What Can IBETO do?

[oseitutu]

Now that Ibeto Cement Importer Limited has been given go ahead to import cement, what can he do? In my view, I would have hoped an ultimatum should have been given to him to start manufacturing cement locally within a set period or that the company should own up to 30% equity in at least one local company that manufactures cement or that 50% of the cement they sell has to be locally manufactured, with a further 10% increment yearly until importation ceases completely.

[RethinK2.0]

i think its a challenge to the management of companies like Ashaka cement to be more pro-active and find ways to rise above competition. Afterall early this year, all the talk was about favourable govt legislation ofr cement makers, yet Ashaka's profit declaration was declining. Even Wapco flattered to decieve.

[Gengen]

First of all, the issue of cancellation of Ibeto's cement importation rights is political. As anything in politics, I do not claim to have full information. There is a lot of misinformation in the whole issue.

The questions (and some answers) are below:

1. Was Ibeto previously given cement importation rights before now? - Yes
   
2. Why was the rights cancelled? (OBJ's govt. side) - There was a petition that "alleged that Ibeto has been circumventing the policy of allocation as regards the bulk cement import by obtaining permission to import unlimited quantity of cement for 10 years.
   The petitioner claimed that Ibeto has not shown proof of investment in local cement manufacturing or have any factory under construction as being bandied by its management."
   
3. Did Ibeto have any factory under construction? - Yes/No. Ibeto went into patnership with the Ebonyi state govt. to set up a factory. This was confirmed by the state govt.
   Based upon the conviction that Ibeto Cement Company was erecting the manufacturing factory that the company was granted Import Duty and Value-Added Tax (VAT) Exemption to import at 2.5 duty and Vat free, equipment, plants, machinery and accessories required for the cement factory.
   Ibeto as at this time, also had a N20 billion bagging plant in Port Harcourt.
   
4. Why was the rights cancelled? (Ibeto's side) -
   a. Govt. was being misinformed by competitors who wanted to monopolise the industry.
   b. At the time of cancellation he had eight ships awaiting to be discharged.
   c. He was into partnership with Ebonyi govt. and showed $16 mill. letter of credit which demonstrated their commitment to local manufacture of cement
   d. His bagging plant was lying idle and 400 staff unemployed

My own opinioun -

1. Since he was given the right to import originally, he should be allowed to continue. Reevaluating the justification after Ibeto has committed much money to importation and baggling plant is wrong.
2. The conditions imposed on other cement companies, that is, when to stop importing cement should apply also on him.

For the average Nigerian, this is also good. Current cement prices are high. Is there a cement cartel? I suspect so. It will lead to a break up of the "cement cartel" and thereby increase competition amongst them. It will be might be similar to the break up in the "GSM cartel" when Globacom was introduced late into the GSM market. Globacom had to do something extra to break in.

[Avocado]

Gengen: good arguments.

If quality is maintained, it should be quite costly to import, except, of course, if there's sth fishy going on with the local companies. Some balance - between support for local companies and protecting buyers - need to be achieved.

.

[dotunk]

if dangote goes on with his objana company as planned and floods the market with CHEAP cement, then importation should not be a problem.

having said that, i am of the opinion that importation of cement should be completely banned. anything that is produced in the country should not be imported in order to have our economy stable.

[oseitutu]

Originally Posted by dotunk

if dangote goes on with his objana company as planned and floods the market with CHEAP cement, then importation should not be a problem.

having said that, i am of the opinion that importation of cement should be completely banned. anything that is produced in the country should not be imported in order to have our economy stable.

Importation should be allowed as per free economy, but taxed heavily to discourage it. Also we should not have cost of production of cement much higher than imported cement even though we have one of the lowest costs of labour in the world. The local cement companies are not being fair to consumers.

[c kenneths]

Originally Posted by oseitutu

Importation should be allowed as per free economy, but taxed heavily to discourage it. Also we should not have cost of production of cement much higher than imported cement even though we have one of the lowest costs of labour in the world. The local cement companies are not being fair to consumers.

I feel the presidents move to allow Ibeto to bring in cement will be for the short term, just to crash the price of cement temporarily, subsequently prices of cement will come down when domestic production will stabilize. I praise the president for this action but let this not extend till the next one year.

[wanaj0]

Originally Posted by oseitutu

Importation should be allowed as per free economy, but taxed heavily to discourage it. Also we should not have cost of production of cement much higher than imported cement even though we have one of the lowest costs of labour in the world. The local cement companies are not being fair to consumers.

That is not totally true. Cement production is not labour intensive. It is energy intensive.

Energy is the major input in cement production. Energy is not really cheap in Nigeria.

Transportation cost is also something that makes cement expensive in Nigeria. The whole infrastructure has broken down!

Also, financing cost (cost of capital) is huge in Nigeria. Check the intesret payment by WAPCO before the refinancing of the loans! They had to re syndicate the loan!

[wanaj0]

Originally Posted by Gengen

For the average Nigerian, this is also good. Current cement prices are high. Is there a cement cartel? I suspect so. It will lead to a break up of the "cement cartel" and thereby increase competition amongst them. It will be might be similar to the break up in the "GSM cartel" when Globacom was introduced late into the GSM market. Globacom had to do something extra to break in.

I always fail to understand the Cartel that we have in cement production that the entry of ONE more additional player will eliminate. We already have WAPCO, ASHAKA, FLOUR MILLS, EAGLE CEMENT, CCNN, FOLAWIYO, DANGOTE etc involved in cement business. How does this translates to a cartel? What percentage of the market share will Ibeto have that he is talking about crashing cement price?

[c kenneths]

Even if he has only a percent of the market share, there will be a little shift in the supply curve which will ultimately reduce price , even if it's only a percent of it.