Ministry of Industry and Commerce in Nigeria declared Nigeria is the worldwide largest cement importing country, whose annual demand of cement is about 19 million tons, but its local producing capacity is about 9.6 million tons, so rest 10million tons should be imported from foreign countries. In order to reverse the tide, the government of Nigeria has released some policies which encourages local manufacturers to invest on cement production, as the government of Nigeria expect they could implement self-balancing until 2013.
Mohammed -the minister of the Ministry of Industry on trade and investment held a meeting on Dec. 21st to discuss the continuous increasing of cement price. And National Mining Company of Libya, Libya Imported Building Materials Company, the Libyan Cement Production Companies and other cement importers participated this meeting. While during the meeting, Mohammed denoted at present Libya need to import 5 million tons cement to meet the needs of local market. So they will open private enterprise importing and build combined cement producing company to meet this demand, and he will cancel all the limits of cement importing. Now the supply is much less than demand for Libya, so the cost of importing cement is much higher than that produced locally, and as their lacking volume approach for 3 million tons, cement price used to be as higher as 20 dinar per bag, thus various cement importers requested to cancel all the importing limits.
一． Cement resource condition in Nigeria
The main raw material for cement production is limestone, gypsum and Kaolin. While Nigeria has a 837million metric tons of limestone which has the following characters: high purity, shadow buried depth, easy exploiting. And the lime stone mainly located in Sokoto area ( could be continuously exploited for 106 years), Yandev, Lgunmale, Ogbolokuta areas( could be continuously exploited for 75 years), Ashaka area (could be continuously exploited for 56-70 years), Nkalagu area(could be continuously exploited for 50-70years), Mfamosing area, Ekkpani area(could be continuously exploited for 50 years), Ewekoro area, Shagamu area(could be continuously exploited for 50 years), Ewekoro area and Ukpilla area(could be exploited for 30 years).
Meanwhile the storage of gypsum is about 15.65 billion metric tons. The character is low purity of only 55% which is much less than the 98% purity of importing gypsum. And it is mainly located in Potistum & Damboa area, Wunno area, Shelleng area, Bauchi area and Ifo area.
Others, the storage of kaolin is about 29billion metric tons and it is very suitable for cement production due to his crystallinity, color, luster and purity. It is mainly located in Kankara area, Onibode, Lishabi, Bamajo, Miroko area, Joss & Ropp area, Maiduguri & Biu area, Dawakin, Tofa, Minjibir, Tsanyawa area, and Ifon, Omiafara areas.
At the same time, Nigeria has a abundant storage of industrial burning material of oil, natural gas and coal used during cement production. The appeared oil store is 34billion buckets, natural gas store is one hundred sixty five thousand billion cubic feet, and the coal store is about 3billion tons.
二. Nigerian cement industrial development and privatization process
Limestone storage of Nigeria is just a little less than that of Sahara desert district. Nigeria holds all the raw material and industrial burning material, the storage is abundant, and producing potential is huge.
Cement industrial development could go back to Dec. 20th of 1957 the first cement factory – Niger Cement Company was built in the Nkalagu district which located at 50 kilometers east of South Eeugu State. Before that, Nigerian cement completely depends on importing, is mainly imported from Indonesia, Thailand, Spain and so on. Along with cement demand increasing in Nigeria, during 1957-1980 they built another 6 cement production company gradually, after that no more new cement factory is built ( at present cement factories became the first passel of industrial enterprises which produced replacement of importing products in Nigeria. ) Now there are seven cement factories and total producing capacity is 5 million metric tons/year. And this seven cement factories are:
1. Niger Cement Group Company located in southern part of Nkalagu area was built in 1957, whose equipment supplier was F.L.SMITH, producing mode was dry process, and designed producing capacity was 600 thousand metric tons per year.
2. WAPCO located in western part of Ogum was built in 1960, two branch of it separately located in Ewekoro and Shaganw area. Its equipment supplier was POLYSINS, producing mode was dry process, and designed producing capacity was 1.6 million metric tons per year.
3. Calabar Cement Company located in Southern part of Calabar was built in 1963, whose equipment supplier was MIAG, producing mode was dry process and designed producing capacity was 250 thousand metric tons per year.
