Federal Government’s Move on Fixing the Price for Locally Manufactured Cement in Nigeria

Federal Government’s Move on Fixing the Price for Locally Manufactured Cement in Nigeria

The current economic challenges in Nigeria characterised by exchange rate volatility and a galloping inflation of about 29.90% as of January 2024 [1] have occasioned sudden and steady increases in the prices of goods and services across the country. Fast-moving consumer goods have experienced some of the most erratic price changes. Also, prices in construction and building materials have not been spared, particularly the ballooning price of cement which has increased by over 50% to the sum of about N13,000 for 50kg bags across locations in Nigeria.[2]

Consequently, on the 19^th of February 2024, the Minister of Works, Mr David Umahi in the company of the Minister of Industry, Trade and Investment Mrs Doris Ukoka Anite (the “Ministers”), held a meeting with representatives of BUA Cement, Dangote Cement, Lafarge and the Cement Manufacturers Association of Nigeria (the “Cement Stakeholders”) over the soaring prices of cement which was largely attributed to the high cost of gas, manufacturing equipment, infrastructural deficit and rising import duties. The meeting ended with a resolution to peg prices of cement to N7,000 or N8,000 depending on the location.

Following this agreement, the Minister of Housing and Urban Development, Mr Ahmed Dangiwa, threatened that if the agreement reached was not adhered to by the cement manufacturers, the Federal Government might open the Country’s borders for the importation of cement. Furthermore, the honourable minister added that the Federal Government wants the Cement Stakeholders to compel wholesalers and retailers to sell at fixed prices while expressing his displeasure at the position of the Cement Manufacturer Association of Nigeria that the association “does not interfere with the pricing of cement”[3].

Price Fixing and Resale Price Maintenance Under Nigerian Law:

The Federal Competition and Consumer Protect Act No. 1 2019 (the “FCCPA”) and the Price Control Act [4] (the “PCA”) provide the legal regime for competition law in Nigeria. Sections 59 and 63 of the FCCPA proscribe horizontal price-fixing by competitors whereby competitors directly or indirectly fix the purchase price of goods (“Price Fixing”). Furthermore, section 63 of the FCCPA prohibits vertical price stipulation by manufacturers stipulating the minimum price at which products can be resold (“RPM”). Suffice to state that Price Fixing and RPMs are categorized as purpose-based restrictions under the FCCPC Restrictive Agreements and Trade Practices Regulations 2022 which rebuttably are presumed anticompetitive ab initio.

However, section 60 of the FCCPA permits the Federal Competition and Consumer Protection Commission (“FCCPC”) to exempt a Price Fixing that: (i) contributes to the improvement in the production or distribution of goods or promotes technical or economic progress while allowing consumers a fair share of the resulting benefit (“Efficiencies”); (ii) is indispensable to achieving the Efficiencies; and (iii) does not afford the undertakings concerned the possibility of eliminating competition in respect of a substantial part of the goods or services concerned.

Concerning price regulations, section 88 of the FCCPA provides that the President may by order published in the Federal Gazette, declare that prices for goods and services specified in the order shall be controlled per the provisions of the FCCPA. However, the President can only exercise the power to regulate prices where the President inter alia receives a report from the FCCPC assessing the state of competition in the relevant market and providing recommendations on the desirability and likely effects of implementing price regulation and other remedies. The President must, however, be satisfied that (i) goods to which the order relates are or will be supplied or acquired in a market in which competition is limited; (ii) it is desirable for the prices of those goods to be controlled following the FCCPA in the interest of consumers or suppliers; and (iii) the declaration of price regulation is narrowly designed, both in terms of duration and the list of goods affected, as is necessary to remedy the effects of the absence of competition in the relevant market.

While section 5 of the Price Control Act [5] (the “PCA”) empowers the Price Control Board (the “Board”) to publish by notice in the Federal Gazette fix a basic price for any commodity of the kind specified in the 1^st Schedule of the PCA or that may be added by an order of the Board, cement is not a commodity listed in the 1^st schedule to the PCA, and the addition of same will require an order of the Board and there has been no order publication in a gazette including cement as part of the commodities to be regulated under the PCA.

Observations:

While Nigeria professes the tenets of the free market where the forces of demand and supply determine price there are instances where government intervention is necessary to remedy a market failure, in this case, the soaring prices of cement beyond the socially desirable price and anticompetitive conducts of market operators. While the FCCPA explicitly prohibits price fixing as may be the case with the recent decision of cement manufacturers, the decision may be exempted under section 60 of the FCCPA, especially for the interest of consumers. However, it cannot be safely submitted that the arrangement does not restrict competition in a substantial part of the cement market. Furthermore, the process for getting an exemption is expressly stated in Part III of the Regulations which have not been followed. Furthermore, the power to regulate price pursuant to the FCCPA and PCA are beyond the statutory powers of the Ministers as the provisions of these legislations have not been complied with.

The above notwithstanding the decision of the Cement Stakeholders and Ministers is laudable and justified given the existential economic crisis that is presently overwhelming the nation. Nonetheless, the price-fixing by the Cement Stakeholders and the Ministers needs to be authorised by the FCCPA and the formality of the meeting between the Cement Stakeholders and the Ministers does not automatically input legality to the collective decision reached by the parties.

Footnotes

[1] The Nigerian Bureau of Statistics’ latest report reveals that Nigeria’s inflation rate has climbed to a staggering 29.90% in January 2024, up from 28.92% in December.

[2] Damilola Aina “Cement Manufacturers List Conditions to Crash Spiralling Price”, The Punch Newspaper, pg. 19.

[3] “Cement Prices: Nigerian Govt Threatens to Allow Massive Importation, Warns Dangote, BUA, Others”. Premium Times, February 21, 2024.

[4] Cap. P28, Laws of the Federal of Nigeria 2004.

[5] Cap. P28, Laws of the Federal of Nigeria 2004.