PRICES of bread have been skyrocketing since 2020, with producers threatening three times over the two-year period to close shop. The ICIR’s Joseph Olaoluwa and Blessing Otoibhi report the problems confronting bakers and the alternatives open to them
In September 2020, bakers threatened they would shut down their bakeries over increases in prices of baking ingredients. According to them, it was a head over high water situation where the prices of flour, sugar, and other baking ingredients had skyrocketed without bakers effecting corresponding increase in prices of loaves.
A year after, in October 2021, the same situation came up again, with bakers saying they could no longer cope with the rising cost of producing bread anymore and might need to close shop to end losses. They pointed out that the impact of their decision could see a loss of about 500,000 jobs in distribution, sales, and production.
How prices doubled between October 2020 and October 2021
Mandela Makinde, who managed Ochuko Bakery in Sapele, Delta State, told TheICIR how his bakery could not operate for over five days as prices spiralled between late 2020 and October 2021. Makinde said the price of flour increased by almost double between January and October 2021.
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“We had to turn customers back. I was waiting to see the outcome of the Master Bakers and Caterers Association of Nigeria (MABCAN) meetings to know if I should risk it a little bit more. But for now, my flour store is empty. I haven’t bought any,” Makinde had said.
According to him, a 50-kilogramme bag of flour that was sold for ₦12,600 in January 2021 went on to cost ₦23,500 in October 2021, adding that although the bakery itself did not sack any of the workers during the period, some of the workers themselves quit due to the precarious situation, as production volume dwindled.
“We haven’t let go of anyone in this period. Some have left but we didn’t bother to replace them due to the current situation of things.
“We have continued to maintain the same volume. We were doing about 12 bags a day, but as prices began to go up, we started reducing what we do to like seven bags a day because of the prices of things,” the bakery manager said of the situation last year.
Another baker, Olanrewaju Mustapha, in Apapa, Lagos, said last year that two workers had already been served resignation letters as he trimmed the number of workers in his bakery from six to four.
Mustapha said of the situation then, “It is extremely bad. We had to cut down from six workers to four workers. The price of everything is on the rise, from gas to flour, sugar, sardine, butter and nylon.”
The baker, maintaining that reducing the quality of bread would only make things worse, had said, “We increased the price of ₦350 bread to ₦400, and sardine bread of ₦500 to ₦700. The ₦100 bread is already small. So reducing it is terrible, and that is the most selling loaf because it’s what people can easily afford.”
He feared that the ₦100 loaf might no longer exist as the bakers association had begun deliberating on selling that size of bread for ₦150. He admitted that bakers had suffered reduction in profit margins, despite an increase in patronage, due to increase in the prices of baking materials.
“I made, at least, ₦200,000, after all expenses, in January (2021). But now I am making barely ₦70,000,” he had said.
Another bakery manager, who gave his name simply as Chima and who spoke on behalf of his wife operating D’Blex Bakery and Confectionery in Lagos, said he was unsure if she would continue once they exhausted their stock of flour.
Chima narrated to our reporter last October that the problem with bread production started in August 2021 when the naira further depreciated and the dollar value went up.
He said, “The situation is terrible. We bought flour at ₦18,500 per bag in early September 2021, but it goes for ₦22,500. I understand a thousand naira will be added to it before the month runs out.
“Who will buy the bread at an exorbitant price? We have just reduced the size of the dough just to make sure the employees and the supply chain are sustained but the complaint about the size is too much.
“The staff now produce small quantities because we do not want to produce much and don’t sell them off on time. The plan is that if nothing changes till the end of the month, we may lay off a few people.”
The president of the Premium Breadmakers Association of Nigeria (PBAN), Emmanuel Onuorah, had, in an interview then, lamented that the removal of foreign exchange for the importation of wheat would make bread unaffordable for the common man.
Onuorah said, “Let me say it to Nigerians and say it very well, the Governor of the Central Bank of Nigeria (CBN) is proposing to remove wheat importation from forex. That is bye-bye; people will no longer be able to afford bread. The millers are saying they are sourcing their forex from the parallel market and the government is not giving them at the official rates.
“So it is difficult for them to import. This whole thing is a ripple effect and cascades down to us. Flour makes 55 per cent of our ingredients. Sugar is now ₦21,000 per bag; at the beginning of the year, it was selling for ₦13,000. Flour was selling for ₦10,300; as I speak with you flour is ₦22,000 or ₦21,000, depending on where you are getting it from. It is a 103 per cent increase.