4. The Bendel Cement Company Ltd. Located in Western part of Okpella area was built in 1964, whose equipment supplier is POLYSINS, producing mode was dry process, designed producing capacity was 450 thousand metri tons per year.
5． CCNN of Nigeria located in Northwest part of Sokoto area was built in 1967, whose equipment supplier was MIAG, producing mode was dry process and designed producing capacity was 500 thousand metric tons per year.
6．Ashaka Cement Group Company located in Eastern part of Ashaka area was built in 1979, whose equipment supplier was POLYSINS, producing mode was dry process, and designed producing capacity was 700 thousand metric tons per year.
7．Benue Cement Group Company located in Southern part of Gboko area was built in 1980, whose equipment supplier was POLYSINS, producing mode was dry process, and designed producing capacity was 900 thousand metric tons per year.
The cements which are under construction or planed to built are:
1. The richest Dangote Family was constructing a huge cement factory, which located in Lokojia area. Total investment of this factory was 850 million US Dollars, and the designed producing capacity was 5 million tons per year and it was planed to be in operation in 2005.
2．The cement factories which are planed to construct are: The cement factory located in AKWA IBOM STATE with designed producing capacity is 500 thousand tons per year, the cement factory located in IMO with a designed producing capacity 500 thousand tons per year, and the cement factory located in Lagos State with designed producing capacity of 750 thousand tons per year.
Since Jan. of 1988, Babangida general sparkplug privatization ( at that time 95 government owned companies implemented privatization including insurance company and banks, but in 1993 the privatization was stopped), Nigeria cement factories went through a process of “ full government owned - public-private joint management together with joint-stock – stock converted to listed equity shares – complete privatization. The BPE privatization plan which declared by President Olusegun on position denoted that all the cement factory in stock market and commercial bank are listed to be first sate privatization. )
At present the cement factories with complete privatization in Nigeria are:
1. Ashaka Cement Group Company and West Africa Portland Cement Group Company have been 100% purchased by BCI of England.
2. Bendel Cement Company Ltd. and CCNN of Nigeria have been 100% takeover by ScanCem International Company.
3．Benue Cement Group Company has been purchased by local Dangote Family. But due to long-term ethnic strife ( Dangote family is HAUSA, while Benue is Tiv race, and HAUSA is the largest race in Nigeria which embrace Islam, while Tiv race is the fifth largest race of Nigeria, which embrace Christianism, as aculeated religion and national conflict, the strong psychological conflict appeared in the heart of local residenters), the production status is not good.
At present, the cement factories which haven’t been completely privatization are:
1．10% stock authorities of Niger Cement Group Company are purchased by ScanCem International Company.(The question of rest authorities’ acquisition is under negotiation of government of Niger and ScanCem International Company in Norway.
2．Calabar Cement Company has denoted through media that they have the privatization willing. The investors of Italy, Turkey, and Mexico are willing to purchase.
三． Cement Supply, Cement Demands and market condition of Nigeria
At present, worldwide average cement production cost is USD 30-50 per metric tons, the highest production cost in developed country is USD55 per metric ton in Germany. At present Nigerian cement production cost approach for about USD100 per metric ton (The sale price Nigerian cement is USD125-140 per metric tons, and the price of northern part is a little higher than southern part. ) Main reason are:
1． Basic equipment of Nigeria is weak and the cost of electricity, water and transportation is very high.
2．Affected by three main elements of manufacturing cost: fuel 33%, spare parts 20%, and electricity 9%, Nigerian burning oil cost keeps increasing (at present official burning oil cost is USD 0.2 per liter); fuel and fittings are lack, electrical equipments are behindhand, and due to serious lacking, electricity cost is increasing gradually. Concerning this, the power department of Nigerian government, national oil company and some relevant departments were in a great quandary causing cement supplying are lacking for a long time.
3．Nigerian cement factories are built before 80s of last century, and the stockholder of most factories were government. Low efficiency of government operation and lack investment for improving the equipment which makes the equipment behindhand, maintenance cost added, and manufacturing cost increased.
