How to Start a Cement Business in Nigeria / Business Plan & Feasibility Study
How to start a cement business in Nigeria – Despite the economic situation of the country, or rather the world at large, engaging in building business (i.e. selling building materials or being a building contractor) is very lucrative and could make one a huge amount of profit monthly. Of all the building businesses, cement sale presently seems to be the most lucrative, how so, you may ask; your answer, it is the business you can engage in and make tremendous amount of profit without breaking sweat. There are several cement companies in Nigeria such as Dangote cement, Lafarge cement, Obajana cement, Ashaka cement, etc. There are also several ways in which a person can be involved in the cement business, I will be discussing a few of them below, join me on this journey as it promises to be an educative and enthralling one. For the purpose of this article, I will be using Dangote cement as a case study.
How Can I be Involved in the Cement Business in Nigeria?
There are several ways which accommodate every class of persons in the economy (rich or hustling) as long as you are willing to join in on the cement party.
Let me start with the least common, HAULAGE. Haulage is the act of transporting heavy materials over distances. You may ask, how do I get involved in this, or, how does this relate to cement business? True, haulage is not a common aspect of cement business in Nigeria, more so, it is not easy for anyone to just get involved in. however, if you have the means, you can make millions of naira without breaking sweat in a year. Let me site an example here, a man named Ronald Nzimora recently started a haulage firm with just two trucks, and by the end of the year he was smiling to the bank with about a million naira. How did he do it? He leased his trucks to Dangote. There are several destinations for the cement companies to reach and the companies do not have sufficient trucks to reach out for delivery, you can easily act as a subsidiary transport for them and make money while enjoying the comfort of your living room. I know you might say, this is for someone who has a lot of money to start up, well, like I said earlier, there is a branch of the cement business for any class of person in this economy.
DISTRIBUTORSHIP is another way you can be involved in the cement business in Nigeria. Being a cement distributor involves supplying the cement as a wholesaler on behalf of the company. To be a distributor of Dangote cement, there are some conditions that should be met, I will be enumerating them below.
- Register your company with the Corporate Affairs Commission. This is because Dangote requires the services of only credible companies as their wholesalers. What better way to prove your credibility than registering with the country’s company registry. To be fully registered as a business in Nigeria will cost between #50,000 and #70,000.
- Open a corporate account with any bank in the country. To do this you will need to get the Economic Financial Crimes Commission (EFCC) Special Control Unit against Money Laundering (SCUML) to ensure the business is not a cover up for shady or criminal business activities. You are also required to the Federal Inland Revenue Services to get your Tax Identification Number. This is to show that you are will to pay your taxes as and when due. With these you are sure to open your bank account.
These are the documents required by Dangote to be a distributor:
- A certificate of company registration from the Corporate Affairs Commission.
- A scanned copy of a bank reference letter.
- A letter of application to the company for distributorship.
- A passport photograph of the company’s proprietor.
- A passport photograph of the company’s representative.
With these, you will become a registered distributor in about 48 hours. One major requirement for distributors is that you must buy at least 600 bags/one trailer in a month. Registering as a distributor with the cement company is one thing, having what it takes in your kitty is a whole different ball game.
What do you need to have as a distributor?
- A warehouse: As a distributor you will need a place to store your goods before selling to the retailers. Based on the amount of goods you are purchasing, you will need a large space. The space has to be a place protected from rainfall and unnecessary sunshine, this is to avoid caking of the cement before you sell. Some people cover their cement with a large tarpaulin, but its best to get a large shop or warehouse for the goods.
- A distribution vehicle: For effective distribution and also as an extra means of income, it is wise to get a distribution vehicle. You can use a pickup van or some other means. This will allow for ease of distribution and the customers could be charged an extra fee for delivering to their shops.
As a distributor, your warehouse should be situated in a place that is accessible by the customers and well secure to avoid loss to theft or other vices.
If you feel you do not have the capacity to become a distributor just yet, due to your financial capacity, you can still be involved in the cement business by being a RETAILER. Yes, you can become a retailer, it is far easier and less capital intensive. All you need to do is get a place to site your shop, this place should be close to the road or better still in an area where new constructions are taking place. Once this is done, locate the nearest depot to your shop, buy your goods and resell to your customers. Very simple right, you do not need to register with the CAC or any other form of registration. This way you can be making about #200 on each cement bag sold, and you can make multiples of that daily since there are a lot of cement users presently and they usually buy more than one bag at a time.
Another question to answer regarding cement business is, How Profitable is the Business?
As a distributor, you will get the cement from the company at about #2,300 per bag. That is about #1,380,000 for a trailer load (600 bags). Each bag can be sold for about #2,600 meaning you will be making about #120,000 profit after removing transportation expenses.
Operating a haulage company, you will be making about #50,000 for each haul. Note here that the amount of money you can charge is relative to the distance covered.
As stated earlier as a retailer you could be making #200 per bag which could be in multiples, depending on where your shop is sited and how many customers you have patronizing you daily.
Why Should I Engage in the Cement Business in Nigeria?
There are a few valid reasons why one should engage in this business in Nigeria.
- There is a geometric rise in the country’s population. This means we are going to be facing a major challenge of housing the growing population, more structures thus have to be built. With more structures comes the need for more supply of cement as it is the chief ingredient used in this part of the world for construction.
- The federal government of the country is currently looking at implementing the use of cement to make roads. Any good businessman can forecast that with this move, demand for cement will skyrocket.
- The product is readily available as long as you have the capital to buy.
- Dangote, the biggest cement company in the world is situated in Nigeria and she provides several modes of assistance as well as bonanzas to her teeming customers multiple times a year.
You must bear in mind that no business exists without its own peculiar challenges, a few challenges associated with cement business in Nigeria include:
- Weather effects. In the case of rainfall, if the cement is not properly protected, it could result in caking of the cement making it useless. This can result in loss to the businessman.
- Capital intensive. If you have been following, you will realize at this point that you require a substantial amount of capital if you are going to start and be successful in this business.
- Transportation of goods. If you stay quite far from a depot, you might face the challenge of moving your goods to your shop, especially with the hike in transportation prices in the country.
Like any business, all you need is a detailed feasibility study, a proper business plan, adequate capital and an efficient accountability system and you are sure your business will thrive. It is also imperative that before indulging in this business, you seek counsel from your predecessors, this is to avoid pitfalls and unnecessary mistakes. Your guess is as good as mine, it is time to make some good money.
You can get a sample cement business business plan and feasibility study from us. This business plan can be used to get bank loan, grants, proposal writing, competitions, etc.
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