“Diesel has spiked to above N300 per litre. There is no light so we are using a generator to run our oven. An egg is very expensive. It used to be ₦800, but it is now ₦1,800. We don’t even have an improver. Everything we use in breadmaking is imported and has dollar components. Is it not a shame?”
Still no reprieve in July 2022
The bread production situation this year, rather than improve, has deteriorated, as the naira gets a further battering and prices of the materials used in baking bread spiral. Bread makers, under the MABCAN umbrella, once again threatened, last week, to embark on a withdrawal of their services.
A statement issued by the association, dated July 20, 2022 read, “In a move to ensure the survival of the premium breadmaking industry in Nigeria, we have decided to embark on a withdrawal of services beginning from Thursday 21st July, 2022 for four days, in the first instance, and where there is no intervention from the government, we shall escalate the duration of the withdrawal.”
When TheICIR visited Onuorah at his bakery in the Surulere area of Lagos last weekend, he explained that things had, indeed, worsened for bakers.
He said, “It has been very tough with us as businesses. Price of flour, which constitutes 65 per cent to 70 of our input, increases every two weeks; sugar the same. Just last month, flour increased by N2,500; it was N27,000, it is now going for N29,500. Sugar was N28,000, it is now N29,500. The increase in flour price was about 25.2 per cent in one month; same goes for sugar, which was 8.63 per cent.
“The same with diesel. If you go there, you will see our generators; they are 100Kva, powered with diesel. We take loans from a banks and default on payments, but bankers are not willing to give us any lifeline any longer. That is why we want the Federal government to look at our side.”
He said the current predicament required an industry-wide intervention, as well as solidarity with MACBAN in withdrawing services. He hoped that the association’s five-point demand would be acceded to. Beyond the cost of bread production, he said that it was wrong for the National Agency for Food and Drug Administration and Control (NAFDAC) to be charging bakers a N154,000 penalty on late renewal of certificates. He described the penalty as “too high.”
Mustapha told TheICIR yesterday that the situation had degenerated, compared to a year ago when he spoke with our reporter on the cost of producing bread.
He said, “We are closing down on Wednesday (July 27, 2022) so as to review prices. I have not collected a dime from the shop since January 2022. I have just been paying workers and keeping the shop running.”
File photo for the the Illustration of wheat.
Historically, the importance of bread cannot be downplayed. It has been the rise of several iconic riots around the world, from France to Egypt, and to even New York city.
Poor grain harvests led to riots as far back as 1529 in the French city of Lyon. During the so-called Grande Rebeyne (Great Rebellion), thousands looted and destroyed the houses of rich citizens, eventually spilling the grain from the municipal granary onto the streets.
Similarly, in 1977, there were Egyptian bread riots, which resulted in lots of people in the lower class protesting World Bank and International Monetary Fund-mandated termination of state subsidies on basic foodstuffs. That protest recorded, at least, 79 deaths and 550 injured persons.
Consumers are bearing the brunt of this harsh decision- majorly bread lovers. For Peter Antigha, his favorite bread brand has really gulped up costs. With inflation rates of 18.6 per cent, Nigerians’ purchasing power is dwindling.
A bread lover, Peter Antigha, said, “The price of Westgate’s sardine bread moved from N800 to N1200 in less than three months. I wouldn’t really blame those bakers, though. Things are expensive everywhere. It is just the reality.”
Bright Elijah declared rising prices would not deter from consuming bread. Saying he knew that though the price of some loaves had risen to N1000 per one, he would still not part ways with his favourite brand.
“I am always on the move. Bread is one thing I can take with anything. Toast it or even fold it to the mouth with water, I’ll continue with my field work,” Elijah commented.
Onuorah described bread as the “common man’s food”, adding, “you can it with anything.”
The PBAN president might not be entirely right. Love for bread runs across all classes, and not for the common people alone. And second, it is arguable that you can do a combo with “anything.”
In April 2021, the CBN began to consider the inclusion of sugar and wheat on the list of import items it has banned from accessing foreign exchange.
“We are looking at sugar and wheat. We started a programme on milk about two years ago. Eventually, these products will go into our FX restriction list,” the CBN Governor, Godwin Emefiele, said during an inspection tour of the proposed $500 million Dangote sugar processing facility earlier in the year.
Nigeria’s insecurity problems in Borno, Bauchi, Yobe, Kano, Jigawa, and Zamfara states have hampered its ability to meet its wheat consumption demand of 4.9 million metric tonnes (mmt).
