* Property market booming
* Strong demand for construction projects in Lagos and SE
* Rival Ashaka planning to expand capacity
By Chijioke Ohuocha
LAGOS, June 16 (Reuters) - Dangote Cement, Nigeria's biggest cement producer, expects demand in Africa's most populous country to rise by 10 percent this year from 13 million tonnes due to a real estate boom and government road building projects.
Wole Adeleke, finance director for the cement unit of private conglomerate Dangote Group, told Reuters there was strong demand for construction projects in the commercial capital Lagos and in southeastern states.
Total cement production in sub-Saharan Africa's second biggest economy is less than eight million tonnes annually, with the shortfall made up by imports, analysts say.
Dangote controls up to 54 percent of the Nigerian cement market, with its wholly-owned Obajana and Ibese cement plants, a controlling stake in Benue Cement, its role as a joint venture partner in Unicem Cement, and four import terminals.
"With the collapse of the stock market, people are re-allocating resources to real estate where the property market is booming," Adeleke said in an interview late on Monday.
"We have seen a lot of our cement going to Lekki (in Lagos), and the eastern part of the country where the property market is buoyant," he added.
A shortage of reliable and timely economic data in Nigeria, particularly on industrial output, mean analysts rely on ad-hoc indicators such as cement production and demand to paint a broader picture of the country's economic health.
The managing director of Ashaka Cement Plc, the Nigerian unit of the world's biggest building materials maker Lafarge, told Reuters last week that the Nigerian market could absorb supply of 20 million tonnes per year.
He said Ashaka was planning to expand its capacity to 1 million tonnes a year from 850,000 tonnes within two years and was considering adding further lines.
LAGOS UNDER CONSTRUCTION
Lower world energy prices and tightening foreign credit lines have taken their toll on the world's eighth biggest oil exporter. The IMF expects its budget deficit to widen to around 8.5 percent of GDP this year.
Banks have adopted conservative lending policies due to the global downturn, increasing provisioning for non-performing loans and crimping their ability to extend cheap credit.
Adeleke said Benue Cement's cost of funds had risen to 19 percent from around 15-17 percent last year.
Much of the construction in Nigeria, outside Lagos, is driven by government contracts, although private building has boomed in the country of 140 million people especially as oil prices peaked last year.
"The key risk for the industry is that government spending drives demand. So a decline in government spending would affect sales," Adeleke said.
But Lagos, a sprawling city of 14 million and the hub of major infrastructure projects in Nigeria, is not as dependent on federal oil revenues as the nation's 35 other states, sourcing a higher proportion of its income from corporate taxation.
It also has approval for a 275 billion naira ($2 billion) bond programme, the first 50 billion of which was oversubscribed when issued in December. Its budget for 2009 is 405 billion naira, 60 percent of it earmarked for capital expenditure.
Benue Cement, Dangote's only listed cement company, on Monday posted a 25-fold increase in first quarter net profit to to 5.35 billion naira. Adeleke said sales could dip in the second quarter due to higher fuel costs, but should rebound.
Benue Cement expects sales to top 16.5 billion naira in the third quarter and rise to 16.7 billion in the fourth. Net profit margins for both quarters are forecast at around 40 percent. (For full Reuters Africa coverage and to have your say on the top issues, visit: http://af.reuters.com/ ) (Editing by Nick Tattersall and Jon Loades-Carter) ($1=132.70 Naira)