Construction Begins on Major Cement Plant in Nigeria
Infrastructure Investment Drives Boom in Support Capacity
Construction broke ground on a $1-billion cement plant in Nigeria for Africa’s biggest cement manufacturer, Dangote Cement, on April 10. The plant is expected to come on line by mid-2019, with capacity to produce six million metric tons per year.
China’s Beijing-based cement equipment and engineering firm Sinoma International Engineering Co. Ltd., a subsidiary of China National Materials Group Corp., will perform the EPC contract under a $4.34-billion deal signed with Dangote Group last year. The deal supports Dangote’s plans for 10 new cement plants across Africa, plus another in Nepal.
Now being built at Okpella in Edo state, the plant will raise Dangote’s production capacity in Nigeria to 35 million metric tons per year. Also in Nigeria, at Itori in Ogun state, the company is building another six-million-metric-ton cement plant, also to be completed in 2019.
The cement firm’s Africa production base stands at 44 million metric tons per year of combined production and import capacity in eight countries.
In Nigeria, Dangote Cement already operates one of the world’s largest such facilities, the Obajana Cement plant, with an annual capacity of 13.25 million metric tons. Company President and CEO Aliko Dangote—ranked by Forbes Magazine as Africa’s richest man, with a net worth of $16.5 billion—says he believes the Obajana plant is “one of the most profitable cement factories in the world.”
The two plants under construction in Nigeria will join four other African Dangote Cement plants commissioned last year in Ethiopia, Zambia, Cameroon and Tanzania. Dangote also is in the final phases of constructing two additional cement plants, in Senegal and South Africa, that are expected to come on line this year.
In the company’s 2015 full-year report, Dangote says the expansion in Africa is in response to the continent’s recent economic growth and increasing cement consumption in Nigeria, where government capital expenditure on high-consuming infrastructure projects increased to $8.5 billion last year from $4.3 billion in 2014.
“The profitability and strong cash generation of our plants in Nigeria [have] helped us expand our business across Africa with a mixture of integrated, grinding and import facilities,” Dangote said.
Dangote says his cement company, which announced a 25.6% increase, to $2.4 billion, in revenues for 2015, targets total production capacity of 70 million metric tons by 2019 and 100 million metric tons by 2020.
Analysts say Dangote Cement is keen on expanding in African countries that have huge limestone reserves; investment incentives, such as tax holidays; large populations with growing economies; good transport infrastructure; low-cost fuel; cement deficits; strong infrastructure and housing commitments; heavy cement-import regimes; and older, less efficient, more costly and subscale plants.
Africa’s cement markets are expected to remain in good shape on the back of strong GDP growth—forecast to average 4.5% this year—coupled with rising purchasing power and the development of numerous infrastructure and housing projects, according to Lome, Togo-based Ecobank, a regional commercial lender operating in 34 African countries.
The bank says cement consumption per capita in Africa remains significantly below the world average of 513 kilograms, “which gives considerable scope to expand consumption.”
“This makes sub-Saharan Africa immensely attractive to cement companies [that] are seeking to establish first-mover advantage in … potential markets, such as Ethiopia, or to build up capacity and squeeze out rivals in the region’s largest markets, notably Nigeria,” the bank stated in its June 2015 analysis of the African cement market.
Dangote Cement constitutes 25% of the Nigeria Stock Exchange’s entire market capitalization, following its acquisition, in 2000, of a 65.96% stake in the Benue Cement Co.