Policy Analysis (IPPA) Nigeria
Moderator: Mr. Thompson Ayodele, Executive Director, IPPA Nigeria
Date: Wednesday, 27th August, 2008
Venue: IPPA Main Office, 9A Adekunle Odunlami Street, Off Aina George, Ilupeju, Lagos
Time: 11am-1pm (Lunch will be served)
There has been shortage in local production of cement thus leading to rise in price. Responding to this, the Nigerian government lifted the ban placed on importation of cement by the previous administration. The latest move is seen an implicit acceptance of the gross failure of the 2001 policy of national self-sufficiency in cement production.
The policy did not achieve its end-view because it provided perverse
incentives to the industry operators. The government banned importation of bagged cement, and granted quota-based importation licenses for 8metric tonnes of bulk cement.
Since commencement of local production of cement in Nigeria in 1957, local production has never been able to meet demand, even in the mid-1980s when demand for cement was declining. Local production has remained at less than 50% of total installed capacity, which largely concentrates in just two plants.
Of the annual demand estimated at 18-million tones, local production can only supply between 6 and 6.5 million tons of cement yearly. The current policy, no doubt, is aimed at bridging the deficit of 11.5 million tonnes in the supply of cement, and temporarily reduces prices which has increased by over 300% since 1999.
The Nigerian cement industry contributes to the economy in various ways. As a major input provider, it provides linkages to other sectors of the economy, especially the building and construction. These potentials are yet to be seen in recent years. The privatisation exercise, which affected most of the cement firms in Nigeria, has not had the desired effects despite the huge concessions made by the government to the new private investors. It is now obvious that the promises of ‘new investments’ are nothing other than expansion of packaging facilities.
The government while announcing the lifting of the ban on importation maintained that the new policy would rejuvenate the cement industry, bring down the exuberant price of cement, stabilise supply and encourage investment. However, the extent to which they can do so efficiently depends largely on the incentives underlying government policies as they affect local production, distribution and pricing.
License-or quota-based importation in whatever form effectively limits the powers of the market to operate efficiently. It creates distortions and diverts resources allocation. As in the 2001 policy, the new policy may actually work against itself.
This event is free but strictly by invitation, to reserve a place please
email Michael@ippanigeria.org or call Segun on 01-791-0959 or 080 5670
6884