High production cost, duties on input crippling Nigeria’s bread industry, PBAN

NIGERIA’S BREAD IN DUSTRY is on the brink of collapse as producers are writhing under the pain of high cost of production, including heavy government duty on the importation of key ingredients for processing.

The industry, with a huge market value estimated at $621 million, appears to be shrinking with bakers struggling with sustainability of operations and profitability.

Companies are increasingly unable catch their breath under a policy which stamps 15 percent additional duty on importation of wheat, a critical ingredient for production while local capacity to meet the industry’s demand remains poor.

The Premium Bread makers Association of Nigeria (PBAN) is an active victim of the situation whose member firms have started folding up. They are caught between high cost of sourcing raw material and the inability to raise prices of the end product due to prices market forces. This has been the reality producers in the last five years with flour increasing by over 150 percent.

The government has continued to defend this policy on the back of ramping up local wheat production, but the lack of deliverable has continuously driven industry operators into insolvency and eventually out of business.

“One of the biggest challenges facing the bread industry is government policies regulating importation of materials needed for the produc- tion of bread. For one, there is a dissonance tune between government policies for the industry and the realities that major stakeholders that comprise bakers, face. For instance, the government charges 15 percent extra duty for wheat importation into Nigeria! The idea is noble but one cannot see the sincerity in it as years down the line, government has nothing to show for a research it did not fail to collect duty on! “Government should take another look at the 15 percent extra duty on wheat, and see how to bring it down considerably to assist in driving down the price of wheat, which is the major ingredient in flour production,” PBAN will be pressing today at a media engagement in Lagos, an advance copy of its position seen by business a.m. shows.

The industry also suffers from unfair competition from unlicensed or non-certified producers who offer lower quality products at equal rates with certified producers under the monitoring of the National Agency for Food and Drug Administration and Control (NAFDAC), PBAN will also say.

It would also be stating that these undocumented producers of bread escape the obligation to adhere to NAFDAC health and other safety standards and are able lure consumers with cheaper prices. The glut created by this lack of censorship further complicates the situation for members of the association, cutting their market share and profitability.

Often, the regulated and licensed bakers in PBAN, who have to bear the extra cost of meeting NAFDAC requirements, find it difficult to compete with these unlicensed and unregulated producers on price. Hence, some of the registered producers have been compelled to cut cornerssuch as defaulting on some of NAFDAC’s requirements-just to survive, PBAN is expected to tell members of the media.

Bread is a staple food in many homes in Nigeria, being a readymade staple that can be combined with almost anything. The market for bread in Nigeria is national. With a population of over 180 million people and an estimated national population growth rate of 5.7 percent annually, an average economic growth rate of 3.5 percent annually in the past five years, Nigeria has a large market for bread.

Apart from producing one of Nigeria’s staple foods, the bread industry creates jobs, comprising those directly employed by the industry, armies of bread distributors, sellers and hawkers all over the streets. It has thus, reduced national unemployment in the country by a wide margin. According to PBAN estimation, over 700 thousand people are gainfully employed in the premium bread sub-sector of the industry, both directly and indirectly.

The association will say at the media engagement that it holds the position that a ‘bread revolution’ may surface should nothing effective be done to address these issues.