The first quarter (Q1) ended March 31, 2024, saw a staggering N238.437 billion expenditure on gasoline and electricity by Dangote Cement Plc and BUA Cement Plc.
This is a 199.64% increase over the N79.574 billion these two massive cement companies spent in the same period in 2023.
This expenditure amounts to 46.36% of the N514.349 trillion total cost of sales that the cement companies reported for the period under consideration.
This follows a period of high inflation in 2024 that caused prices for goods and services to increase nationwide.
The data can be found in the unaudited Q1 results of the businesses that The News Chronicles follows. The depreciation of the Naira, the withdrawal of gasoline subsidies, and exchange rate harmonization contributed to some of the cost pressures.
The difficulties were also exacerbated by macroeconomic inflationary pressures, which were especially noticeable in the home market due to elevated average inflation.
Cement producers in Nigeria primarily rely on their electricity production because the state’s power grid infrastructure is inadequate.
Even after the power sector was privatized almost ten years ago, manufacturers’ access to electricity has not much improved.
As a result, they largely rely on self-generation, which is expensive. However, stable electricity infrastructure continues to be essential for supporting the manufacturing sector and encouraging the development of jobs.
Growing rates of inflation
As per the latest data from the National Bureau of Statistics (NBS), Nigeria’s inflation rate surged to 33.2% in March 2024, as reported by The News Chronicles.
Comparing this to the 31.7% recorded in February 2024, there has been a 1.5% increase. In March 2024, the rate of inflation increased at a slower pace than it did in February when it increased by 1.80%.
Cost increases for food and drink, energy, and housing contributed to March’s inflation.
The headline inflation rate rose from 22.04% in March 2023 to 11.16% yearly. In addition, the headline inflation rate for March 2024 was 3.02%, down 0.10% from 3.12% in February 2024.
The rate of food inflation in March 2024 increased by 15.56 percentage points from 24.45% in March 2023 to 40.01% year over year.
The expenses related to medical services, real and imputed home rentals, pharmaceutical products, accommodation services, and passenger transportation by air, and road transportation were among the core category items where inflationary pressures were most noticeable.
The greatest price rises were seen in these sectors, indicating the widespread nature of inflationary pressures that extend beyond the food and energy industries.
There are concerns that the increase could put factories under further financial strain, particularly when it comes to gas and other raw supplies. The majority of cement producers have raised the cost of their products to reduce this risk.
In summary: TNC’s data indicates that these companies’ profit after tax decreased by 4.15% to N130.643 billion in 2023 from N136.301 billion. The increase in production costs of sales, which was mostly caused by an increase in the price of energy and raw materials, affected the profits.
After growing inflation and high exchange rates, the increasing cost of sales ate up a large portion of the earnings. With a surge of 134.17%, the companies’ cost of sales increased to N514.349 billion in 2024 from N219.648 billion in 2023.
