Paragraph 1: A New Era of FX Transparency and Market-Driven Access
Dr. Abdul Samad Rabiu, Chairman of BUA Cement Plc, has lauded the transformative impact of the Central Bank of Nigeria’s foreign exchange (FX) reforms. He highlighted the newfound transparency and market-driven nature of the current FX regime, a stark contrast to the previous system, which he criticized for fostering artificial scarcity and necessitating lobbying for access to dollars. Rabiu recounted his past experiences of frequent visits to the CBN to secure FX, a practice now rendered obsolete by the reforms. This shift signifies a significant departure from the opaque and cumbersome processes that previously characterized FX acquisition in Nigeria, ushering in an era of greater accessibility and predictability for businesses.
Paragraph 2: Dismantling the Artificial FX Rate and Empowering Businesses
The previous FX system, with its artificially low official rate significantly diverging from the parallel market rate, created substantial distortions in the Nigerian economy. Rabiu pointed out the discrepancy between the official rate, often around N500-N600/$, and the parallel market rate, which approached N1,000/$. This disparity limited access to FX for many businesses, hindering their growth and operations. The current reforms have unified the market, ensuring that all businesses access FX at the prevailing market rate, thereby eliminating the preferential treatment and inefficiencies that plagued the previous system. This level playing field fosters a more competitive and equitable business environment, promoting sustainable economic growth.
Paragraph 3: A Strengthening Naira and Its Ripple Effect on Commodity Prices
Rabiu expressed optimism about the naira’s trajectory, projecting a further strengthening to around N1,200/$ in the coming months, a significant recovery from the highs of nearly N2,000/$ earlier in the year. He attributed this positive trend to the CBN’s reforms and their impact on market dynamics. The strengthening naira has already begun to alleviate inflationary pressures, leading to lower prices for essential commodities like cement and food items. This downward pressure on prices offers much-needed relief to consumers and contributes to overall economic stability.
Paragraph 4: Navigating the Complexities of Cement Pricing and Production Costs
Addressing concerns surrounding cement prices, Rabiu explained that the recent price hikes were a consequence of escalating production costs. Factors such as FX volatility, surging energy costs, and the reliance on imported equipment have significantly impacted the cement industry. Despite these challenges, BUA Cement has strived to maintain price stability, absorbing some of the increased costs to mitigate the impact on consumers. This commitment to affordability reflects BUA’s recognition of the essential role cement plays in infrastructure development and its impact on the wider economy.
Paragraph 5: BUA Cement’s Robust Financial Performance and Strategic Growth
BUA Cement demonstrated remarkable financial resilience and growth in 2024, despite navigating a volatile economic landscape. The company achieved an impressive revenue of N877 billion, a substantial increase from N460 billion in 2023, even after absorbing FX losses of N93.9 billion. Profit before tax surged by 48.2% to N99.63 billion, and earnings per share rose to N2.18 from N2.05 in 2023. This strong performance was driven by a combination of increased dispatch volumes, prudent pricing strategies, and effective cost management, showcasing the company’s ability to adapt and thrive in challenging market conditions. Furthermore, BUA Cement’s strategic focus on reducing FX exposure by paying down import finance facilities and aligning accrued interest payments with available cash flows has further strengthened its financial position.
Paragraph 6: Future Outlook, Capacity Expansion, and Shareholder Value
Looking ahead, BUA Cement projects even stronger financial results in 2025, with Q1 profits already exceeding the entire 2024 earnings. The company anticipates full-year earnings of N250 billion, driven by operational efficiency, reduced FX losses, and increased production capacity from newly commissioned lines in Sokoto and Edo States. Despite this growth trajectory, BUA currently has no immediate plans for further capacity expansion beyond its 20 million metric tonne capacity. The company remains committed to maximizing shareholder value, as evidenced by the N2.05 dividend per share, representing a 94% payout ratio. Additionally, BUA Cement is proactively addressing its largest cost driver – energy – by investing in a 700-tonnes-per-day LNG regasification plant to secure supply and reduce costs. This strategic move, coupled with renegotiated service contracts prioritizing local content, underscores BUA Cement’s commitment to long-term sustainability and profitability.
