Nigeria is expereicning galloping inflation and data suggest bread prices are a major factor.
Available data from the December 2022 consumer price index (CPI) report from the National Bureau of Statistics (NBS) shows that increased bread costs are a contributing factor to food inflation in Nigeria.
According to the CPI and inflation report, the food inflation rate in December 2022 was 23.75% on a year-on-year basis; which was 6.38% higher compared to the rate recorded in December 2021 (17.37%).
Also, on a month-on-month basis, the food inflation rate in December was 1.89%, this was 0.49% higher compared to the rate recorded in November 2022 (1.40%).
The NBS identified inflation as being caused by the rise in prices of bread and other food items like potatoes, yams, fish, oil, and cereals.
- “The rise in the food inflation was caused by increases in prices of Bread and cereals, Oil and fat, Potatoes, Yam and other tubers, Fish, Food Product etc.”
Rising costs of major ingredients
Mrs. Okafor, a caterer told Nairametrics that the cost of flour, sugar, and milk for the production of bread has been increasing since 2022.
- The increase is mainly due to the increase in wheat importation costs as a result of the Russia-Ukraine war as well as Nigeria’s foreign exchange challenges.
- With Nigeria being the second largest wheat importer in the world, it makes it hard for bakers and even big bakeries to effectively run their businesses without increasing the cost of bread, which is a staple food for Nigerian families.
- According to her, customers have been complaining about the rise in the cost of bread, especially the family loaf which costs N1000 or N900 per loaf.
Mrs. Okafor, who is based in Lagos, gave Nairametrics a breakdown of the average costs of large quantities of flour, sugar, and milk, which are major ingredients needed for bread production.
- 50kg bag of flour – N30,000 to N32,000
- 50kg bag of milk – N32,000 to N34,000
- 50kg bag of sugar – N34,000 to N36,000
Production costs at FQ Loaf typify the burden on bakeries
Ada Abel, General Manager at Abuja-based FQ Loaf Bakery, told Nairametrics that aside from the rising cost of ingredients, the business carries a lot of other costs.
According to her, the bakery has multiple products but the Jumbo loaf and the Family loaf are more popular among customers.
The average unit cost of a Jumbo loaf is N700 and there are over 40 in a batch which has to be produced mostly using a diesel generator. Meanwhile, the average unit cost of a Family loaf is N650 and there are over 70 per batch.
- To cover risks, the bakery adds the cost of only a loaf of bread to each batch, which most times is less than the risks later encountered.
- That and other risks like loaves that may go bad in passing through the value chain are borne entirely by the business.
- The bakery buys diesel at N880 per liter and sometimes the full production process which could take over an hour has to be run using the diesel generator.
According to Ms. Abel, the loaves of bread pass through three layers of sales – bakery to distributors, distributors to table toppers (retailers), and table toppers to end consumers.
As the loaves travel to each party, money is added before the bread gets to the final consumer, so they can all make a profit.
- She told Nairametrics of other costs that do not factor into the price of bread. She mentioned over 15 levies by the local government council, public health cadet charges, and food handling tests which cost the bakery N5000 per staff and have to be done every two years.
- The Public Health Act inspection has to be done every three months and costs N3,500 per staff as well as an N30,000 certificate.
- She also highlighted the inspection of business premises by officials of the Abuja Municipal Area Council (AMAC), as well as levy increases by the National Agency for Food and Drug Administration and Control (NAFDAC).
For the record: The NBS inflation report earlier cited says that in December 2022, food inflation on a year-on-year basis was highest in Kwara (27.90%), Imo (26.94%), and Ebonyi (26.28%), while Sokoto (20.90%), Taraba (21.59%) and Cross River (21.71%) recorded the slowest rise in year-on-year food inflation.
- However, on a month-on-month basis, December 2022 food inflation was highest in Sokoto (3.38%), Oyo (3.10%), and Kaduna (2.97%), while Nasarawa (0.06%), Osun (0.70%) and Kogi (0.76%) recorded the slowest rise on month-on-month inflation.
Why We Seek Inclusion In Conditional Cash Transfer –Obiora Oti
THE National Vice President of Mobile Money and Bank Association of Nigeria (MMBAN), Obiora Oti, said money wallet bankers would improve their capitalisation and liquidity if the government included them as facilitators in the conditional cash transfer scheme.
Oti told The ICIR exclusively on Wednesday, November 8, that many young people involved in the money wallet business could be supported with a seed capital of about N50,000 and become part of the Federal Government’s cash transfer scheme.
