Why Makers of Premium Bread Brands Are Threatening Price Hike
It is no longer news that makers of premium bread brands under the aegis of the Premium Breadmakers Association of Nigeria (PBAN) an Association comprising Owners/Managing Directors/Partners of Premium Bakeries in Nigeria are threatening to increase the price of bread by up to 90%.
In a statement by the recently at a press briefing through its President, Tosan Jemide, the association said except government and stakeholders do something urgently about the serious challenges facing the industry, a hike in price is imminent.
He said, “The challenges we face as a result of incessant increases in the prices of baking ingredients has rendered most premium bakeries comatose from operating at a loss; capital injection through loans and equity investments have been pumped into a lot of these businesses and repayments are no longer possible. This has a ripple effect on the economy as a whole as it serves as a disincentive for investment.”
Blaming one of the challenges on the high price of raw materials, he said, “Between 2015 and now the price of flour which is our major ingredient has increased from #6,500 naira per 50kg bag to #11,500 naira per bag as at today, with the possibility of further price increases.
“Also in the last 3 years, the prices of, sugar and other baking ingredients have quintupled without a corresponding increase in prices of premium bread by PBAN members. As an Association, it is either we do something about the astronomic increases in prices of baking ingredients or we burst. Most of us got loans with double digit interest rates from financial institutions to fund our bakery projects and are finding it extremely difficult to meet our loan repayment obligations.”
The association also faults the role of the government in the challenges it faces. “On July 20, 2012, the Federal Government introduced a 15-percent levy on wheat grain imports resulting in an increase of the effective duty from 5 percent to 20 percent. The levy is meant for the development of wheat cultivation in Nigeria, but about 6 years after the introduction of the levy, we have not seen the effect on wheat cultivation in Nigeria. We call on the Federal Government to review downwards the 15 percent levy on wheat grain imports to help drive down the price of flour which constitute about 75 percent of baking ingredient. We believe that a reduction in the 15 percent levy on wheat grain by the Federal Government, will lead to a substantial reduction in the price of flour by millers.
“On tax too, to our understanding, Part 1 Paragraph 2 of the first schedule of the Value Added Tax Act exempts certain goods including ‘basic food items’ from VAT. However, the Act does not define basic food item. In reality however, producers of premium bread over time have been made to pay VAT, penalised or threatened for not paying VAT on bread. We find that there is an ambiguity in the tax law and the clarification of the FIRS Act made by FIRS. We therefore demand that the federal government and FIRS look into this as a matter of urgency in order to clarify this ambiguity.”
Other challenges Jemide highlighted include the cost of alternative energy, mainly diesel, necessary for operations outside the epileptic power supply, etc.
“Given the current situation, most premium bakeries may be forced to embark on a price increase which will further make bread (a staple food) unaffordable to the common man. As an association, we are totally committed to ensuring that Nigerians have healthy, quality, affordable and unharmful bread on their table. It is in light of this that we appeal to the Federal government to look into the issues that currently threaten the existence of the premium bakery industry in Nigeria,” he concluded.