4．Managing level and technical level of Nigerian cement factories are behindhand, and WAPCO the largest cement manufacturer still takes use old wet process until now.
5．Cement manufacturers take use coal as fuel in foreign countries, while at present Nigerian cement manufacturers take use fuel as elding, the manufacturing cost is much higher than using coal.
6．According to the principle of international division of labor and resource optimization, though Nigeria has the resource advantage locally, but the unreasonable division of resource caused cement industry misshapen development for a long time, the cost advantage couldn’t appear.
7. Importing cement impact strongly national weak cement industry.
The designed producing capacity of Nigerian cement is 5 million metric tons per year, but as the equipment is old, the managing is weak, the technology is behindhand, so the factories stop manufacturing frequently especially that Nigercem Cement Company Plc.、Bendal Cement Company Ltd.、Calabar Cement Company Ltd. hardly stop manufacturing for as long as 6 years (this ignoring of industries only could be seen in Nigeria), and cement output of Nigeria was gradually decreasing since 90s of last century. In 1994, total output is 2.6 million metric tons, in 1995, it is 2.58 million metric tons, in 1996, it is 2.53 million metric tons, in 1997, it is 2.52 million metric tons, and in 1998, it is 2.2 million metric tons. During 1994-1998, Nigerian general cement producing capacity decreased from 52% to 44%. (During this time, mainly WAPCO and Ashaka supply 70% cement output locally. ) Compared with the same period of last years, national cement demand of 1994, 1995, 1996, 1997, 1998 are 8.2 million metric tons, 8.5 million metric tons, 8.8 million metric tons, 9million metric tons, 8million metric tons. From this to see that the supply is much less than demands in Nigerian cement market.
Complying with gradually deepening of democratization, engineering market develops cosmically, cement demands of Nigerian market increase gradually. At present local cement demands of Nigeria is 9.9million metric ton per year, its producing capacity could only meet 45% local demands, rest 55% demands depend on importing. At present, the cements are mainly imported from Indonesia, Spain, Thailand, America, Togo, Japan, China and so son. And the importing volume of Indonesia to Nigeria account for 35%, which is the traditional importing country, while that of spain is 17%, Thailand is 15%, America is 15%, Togo is 5%, Japan is 4%, China is 2%. However, cement affixation of developed countries are normally higher than developing countries. Local bureau of Nigeria forecast that in 2005 local cement demands could reach 15million metric tons per year. (The Tiger cement which produced in southern part Calabar of Nigeria has very good reputation in Nigerian market.)
四． Cement importing, exporting and encouraging investment policies in Nigeria
1． In the aspects of importing and exporting
In the aspects of exporting, Nigeria just has little cement exporting at present, but the government is still promoting cement exporting. Depends on abundant raw material storage, government of Nigeria thought cement exporting will become a new economy increasing.
In the aspects of importing, Nigerian government has the negative attitude. At present, Nigerian government has forbidden bag packaging cement; just allow single order volume above 10000 metric ton bulk cement importing. Concerning the bulk cement importing, government has declared the last order to Local cement importer especially large cement importers and request them to invest main fund to national cement industry developing in 18 months on July of 2001.
At present, cement importing tax has adjusted from 5% in 1993 to 10%. And the cement importing seaport should be Port Harcourt Port, Warri Port, Tin Can port, Apapa Port, Calabar Port. While national cement market of Nigeria has been monopolized by Flour Mills of Nigeria Plc. and Dangote Cement Terminal, which imported bulk cement from Indonesia, then they will package the cement into bags and sell to various cities locally. Now main cement importers of Nigeria are:
1)Gateway Paper Mills Nigeria Ltd. located in Otago area of Ogum
2)Atlas Rebagging Cement Co. located in Harcourt Region of Rivers State
3)Rock Cement Company ，located in Harcourt Region of Rivers State
4)Eastern Bulk Cement (Eagle Cement) ，located in Harcourt Region of River State
5)Ibeo Group, located in Harcourt Region of River State
6)Continental Cement Company ，located in Tianqian Island of Lagos State
7)Dangote Cement Terminal located in Apapa port of Logos and Harcourt Region of
8)Flour Mills of Nigeria Plc (Burham Cement) , located in Apapa Region of Logos
2． In the aspects of encouraging investment
Foreign investment has entered into Nigeria for hundreds of years. Nigeria set us mining resource surveying group to survey and exploit the mining resource. During 1903-1905 Nigeria began to survey and exploit tinny resource, during 1906-1916 Nigeria began to survey and exploit coal resource in Enugu state, in 1914, Nigeria began survey and exploit gold, niobium, tantalite in Niger and Kogi State.