This development, he said, would ensure enough liquidity for them to stay in business since many of them have undergone financial inclusion training under the Central Bank of Nigeria (CBN) policy guidelines.
Oti recalled how he supported someone with seed money of N20,000 in 2020, during the COVID year, and how the person has become an aggregator and now manages N15,000,000 capital.
“This is how financial inclusion works, and it is one of the fastest ways of removing people from poverty,” he said.
“Typically, you don’t grow the gross domestic product (GDP) by throwing money to people through interventions. When there is a channel for such distribution, it stimulates the economy’s growth,” he added.
He also argued that empowering money wallet agents was a sure way of driving Nigeria’s financial inclusion and economic base.
According to Oti, Nigeria has many lessons from Kenya in its financial inclusion success story because of the Kenyan government’s involvement and facilitation through policy direction and incentives to operatives.
Agency banking allows customers to deposit and withdraw money instead of going to the bank or using automated teller machines (ATMs.)
Currently, there is one agency banking agent for every 80 Nigerians and one bank branch for every 27,000, according to a 2023 report on the Nigerian Financial Services Market.
Naira Falls To N1, 000/$ In Official Market
Despite recent moves by the Central Bank of Nigeria to strengthen the foreign exchange market, the naira closed trading on the Investor & Exporter forex window on Thursday at N996.75/$.
This is a 13.95 per cent decline from the N874.71/$ it closed trading on Wednesday. So far, the naira has lost 27.75 per cent of its value since opening the week at N780.23/$ according to details on FMDQ OTC Securities Exchange.
Since firming up against the dollar last week, after news that the apex bank was clearing some of its backlog broke, the naira has been on a steady decline in both the official and parallel markets.
So far, the naira has lost about 40 per cent of its value in 2023, earning the tag of one of the worst performing African currencies from the World Bank.
In the parallel market, the currency has lost value too, falling from N950/$ as of Friday to close to N1,140/$ as of Thursday according to Bureaux De Change operators who spoke to The PUNCH. This represents a 20 per cent decline.
A trader who only gave his name as Kadri said, “Dollar is N1,100 if you want to sell. It is N1,140 if you want to buy.” Another trader, Awolu, stated that he would buy the dollar at N1,100 from our correspondent.
He said, “Dollar is N1,100 if you want to sell to me.”
Earlier in the week, the President of the Association of Bureaux De Change Operators of Nigeria, Aminu Gwadabe, told The PUNCH that the dollar was gaining against the naira because people who had bought it at a higher price were resisting its fall.
He said, “Speculators are always looking at elements of sustainability. Once they sense that it (the injection) is not continuous, they begin to react. They begin to react. It is the reaction of the market we are witnessing. Also, there is resistance. There are people that bought at a higher price that this does not favour. People are not willing to take further losses.”
Concerned with the fall of the currency, the presidency recently stated that it is planning policies to strengthen the local currency.
A Special Adviser to the President on Economic Matters, Dr Tope Fasua, who was representing the Vice President, Kashim Shettima, at an event, said: “For those who are speculating and praying and wishing that the currency would become nonsense, I believe that the central bank is rolling out the policies and the government that I serve, led by the President, will shock some of them.”
Dangote Repatriates $688m From African Operations
Dangote Industries Limited has revealed that it has so far repatriated over $687.98m through various banks in Nigeria.
In a statement on Sunday, the company said it brought in $576,008,672.41 through various banks in Nigeria, in addition to a $111,968,109.38 cash swap arrangement between Dangote Cement Plc and Ethiopian Airlines.
Dangote re-affirmed its determination and belief in Nigeria, noting that the government of President Bola Ahmed Tinubu had shown the will and resolve to get the economy moving again.
“We are not body-shop investors. We believe in Nigeria, and we believe in Africa. We are genuine and authentic about our investments, and we call on all relevant agencies to investigate our FX transactions in the past 10 years and make public any infraction noticed or discovered.”
Insisting that all forex purchased in respect of its African Project Expansion were genuine and fully utilised for what they were meant for, the firm noted that the projects for which the forex was utilised were visible for everyone to see.
“It is on record that some of these projects were commissioned by Nigerian top-ranking government officials and in attendance were chief executives of various banks, captains of Industries, and the Presidents of the host countries supported by their Senior Government officials.
“The commissioning events of these projects were well documented and covered by both local and international media. There are also print and electronic copies of the commissioning ceremonies as further testimony to the judicious utilisation of the funds.”
Dangote further explained that its massive investments in Africa would lead to the repatriation of forex in the very near future and boost foreign exchange earnings in Nigeria, as well as stabilise the forex market.