Nigeria has introduced new rules for the production and use of cement to lower the risk of building collapses, threatening local profit margins at the country’s biggest international producer, Lafarge.
The Standards Organisation of Nigeria (SON) told manufacturers of the building material that only 52.5 grade cement could be used to build bridges and 42.5 grade for columns, slabs and moulding of blocks, Lagos-based Dangote Cement said in a statement on Monday. The 32.5 grade would be limited to plastering, it said.
Joseph Odumodu, the chief executive of the SON, did not immediately answer calls or reply to text messages seeking comment.
“Lafarge produces more of the 32.5 grade and will need to incur additional costs for the higher grades, resulting in lower margins,” Pabina Yinkere, the head of research at Lagos-based Vetiva Capital Management, said yesterday.
Dangote, Africa’s largest producer of the building material, controlled capacity and volume for the 42.5 grade cement, Yinkere said.
Lafarge, the world’s second-largest cement producer with operations in 64 nations, is adding capacity in countries such as Nigeria that need new infrastructure to support a fast- growing economy.
“The 32.5 grade of cement has never been proven by any empirical evidence to be the cause of building collapses in Nigeria,” Paris-based Lafarge said in a statement. There were several impending court actions challenging the SON’s claim, the company said.
Lafarge is also battling regulators in Kenya, where it has been accused of flouting domestic competition rules. Its Nigerian unit had increased first-quarter profit by 33 percent to 8.1 billion naira (R524 million), it said in an April 28 filing to the Nigerian Stock Exchange.
Dangote said the new rules were in line with international standards and would help to improve safety in the building and construction industry.
Shares in Dangote Cement, controlled by Africa’s richest man Aliko Dangote, fell 2.3 percent to 229.50 naira by 11.30am in Lagos yesterday, paring the year’s gains to 4.8 percent.
Lafarge traded 0.6 percent lower at e63.26 (R913) in Paris, while its Nigerian unit was flat at 113 naira in Lagos. - Bloomberg