The NIPC is the main department who is in charge of investment in Nigeria, and main mining exploiting department is MSMD. NDCC made a special law –《Nigerian Enterprises Promotional Law》to treat the investment directly from foreigners. The mining of Nigeria could be divided into: fuel kind, metal kind, building kind, industry kind and Gem Kind, including the raw material of Limestone, Gypsum and Kaolin which are the raw material for cement production and belong to building kind mining resource. Now Nigeria has fully open its solid mining exploiting investment and the duties of solid Ministry of Mineral Resources is to supply the licensing to private investor for exploiting.
According to 1998 Revision Laws ( Revision on 1995NIPC Law) of NIPC, except military affairs, security, finance, medical narcotic drugs and psychotropic substances areas, foreign investors could freely choose any projects, and the investing capital could be cash, equipment, equipment fittings, raw material or other assets, meanwhile the foreign investors could 100% control the stock. At the same time, Nigeria Foreign Exchange Controls Item 17th of 1995 law denoted that they have set up AFEM in order to coordinate with local financing of foreigners, so investors could exchange local currency and foreign currency in Nigeria and the bonus, investing fund and investing capital removing could be remitted freely through official foreign currency market. And during the operation, only some relevant proving documents should be submitted, no need of license from ministers of Nigeria
The application process of investing enterprises is as follows:
First Step: they should apply for Register Branches and build company licenses, and prove their capability of technology together with fund.
Second Step: The applicant apply for PR which allows them to prospect the mining included in the mining lists scientifically and synthetically under the PR.
Third Step: They should apply for EPL from the government the locus where the mining is, using ground should be not more than 22 square metric meters.
Fourth Step: If the mining resource inside EPL reaches commercial quantity, the applicant could apply for exploiting license.
At present, the encouraging policies that Nigerian government denoted are:
1) Tax concession during 3-5 years
2) The rent cost of mining could be put off.
3) The expenditure during exploiting and prospecting could be capitalization.
4) Relevant basic establishment could connect to exploiting point of mining.
5) Foreign investors could 100% control the stock.
Others, the enterprises which operate mining exploiting together with manufacturing
reach a certainly extent, the government could offers:
1) Tax preference during developing of Enterprises
2) If the enterprise could build factory in the export processing zone or freed trade
zone, they could enjoy further tax concession
五．Some proposals for Nigerian cement exporting and investment
1．In the aspects of exporting
China has began the trade with Nigeria in 1953. While in 2000, China’s cement exporting volume to Nigeria is 17642 metric tons, it is 21515 metric tons in 2001, and it is 28615 metric tons in 2002 (at the same time, the exporting volume of Kaolin is 18.5 metric tons, 22 metric tons, 28.2 metric tons). Though the price of Chinese cement increased a little recently, our cement manufacture cost is only USD 50 per metric tons, thus we should take use the cost different between Nigeria and us, we could have more benefits.
By the dint of Nigeria promoting of privatization process and encouraging investing policies, depending on Nigerian resource advantage, using our advanced technology, scientific managing and rich experience, investors could consider to invest gradually and gain long-term benefits. Based on the long-term huge lacking on cement market and wealth gap in Nigeria, we suggest cement industry investment could begin from the middle extent. The reasons are: 1st, this could meet part local demands in time, 2nd, Nigerian cement market is not mature and perfect, so there may lots of unpredicted elements, avoid to suffering loss for investing a large extent. Chinese investors may review the Nigerian cement market by themselves, and then decide the extent of cement factory. At the same time, the following points should be paid attention to during the investment of Nigeria:
1)Cement investment should catch up and decide quickly, at the same time the main product should be middle-level cement meanwhile develop Medium and High Grade cement. The reasons for these are: 1st, this could solve part demands of Nigeria in time, and earn some benefit of cost difference from the high grade cement market. (At present Nigerian high grade cement mainly depends on importing). 2nd, as the difference between cement supply and demands is only 5 million -6 million tons, and some Nigerian cement factories are planning to build new project, developing high grade cement market could avoid the over competition risks after the lower grade cement market are full.
