Agora Policy: Rising Cement Prices Driven by Market Power, Not High Operating Costs

• Think tank says weak competition pushing price hikes

•Argues Nigerian cement firms earn margins far above global peers

•Calls for reforms, seeks FCCPC’s intervention

Emmanuel Addeh in Abuja

A new policy brief by Nigerian think tank, Agora Policy, has argued that persistently high cement prices in Nigeria are the result of market power and weak competition, rather than high production costs or capacity shortages.

The Waziri Adio-led organisation, in the document released yesterday, warned that current outcomes undermine housing delivery, infrastructure development and the long-term economic growth of the country.

In the memo titled: “Market Power and Failure of Competition Policy in Nigeria’s Cement Industry,” Agora Policy said that although Nigeria has already achieved what industrial policy set out to accomplish more than a decade ago, including self-sufficiency in cement production, it has failed to translate that success into affordable prices for households, builders and government.

According to the report, despite the fact that Nigeria attained formal self-sufficiency in cement as far back as 2012, and installed capacity now exceeds domestic demand by a wide margin, cement prices remain elevated, while the industry’s three dominant producers continue to post exceptionally high profit margins.

As of the end of September 2025, Nigeria’s cement producers, according to Agora, recorded average core operating profit margins of about 49 per cent, up from roughly 34 per cent in 2024. The organisation noted that these margins are significantly higher than those seen in comparable markets.

In North America, for instance, it stated that cement producers typically record margins of 20 to 36 per cent, while Asian producers operate within a 15 to 25 per cent range. Besides, across Africa, that is outside Nigeria, it reported that margins are generally between 18 and 30 per cent.

“The contrast between capacity outcomes, pricing and profitability margins is difficult to ignore. Nigeria has built the capacity it set out to build, but the benefits of that achievement have yet to show up fully in prices paid by households, builders, and government.

“Cement producers blame high cement prices on taxes, energy costs, transport bottlenecks, and financing constraints, noting that exported cement is cheaper because it is exempt from many domestic levies. But this explanation leaves an uncomfortable question unanswered: if costs are the binding constraint, why can Nigerian producers sell cement profitably abroad at lower prices than Nigerian households and builders pay at home? The gap suggests that market structure—and the pricing power it confers—may matter at least as much as cost pressures,” Agora maintained.

Stressing that cement producers often attribute high prices to taxes, energy costs, transport bottlenecks and financing constraints, Agora Policy however questioned this explanation, pointing out that Nigerian firms are able to export cement profitably at prices lower than those paid domestically.

The report traced the roots of today’s market structure to the policy choices that shaped the cement industry from the late 1990s. At the time, it said that the government offered import protection, tax holidays, preferential foreign exchange access and exclusive limestone concessions to investors, in exchange for rapid capacity expansion and affordable cement.

By 2012, the report noted that the production side of that bargain had been fulfilled, while Nigeria moved from being a net importer to an occasional exporter of cement. However, Agora Policy said the consumption side of the deal, which is competitive pricing disciplined by rivalry, never materialised.

Instead, the market consolidated into a highly concentrated oligopoly dominated by Dangote Cement, Lafarge Africa and BUA Cement, it argued, explaining that today, installed capacity is estimated at about 65 million tonnes per annum, more than double domestic demand of roughly 32 million tonnes, yet prices remain high and margins elevated.

The policy brief argued that this outcome reflects a price-leadership model, where the largest producer effectively anchors pricing, with smaller firms adjusting their prices rather than competing aggressively. Excess capacity, rather than lowering prices, is said to serve a strategic role by deterring new entrants through the credible threat of output expansion or price cuts.

Agora Policy cited empirical studies showing that such spatial fragmentation enables price discrimination and sustained mark-ups without explicit collusion. It also highlighted the role of exclusive limestone concessions, noting that long-duration and geographically concentrated mining licences limit entry and entrench dominance.

The think tank warned that high cement prices act as a hidden tax on housing and infrastructure. Cement is a key input into construction, and when prices are elevated, fewer homes are built, projects become more expensive and public budgets are stretched further, it posited.

Drawing on international evidence, the memo noted that cement typically accounts for 8 per cent of construction costs globally, but this share can rise to 15–20 per cent in lower-income countries. Price increases, it said, therefore pass through directly to higher housing and infrastructure costs.

Agora Policy dismissed import liberalisation as a durable solution, arguing that cement is poorly suited to sustained import competition due to high transport costs, limited global spare capacity and Nigeria’s large inland market. Imports, it said, may provide temporary relief but do not address the structural sources of market power.

Instead, the think tank called for a shift in policy focus from capacity expansion to competition restoration. It also urged regulators to address regional dominance directly, including restrictions on further capacity expansion by dominant firms, measures to prevent domestic prices from exceeding export prices, and predefined policy triggers that activate corrective measures when capacity utilisation falls too low.

Agora Policy further recommended mandatory disclosure of plant-level utilisation rates, ex-factory prices and regional sales data to strengthen oversight and improve transparency. It called on the Federal Competition and Consumer Protection Commission (FCCPC) to prioritise cement as a strategic sector and undertake regular market studies focused on dominance and conduct.

According to the organisation, Nigeria’s cement problem is no longer about supply but about governance, warning that without competition reform, high cement prices would continue to constrain housing, infrastructure and investment, undermining broader development goals.

“Market power in cement is not accidental; it is a predictable outcome of an industry dominated by a few large players. In Nigeria, this is already the case in industries such as telecommunications and electricity, where strong regulation reflects their strategic importance.

“By contrast, cement and fertiliser—both essential inputs into housing, infrastructure, and food production—remain largely outside effective competition regulation. This gap has allowed market power to persist largely unchecked. Addressing this requires a shift in enforcement priorities,” it explained.

According to Agora Policy, the FCCPC should begin with the introduction of a cement competition desk which undertakes targeted market reviews focused on areas where market power is most likely to arise, including control over limestone mining rights, transportation bottlenecks, and the deliberate build-up of surplus capacity to deter new entrants.

“Much of the public debate—and the industry’s own defence—frames high cement prices primarily as the outcome of multiple cost pressures, including taxes, currency weakness, energy prices, and transport costs. While these factors clearly matter, this framing is incomplete. It overlooks the central reality that these costs are passed through to final prices within a market structure that facilitates and sustains extraordinary profitability.

“The empirical evidence is unambiguous: Nigeria’s cement prices are high not because costs are uniquely burdensome, but because the industry operates as a spatially fragmented oligopoly where price leadership, regional dominance, and control of critical inputs have neutralised the competitive discipline expected from surplus capacity.

“The current outcome represents a fundamental divergence from the original policy bargain. Protection, incentives, and resource concessions were granted to achieve self-sufficiency and, ultimately, affordable cement for national development.

“The first objective has been spectacularly achieved; the second has demonstrably failed. The industry’s evolution from protected infant to entrenched oligopoly highlights a classic pitfall of industrial policy: without concurrent and assertive competition safeguards, scale can cement into dominance, and policy support can transform into structural barriers to entry.

“Therefore, recalibrating Nigeria’s cement sector is no longer an exercise in stimulating supply, but one of restoring competition. The policy focus must shift decisively from capacity expansion to competition enhancement,” it averred.

According to Agora Policy, a competition policy that fails to check undue market power in the sector does not merely tolerate high prices, but indirectly taxes investment, constrains capital formation, and undermines broader economic progress.