Bread Price Increase Imminent As Flour Goes Up
Bakers Criticise Hike, Millers Blame Naira slide
As consumers return to settle down for business in the New Year, there is likelihood they may soon find the price of their beloved staple breakfast, bread, on the upside if bakers make good their veiled threat of turning their baking ovens off.
This would be in protest of the increase in the price of baking flour by the millers nationwide, who have raised the price per bag of flour by 10 per cent with effect from January 6, 2015.
By this, according to a statement by Mansur Umar, National Secretary of the Association of Master Bakers and Caterers of Nigeria (AMBCN), a bag which sold for about N6, 300 now goes for between N6,800 and N7, 000 depending on the area.
Umar said the association, in its recent meeting in Sagamu, Ogun State expressed surprise at the recent unilateral increase in all flour brands by the Flour Milling Association of Nigeria.
He said the millers did not put into consideration the fact that wheat prices fell “to an all-time low in the international market a few months ago” without the Millers adjusting their prices in consonance with the drop. He noted that rather, it was engrossed in one sales promo or the other.
In its grouse with the millers, the master bakers said they were not carried along or officially informed in spite of the “understanding with them,” adding that the prices were increased as if the brands were exactly of same quality and produced at same cost.
The master bakers said the action of the millers at this time, “we are still imbibing the cassava inclusion policy of the federal government, which is the best thing that have happened to our industry, is tantamount to dragging us backwards and removing bread from the table of Nigerians.”
But Mr. Paul Gbededo, Group Managing Director, Flour Mills of Nigeria Plc told The Guardian it is a serious economic issue the decision to devalue the naira.
“If oil that brings in the foreign exchange that sold formerly, at say $100 and suddenly, it drops to $50, it means that income is halved. Government had to devalue the naira and since we are import-dependent, it shows we need more naira in order to get the dollar needed. The effect is price increase otherwise many businesses would go under, and it is going to happen,” Gbededo said.
He added that the naira depreciation has not stopped and would likely go down 30 per cent or thereabout; by the time it hits the exchange rate of N200 to the dollar, the depreciation would have reached 30 per cent.
“Wheat millers are not increasing their price more than 10 per cent, while the naira is depreciating 30 per cent. Wheat constitutes imported raw material as much as 80 per cent; it not difficult mathematics to work out.”
For bakers, the Group Managing Director said the increase is only marginal. They should not expect that the naira is devalued by 25-30 per cent and not get a token increase in selling price, adding that if the full depreciation weight is applied, people would not be able to eat well and that would not be good for the nation. “We are also mindful of the disposable income,” he noted.
At Honeywell Flour, another of the millers quoted on the Nigerian Stock Exchange, its Managing Director, Mr. Lanre Jaiyeola said wheat has been badly affected by the depreciating naira and the company consistently requires foreign exchange to buy raw material. Therefore, it was a matter of last resort that Honeywell had to do a price increase.
Jaiyeola told The Guardian that in the books of the mills quoted (Honeywell, Dangote, Northern Nigeria Flour Mill and Flour Mill of Nigeria) on the Stock Exchange, there is a wide departure from what it used to be, adding that the last quarter result is glaring that it has not been rosy for flour millers.
For Honeywell, located in Tin Can Island, he said it is public knowledge that the traffic situation in the area is so bad that no transporter wants to come – it takes six hours for a journey that usually can be done in 30 minutes.
For now, the effect of the increase is yet to be felt, because according to Jaiyeola, many dealers have their warehouses fully stocked. “Usually, when there is a price increase, people tend to hold back a little and continue sales from their old stock. However, they are selling at the new price that has been announced by the flourmill and this has been the trend in the industry for quite some time now,” he said.
In spite of the promotions and slashes in selling price, the millers wondered why bakers never dropped the price of bread. For Honeywell Managing Director, increase up by N600 is really recovering part of the N800 lost in the course of the promos and “we don’t expect bakers to complain at all because what has been done is moving back close to the same old price.”
He does not expect there should not be any change in the price of bread.
On the new multi-purpose flour, which is a blend of wheat and cassava flour, Jaiyeola commended the Federal Ministry of Agriculture for the Cassava bread initiative and the support the partnering mills have received in terms of low, single digit funds to keep the production lines rolling.
“The arrangement of the Wheat-High Quality Cassava composite flour should not be affected in anyway. This is also in the interest of Nigeria and Nigerians. Honeywell has committed so much to this project already in terms of human resource and financial investment. So for us, it is not good at all to have anything affect the project.”