Already, the Foreign Agricultural Service of the United States Department of Agriculture has forecast Nigeria’s wheat production in the marketing year 2021/2022 to reach 55,000 metric tonnes, a report authored by the Global Agricultural Information Network stated.
Besides, there are other existential issues the 2021 paper highlighted, which include unavailability of improved seeds, the drying of Lake Chad – which was once a source of livelihood for about 30 million people – closed borders, and high foreign exchange rates.
The paper read, “Nigeria is struggling to meet rising wheat demand. MY2021/22 consumption is forecast at 4.9 million metric tonnes (mmt), up nearly 10 per cent higher than 2020/21 post estimates. Wheat consumption is expected to grow, but the recent foreign exchange restriction is impeding growing domestic demand. The Government of Nigeria, through its central bank, is implementing measures to increase foreign exchange (forex) availability.
“Importers are forced to source forex outside official CBN sources. Many of the milling companies have started looking at partners like subsidiaries or parent companies outside of Nigeria for help in getting dollars. This situation is negatively impacting the price of wheat products like bread. The prices of bread and other wheat derivatives increased between 10 and 15 per cent over the last 12 months due to high costs of production by the millers and bakers.
“Many households are already using yams, plantain, sweet potato, and gari (cassava products) as substitutes for bread. Bread loaves are staying longer on retail shelves and consumers are not purchasing the same amounts as before.”
According to Onuorah, the nation imports 4,760 million metric tonns of wheat annually. Thirteen states are growing wheat in the North. Sadly, production in the 13 states has not been able to match the almost five million tonnes needed for the nation’s yearly wheat intake.
“The Flour Mills of Nigeria has been helping them (farmers) with seedlings. Despite that, they have not been able to do up to 300,000 metric tonnes. That is the maximum they have been able to do. For the four million demand, this would come in as imports, with the scarce sourcing of forex, which can only aggravate the matter,” he explained.
The importation of wheat is further strained with the implementation of the duty paid on it. Onuorah explained that the only way bakers can break even is if the duty is withdrawn.
He said, “We pay a duty of 30 per cent on wheat import. There is a component that is 15 per cent wheat development levy and 15 per cent of wheat duty. It would be good if the government can withdraw the 15 per cent wheat development levy, use it as a form of incentive to give a moratorium, or freeze it for a time being that would go a long way to help us.”
Exploring the alternatives: Wheat vs cassava vs potato puree
In 1982, the Federal Institute of Industrial Research, Oshodi, presented the first cassava bread, which was produced with 10 per cent of cassava flour and 90 per cent of wheat flour from its research work, to the Federal Executive Council during the administration of ex-President, Shehu Shagari. In 2004, another former President, Olusegun Obasanjo, made efforts to revive the idea. Former President, Goodluck Jonathan, toed the line during his tenure as well.
A recent PREMIUM TIMES report highlighted the importance of potato puree in the baking business. The report noted the possibility of converting the potato to puree. However, it is still not viable, or for the lack of a better term, it has not been developed to a point where it is commercially acceptable.
Nonetheless, some research and development trials by SANO Foods, an organic food-focused company based in Lagos, produced some results, part of which have led to how to improve the puree’s shelf life.
The company’s head of operations, Monsuru Odedoyin, pointed out that lack of electricity would damage the shelf life of potato puree used in producing bread.
Odedoyin said, “It would be good if you have continuous electricity supply, or the period of an outage is not too long for it to ferment. It is that fermentation you must avoid. If it doesn’t ferment, it can last up to eight to 12 months.”
However, the PBAN president strongly disagreed that cassava would be a better replacement for wheat. Onuorah stated that the lack of gluten in cassava is why the starch product cannot be the best wheat substitute.
“Cassava is just a finite – an acid. It doesn’t have the required gluten that will give the cassava the desired quality and taste.
“The cassava is rancid and it doesn’t have gluten; same goes for the potato puree. The gluten helps the bread kick and have those abilities. It looks very fancy providing alternatives. Actually, we have not taken this research to the next level. We encouraged FIIRO to do more. Ultimately, we cannot remain a dumping ground for the world. We have to make sure some of these things are produced here,” he said.
Onuorah explained that potato puree was not so bad a choice, but more research needed to be done about the product. He recounted an experience when a test bake was conducted at his bakery with potato puree. He sought for more intervention in these two researches – cassava and potato puree – to drive wheat alternatives.