2) We should be very familiar with local encouraging policies. For example, after investing on local basic equipment construction, government will give corresponding cost discount; during the production, the raw material rate approach for a percent, the government will give the tax preference; and the local workers reaches a number, the government will give relevant encouraging policy. Nigerian Cement Industry Investment is divided into Mining resource exploiting and cement manufacturing. If the enterprises invest on mining resource exploiting, they should coordinate the aftercare problem of residents in the mining area. If the enterprise invest on cement manufacturing, they could consider to build exporting enterprises in process zone or free trade zone, which could adequately enjoy the tax concession from various states of government, and part of raw material imported for manufacturing could enjoy the VAT concession, and the enterprises could try to get developing fund and interest free loan set us by local government for encouraging exporting; besides this, if the exporting account of exporting type enterprises could account for over 50%, the enterprises will be easier to get “Leading enterprises” license and relevant concession. At present, Vertical Kiln and Rotary Kiln technology used during national cement manufacturing still have a certainly technical advantage in Nigeria.
3) Reasonable analysis the investing cost in Nigeria. As Nigerian basic establishment is weak, so when calculated investing cost, the enterprises should consider completely, especially water, electricity, transportation, etc. basic equipment (behindhand basic advantage bring negative affection of raw material transportation and finished products damp proof, moisture proof and not suitable for long storage, and in Nigeria, many cement produced locally are stored over 2-3 months, then be used as lower grad cement). Now the exchanging rotes of Nigerian official foreign exchange market are very difficult, (Foreign currency is seriously lack in Nigeria, the expenses and receipts of government are deficit for years, and foreign loans are too much.). We suggest considering foreign exchange rate of free foreign exchange market while calculating the investing cost. And investors should make full cost auditing, market analysis and risks evaluation.
4) The governmental corruption is very serious in Nigeria; its federal system has many politics, which cause irregular of Nigerian market. It should be careful to enter into Nigerian market, don’t progress eyeless to chasing the largest benefits. Our investors could consider cooperating with Nigerian investors to transfer part risks, and this could make up the unknown for local situation. But Chinese investors should carefully audit the honor and operating situation of the partners, trying to finish cooperated items, well defining cost, risk and benefits partition of both sides.
5) According to Nigeria situation, Chinese enterprises should pay attention to coordination of local government and labor union. As Nigerian labor union has very big affection and strong rallying point. Nigerian government set up MECP which made lots of laws. Such as 《Labour Act. Cap.198 LFN》、《Trade Disputes Act, Cap.432 LFN》、《The Workmen's Compensation Act Cap.470 LFN》、《National Salaries Incomes and Wages Commission Decree》、《Nigeria Social Insurance Trust Fund Decree》and so on. Among them, some rules are as follows: Employee’s insurance request employees to pay 2.5% of salary standard while employers pay 5% for insurance; concerning work injury of employees, Nigerian government regulate if the employee died in working, the employer should report to relevant department in 7 days; employees are disable during working, employers should pay for full cost, and the highest compensation to workers could be 67.5 times of employees’ salaries. Thus investing in Nigeria, the enterprises should be familiar with all relevant labor regulation, carefully sign contract of employment, serious implement various rules for avoiding economic and manufacturing losses for employees’ dissension.
In a word, investing in Nigeria is that there are high benefits complying with high risks. Chinese enterprises should be careful to invest in Nigeria, pay attention to control the cost, coordinate various relationship, acquaint local policies and laws, understand local market, national condition and customs (Nigeria is a multi-nations country, conflict between nations is always a prominent problem), and we should know your opponent and your side and shoot the arrow at the target. If we could well do according to above suggestion, Chinese enterprises will have our own world in the Nigeria full of chance and challenge.