High Energy Cost Inducing Hike In Cement, Other Locally Manufactured Products – CPPE
The Center For The Promotion Of Private Enterprises (CPPE) has said that high energy costs have made local production in the Country expensive and uncompetitive, especially in the cement industry.
The Centre noted that high energy costs are responsible for a soaring hike in the prices of cement and other locally made products in the country.
Cement production is highly energy intensive with gas being the major energy source and unfortunately priced in dollars for manufacturers in the country who in turn sell their products in naira, to centre explained.
Chief Executive Officer of the CPPE, Dr. Muda Yusuf said this when he reacted on the comments on the floor of the House of Representatives on cement prices which portrayed cement manufacturers in a very bad light.
He explained that energy costs are a major predicament for domestic manufacturers.
He made it known that the implication of that for production costs is better imagined, especially in the light of the plunge in the value of the naira.
He went on to stating that the logistics cost of cement distribution is humongous, given the escalating cost of diesel and the state of the roads.
“Exchange rate depreciation is taking a huge toll on the cost of imported components of production inputs, including spare parts and machineries. Cost of funds is mounting as the Central Bank of Nigeria, CBN continues its aggressive monetary policy tightening,” he said, adding that the latest headline inflation for February was 31.7 per cent.
He said that all these are variables which are not within the control of the manufacturers and which have a profound impact on production and operating costs.
“Admittedly, the risk of profiteering increases with monopoly power in any economy and in any sector. This risk exists in the Nigeria cement industry as there are few dominant players. But this is a regulatory issue that could be addressed within the framework of the Federal Protection and Competition Act of 2018.
“The Federal Competition and Consumer Protection Commission [FCCPC] has a responsibility to ensure compliance with the Act to ensure the protection of the interests of consumers and the public. If there are proven lapses in this respect, the FCCPC should be held to account.
“Meanwhile, the current ex-factory price of cement by the major players is less than N7,000 per bag. It follows that pricing issues and the culprits could also be within the cement distribution chain over which the manufacturers have limited control.” Yusuf further stressed.
“It is a dangerous thing to do, given the huge stake they have in the Nigerian economy and their enormous contributions to the economy. We plead with the leadership of the house to ensure moderation in the use of language to avoid adverse consequences for investors in the economy, going forward.
“It is even more troubling that the members have not listened to the manufacturers before rushing to judgment and castigating the manufacturers,” he said.
He noted that the business of manufacturing is perhaps the most challenging enterprise in the contemporary Nigerian economy.
“Many foreign firms in that space have either exited the country or downsized their operations,” he said.
“We appeal to the national assembly to always extend due courtesies to investors in the economy in the course of their legislative duties. The private sector plays a very critical role in the economy. They account for over 80% of the country’s GDP, about 90% of the employment and over 70% of the government revenue. They deserve to be addressed with respect, courtesy, civility and fairness. This is without prejudice to the imperative of compliance with extant laws and regulations as well as responsible corporate citizenship by the investors,” he added.
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