Vetiva: Nigeria cement outlook remains cautiously optimistic

The performance of Nigeria's cement sector in 2024 was marked by a notable top-line growth driven by a hike in cement prices. Prices soared as high as about 15,000 Naira in the first half of the year, prompting government intervention to curb the surge. Despite this, prices remained elevated as cement players sought to maintain their margins amidst soaring production costs. The sector witnessed a mix of robust top-line growth and FX challenges, with players grappling with extreme FX losses amid stability in the foreign exchange market. Despite challenges, the industry remains cautiously optimistic for the outlook in 2025, buoyed by high cement prices. Analysts at Vetiva Research believe that improved stability in the FX market this year could lead to enhanced performances for key players. Abigail Alabi, a sub-Saharan Africa Industrial Goods analyst at Vetiva, shed light on the sector's performance and outlook in a recent CNBC Africa discussion. Alabi highlighted the impact of pricing strategies, market sentiments, and expansion drives on the cement sector. She noted that cement players are likely to continue facing cost challenges in 2025, with diesel prices and operating expenses remaining significant concerns. However, there is a silver lining as some players are shifting towards using CNG to drive cost-saving initiatives, potentially mitigating price spikes. The sector also witnessed notable developments in terms of expansion, with key players like Holcim exiting the market and new entrants like Huaxin stepping in. Huaxin's acquisition of Waco aligns with the latter's focus on environmental sustainability and eco-friendly products, offering prospects for operational enhancements. In Nigeria, Lafarge is spearheading environmental sustainability initiatives by introducing eco-friendly products, while its expansion plans aim to bolster production capacity. Other key players like Dangote Cement are also gearing up for expansion by increasing capacity at existing plants and venturing into new markets like Cote d'Ivoire and Ghana. The industry's growth trajectory is further fueled by preparations for the African Continental Free Trade Area (AfCFTA) agreement, set to enhance trade between Nigeria and other African nations. Market sentiments have been positive, with investors actively seeking opportunities in both equity and fixed income markets. The bullish trend witnessed since the start of the year indicates a continued appetite for significant yields. As companies gear up to release earnings and declare dividend payments, investors are expected to solidify their positions in anticipation of a potential rally in banking, industrial, and listed stock sectors. Despite the pricing challenges and market uncertainties, the cement sector in Nigeria is poised for an interesting and promising year ahead. With strategic pricing strategies, concerted expansion efforts, and a favorable market outlook, key players are gearing up to navigate the evolving landscape and capitalize on growth opportunities in 2025.