Rising cost of gas, which is priced in dollars and uncertainty over supplies due to disruptions in Niger Delta has forced Dangote Cement to consider completely eliminating its dependence on gas to fuel its operations.
In a statement released by the company on 31 August, the company’s management disclosed that disruption in gas supply, its preferred fuel in Nigeria, has deteriorated in the present quarter.
“Alternative fuels such as LPFO, and to a much lesser extent coal, are up to three times higher in costs and the need to use them instead of gas has led to a substantial cost increase. In addition, the Naira has experienced a significant devaluation against the US dollar over the past few weeks. Both of these external factors have combined to increase our costs substantially in our largest market.”
As a ways out of its energy crisis, the company disclosed that it has accelerated installation of coal mills and coal mining initiative in Nigeria and now expect to begin mining its own coal in November.
“Most of our production lines are now capable of running entirely on coal and this drive towards self-sufficiency will almost eliminate our dependence on gas supplies, imported coal and, more significantly, LPFO” Onne van der Weijde, Chief Executive Officer of Dangote Cement said:
The company disclosed that own-mined coal will be cheaper than gas, which is priced in US$ but paid for in Naira. It also disclosed that since coal is paid for entirely in Naira, it will reduce its need for foreign currency at a time of scarce foreign exchange in the country.
“These are challenging times for Nigeria and for Dangote Cement but we are taking strong actions that will position the company for continuing success. Our coal mining initiative will benefit both the company and the Nigerian economy by reducing the need for foreign exchange and helping us to both protect existing jobs and create new ones” said Onne van der Weijde.
Weijde said that the company is not deterred by its current challenges in its expansion drive in Africa.
“Although we have indicated a more measured approach to our expansion across Africa, we have new operations opening soon in Congo and Sierra Leone and these will strengthen the company’s profitability and generate additional foreign currency earnings. Despite the challenges we are facing, we continue to focus on becoming a global force in cement production.”
Dangote Cement also announced a N600 increase in the price of a bag of cement citing the increased production cost in its Nigerian operations.
Dangote Cement is Africa’s leading cement producer with nearly 44Mta capacity across three plants in Nigeria and recently opened factories in Cameroon, Ethiopia, Senegal, South Africa, Tanzania and Zambia.
It is a fully integrated quarry-to-customer producer with production capacity of 29.25Mta in Nigeria. Its Obajana plant in Kogi state, Nigeria, is the largest in Africa with 13.25Mta of capacity across four lines. The Ibese plant in Ogun State has four cement lines with a combined installed capacity of 12Mta. The Gboko plant in Benue state has 4Mta. It plans to build new factories in Ogun State (3-6Mta) and Edo State (6.0Mta). Through its recent investments, Dangote Cement has eliminated Nigeria’s dependence on imported cement and is transforming the nation into an exporter serving neighbouring countries.
In addition, it is investing several billion dollars to build manufacturing plants and import and grinding terminals across Africa. Dangote Cement has operations in Senegal (1.5Mta), South Africa (3.3Mta), Cameroon (1.5Mta), Ghana (1Mta import facility), Ethiopia (2.5Mta), Zambia (1.5Mta) and Tanzania (3.0Mta).
It will open a new 1.5Mta integrated factory in Republic of Congo and an import facility in Sierra Leone later in 2016. It is also planning new capacity in Nigeria, Kenya, Nepal, Zambia, Ethiopia, Cameroon, Zimbabwe, Ghana, Cote D’Ivoire and Liberia.
