Nigerian road project push could see switch to concrete

The Nigerian government is involving some key concrete producers in a raft of new federal road projects across the country, signalling greater intent to switch away from asphalt.

Works minister David Umahi said last month that 20 new road projects are to be funded through the federal government's Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme and are to be supported by private-sector firms including Dangote Group, BUA Group, Mainstream Energy Solutions and MTN.

Suppliers of bitumen — which is used to make asphalt, the predominant material for road paving — say the involvement of Dangote and BUA, both important Nigerian cement producers, is likely to signal a greater intent by the government to push for a switch away from asphalt, which could significantly dent Nigerian bitumen demand growth prospects.

One market participant said most new federal road projects, including those under the tax credit scheme, are being designed on the basis of cement construction.

Umahi began pushing for a switch to concrete last summer after he took up his ministerial role. But some industry and political opposition to the move, as well as the high costs involved in concrete road construction, created uncertainty over the policy's progress. Meanwhile, Nigerian market participants have pointed out that large volumes of bitumen will still be needed for repair and maintenance of the existing road network.

Spanner in the works

Nigeria, which produces little to no bitumen itself, imported 280,000-290,000t last year, slightly higher than in 2022. Prior to the change in government last year, some bitumen suppliers had expected Nigerian consumption to reach as high 400,000-450,000 t/yr in the coming years. But the new government's concrete roads push has put a major dent in those expectations.

There was the usual seasonal surge in bitumen imports in the first half of this year during the peak dry season for road construction activity, but a decision by President Bola Tinubu's administration to sharply devalue the naira against the US dollar in late January drove up domestic bitumen truck prices, discouraging some buying.

A lagged reaction to the naira devaluation pushed domestic truck prices to N1.35mn/t ex-works by mid-February from N1.15mn/t at the start of the month, before rising further to reach a peak of N1.55-1.6mn/t in early March. A subsequent recovery in the value of the naira helped push prices back down to N1.2-1.3mn/t ex-works by early July. A renewed slide in the Naira followed, but was not accompanied by a rise in bitumen truck prices until mid-August.

One market participant said prices had been "shockingly stable" as suppliers tried to encourage buying during the low demand rainy season that usually runs from late June until October. Prices were raised to N1.32-1.35mn/t ex-works last week in a belated bid by suppliers to recover some margin.

Even when the Nigerian road construction season resumes later this year, the renewed push to encourage concrete road construction is likely to keep demand for bitumen and mixed asphalt in check, although the continued need at federal and state level for repair, maintenance and upgrade projects on existing asphalted roads should support consumption and imports.

By Keyvan Hedvat