He said, “They invited me to FIIRO when they began presentations on potato puree. It is a laudable project and there was a test bake here in this bakery, Bumpahav. We asked the company to supply us, they could not meet demand. They ran away. Puree is wet but you have to store it in a cool place before you can use it. You can get 10-15 per cent of it and reduce our net import of wheat in the country.”
Cake makers not isolated from production problems
The Chief Executive Officer (CEO) of Penky Confectioneries, Abuja, Mrs Anna Nwoha, lamented the rising cost of producing cakes as she worried about continued patronage.
Nwoha said, “The high cost of production lately has been really bad. The cost of production has skyrocketed; it doubled what we usually produced months back and it gets worse with time.
“For instance, our ready-to-go cakes as at the beginning of this year was N10,000 and got to N12,000, and now it’s N15,000.”
She lamented the hike in prices of cake-baking materials, which she said has had a toll on the cost of production. “Nobody’s salary is being increased, but the cost of production is rising because of the rise in prices of materials in the market.”
She urged the Federal government to intervene by helping bakers reduce the price of diesel and transportation cost, saying these have affected the cost of production.
The creative director of Comfort World Cakes, Abuja, Mrs Comfort Onyemaenu, similarly said the high cost of production had been challenging for the business.
“What we do is that we add to our cost of production and then inform our clients that we are increasing our prices,” Onyemaenu said, adding there would be no way cake bakers can break even if they don’t increase the prices of their products.
Onuorah said the sorry situation affected bakers in 2021 tremendously and, at least, 35 per cent of the PBAN membership went down as many bakers sold their equipment, cut their losses and moved on.
He said, “I ran at a loss last year. You won’t believe the amount I have lost in the bread industry. I have lost over well ₦150 million in the last two years that I have been subsidizing. Why should I subsidize bread for Nigerians? But, then, people are quite impoverished.”
When the PBAN president spoke again with The ICIR this month, he lamented that nothing has changed.
He said, “We employ over a million in the baking industry, but now we have let go of 200,000 of our workers. Where are those workers going into? Into an already saturated industry? These things have the tendency to exacerbate the insecurity condition of this country. Anything you do to keep people in the job, the government should be able to support and assist us to do all that.”
Onuorah noted that PBAN, alongside MABCAN, met with the Ministry of Trade and Investment three times last year. Up till now, he stated, nothing positive has come from it. It became an inter-agency intervention with the Ministry of Agriculture, potato growers and cassava growers, and, yet, nothing changed.
An imminent bread price hike
Onuorah informed that bread price would increase immediately after the withdrawal of their services was over.
He said, “Certainly bread price will increase. Once we are coming back, we are putting money on bread. We are not doing this to be punitive; we are Nigerians, we are human and have brothers and sisters living in the society, like us. We dont even increase prices, we adjust prices.
“We are recording a 106 per cent loss on our big jumbo-sized bread, as we speak. On the sliced bread, we are doing N66.77k. If we put N50 on the small bread and N100 on the big bread, we still have a net deficit of N6 and N12. What we try to do is ramp up volume and augment. If you really want to make a profit, you put N200 and N100 on the big and sliced ones respectively.”
He noted that people’s income had been affected and lots of people spend less on food now.
He believed the fear of the Russia-Ukraine war could impact wheat production, saying the Ukrainians should be planting and not going to war during this season.
To compound the problem, he said, India and the United States of America (USA) had stopped exporting wheat.
Already, the president of the World Bank Group, David Malpass, has warned central banks across the world to stop pumping money into government expenditure.
Malpass said, “I have argued and I think it is very important, that as central banks raise the interest rate, they will use other tools as well to fight inflation. And that means allowing capital to flow to the supply chains.
“That is right now blocked because the central banks are guiding so much of their capital into over- capitalised sectors of the global economy, meaning mostly governments. A lot of the money in the world is going into government, and that is not the most productive use.”
He noted that it was becoming increasingly difficult for poor countries to take care of their own people, and placed the responsibility on advanced economies to step up to the challenge of expanding production for the world.
Experienced Business reporter seeking the truth and upholding justice. Covered capital markets, aviation, maritime, road and rail, as well as economy. Email tips to jolaoluwa@icirnigeria.org. Follow on Twitter @theminentmuyiwa and on Instagram @Hollumuyiwah.
Blessing Otoibhi is a Multimedia Journalist and Anchor host for the News in 60 seconds at The International Center For Investigative Reporting. You can shoot her a mail via Botoibhi@icirnigeria.org or connect on Twitter @B_otoibhi
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