Rising Production Costs and Removal of Fuel Subsidy Threaten Bread Prices in Nigeria

Nigerians are bracing themselves for an impending increase in the prices of bread, a staple food item that graces almost every Nigerian table.

The bread producers have attributed this forthcoming rise in prices to the withdrawal of fuel subsidy and the liberalization of the foreign exchange (forex) market by the federal government.

Speaking on the situation, Engr. Emmanuel Onuorah, President of the Premium Breadmakers Association of Nigeria (PBAN), highlighted the import dependency of crucial baking ingredients, such as wheat flour, Ascorbic Acid, Calcium Propionate, Yeast, and bread softener, stating that the floating forex rates have caused an increase in the cost of clearing these essential ingredients.

“Most of our baking ingredients are import dependent, ranging from flour produced from wheat, Ascorbic Acid, Calcium Propionate, Yeast, bread softener, etc., are mostly imported. The forex floating led to an increase in the amount used for clearing; we know this will certainly lead to an increase in the prices of bread,” Onuorah stated.

Onuorah revealed that flour millers are contemplating on using the forex as an excuse to hike the price of wheat flour, which would subsequently cause a significant rise in the cost of bread.

He said “The flour millers even wanted to use the forex floating as an alibi to increase the price of wheat flour; if they do that the price of bread would go up significantly because we would pass on the cost. With any increase in the price of bread now, there will certainly be more drops in sales and more bakeries will certainly close shop”.

Discussing the impact of the removal of fuel subsidy, Onuorah expressed his disappointment in the government’s hasty decision without a comprehensive plan to mitigate its repercussions on businesses and Nigerians. He likened the situation to “putting the cart before the horse.”

Onuorah added, “Some of our members have delivery vans that use fuel; it spiked their cost of delivery, which dovetailed into increased cost of production and reduced margins. Our distributors also employ delivery vans that rely on fuel, and their sales were affected, resulting in a decline in our overall volumes.”

The burden on the bread industry was further exacerbated by the imposition of a 7.5% value-added tax (VAT) on diesel by the new government, causing an immediate surge in prices. This development has had a detrimental impact on both production and sales, adversely affecting the industry.