The Success of the Backward Integration Policy in the Nigerian Cement Sector

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The consumption of cement in Nigeria has increased to 18.5 million metric tonnes per annum (MMTPA) due to rapid urbanization and industrialization. Despite the huge demand for cement in Nigeria, domestic production was unable to meet the demand; hence the country relied on importation of cement to meet domestic construction needs. In 2002, the government adopted and implemented the backward integration policy (BIP), which requires cement import licenses be allocated only to importers who show proof of building factories for local cement manufacturing in Nigeria. Incentives under the policy include waiver of VAT and custom duty for importation of cement production equipment. The aim of this paper is to access the effect of the policy on the cement sector in Nigeria ten years after implementation. Following the implementation of the BIP, all the moribund existing government owned cement plants were privatized, while the private sector installed additional production and bagging capacities. Results showed that before BIP, Nigeria had an installed capacity of 4.03 MMTPA, but producing only 2 MMTPA. But 10 years after the implementation of the BIP, the country now produces 28 MMTPA with a total installed production capacity of 45 MMTPA and bagging capacity of 27.7 MMTPA, while additional 14 cement production plants of various capacities are under construction. Now that Nigeria has become self-sufficient in cement production, with domestic production exceeding the country’s need, additional policies that would address the new challenges of the cement sector particularly cement glut is required.