Nigerians may soon have to grapple with further hikes in the prices of most of the staple food items as wheat will soon join the list of items restricted from official forex allocation by the Central Bank of Nigeria (CBN), reports say.
Nigeria’s inflation rate is currently at 17.01% while food inflation stands at 20.3%, according report of the National Bureau of Statistics (NBS) released in September. World Bank had in its June report stated that the rising prices of goods in In Nigeria had pushed seven million people into poverty.
Wheat flour is used to make bread, noodles, pasta, biscuits (cookies), semolina and some beverages like wheat beer and Malted milk. With the planned restriction, any firm that requires imported wheat for its operation will seek forex from alternative sources.
Business Hallmark gathered that the apex bank is seeking to put an end to $2 billion spent annually to import about 99 percent of Nigeria’s wheat demand, which it said is depleting the country’s foreign reserves.
However, coming at a time the Bureau de Change (BDC) Operators across the country no longer get forex allocations from the apex bank, the development will lead to increase in the price of wheat, thereby worsening the nation’s food crisis, analysts think. By sourcing forex from a third source (including buying from Nigerians who receive foreign currencies), the BDCs are bound to sell at higher rates.
The local currency is currently hovering around N570/$ at the parallel market, with analysts predicting further fall due to worsening dollar scarcity.
Recall that in May, the Association of Master Bakers and Caterers of Nigeria (AMBCN) directed its members nationwide to increase prices of bread, biscuits and other items by 30 per cent due to the devastating economic situation of the country.
The directive was part of the resolution reached at the end of the National Executive Council (NEC) meeting of the association in Abuja. The association explained that the adjustment in price was as a result of the sudden increase in the cost of production, as well as prices of sugar, butter, yeast and flour.
National President of the association, Mansur Umar, who read the resolutions explained: “After considering the impact of the skyrocketing prices of baking ingredients/materials, for the survival of our noble business, which is presently bleeding, the association came to the conclusion to adjust our prices by 30 per cent.”
This is coming for the second time in one year. The first price review was done last year in the wake of the COVID-19 pandemic, which disrupted economic activities.
“Normally, at home, a bread of N500 would serve about four adults, but now, we buy bread of N750 to feed four adults and it won’t still be enough to satisfy our hunger”, laments OnyinyehEzeilo, an undergraduate who resides in the Mushin part of Lagos.
“The tiring aspect of the whole thing is the fact that the bakers are constantly telling their customers that the price would still increase and we should get ourselves prepared.”
Findings show that in the last one year, prices of almost all the wheat-based staples have increase by at least 50 percent.
According to a recently published review of the wheat value chain, analysts at Proshare explained that due to the disruption to vital supply chains, globally and locally, as a result of several COVID-19 curtailment policies, and unfavourable FX regimes, and insecurity issues in the wheat-planting belt of Nigeria, securing food for the average Nigerian was becoming tougher.
The report highlighted the profit eroding effects of the shrinking global wheat production levels, increasing cost and skyrocketing freight/free on board (FOB) rates placed on Nigeria-bound goods on the revenue of flour millers and bakers.
It submitted that the current price hike in the global wheat market, which the local millers rely upon to bridge the expansive supply short-fall, occasioned by the low level of domestic wheat production, constituted an operational strain that was heavily impacting the cost of production of millers and had the potential to further elevate wheat-based food prices.
Highlighting recent price volatility in the global wheat market, the analysts noted that from as early as the first quarter of 2021, the global price of wheat rose to US$642 per bushel in January 2021, and then US$650 per bushel by the end of the quarter.
Further market pressures saw price settle at US$726.75 per bushel in May. By the end of June 2021, price dropped to US$693.5 per bushel, while yet another spike pushed price to US$707 per bushel in July 2021.
The sector report revealed how the millers and bakers absorbed the inflationary burden and the impact of rising global wheat cost on the cost of wheat-based products, adding that wheat-based food products were fairly price-elastic and therefore, any rise in the price of these products in the local markets could potentially heighten pressure on the disposable income of Nigerians.
The experts revealed that a likely third wave of COVID-19 outbreak, considering the widening spread of the new Delta variant in addition to several early knocks, could see the bottom fall out entirely for the flour milling industry.
The flour milling industry plays a significant role in providing Nigeria’s ever-growing population access to relatively cheaper staples. Recent industry reports showed that 45 per cent of the food variants served in Nigerian homes were wheat derivatives, and accounted for 75 million of the daily food portions in Nigerian households.
They, therefore, urged the government to allow the millers to access FX at the I&E window, suspend the 15 per cent cassava levy, explore other measures to support the millers and bakers, as well as assist local wheat farmers to acquire improved wheat seed varieties.
They pointed out strategic tax concessions in areas that align with the backward integration target of the CBN, amongst others, as further measures that would forestall a cave-in of the flour milling industry.
However, the CBN said it has devised strategic action plans to increase wheat production by addressing existing difficulties in the value chain, thereby bolstering the country’s foreign reserves. Director of Development Finance Department at the CBN, Mr. Philip Yila Yusuf, revealed this at a wheat conference and stakeholder engagement in Abuja, themed: “Improving and Sustaining the Wheat Value Chain Development in Nigeria,” according to The Nation.
Yusuf said the CBN plans to jump-start a massive local production of wheat to cover for the 99 per cent disparity as only one per cent (about 63,000 metric tonnes) of wheat out of the five to six million metric tonnes consumed in Nigeria is produced locally.
He emphasized the wheat value chain’s immense potential for ground-breaking impact in the agricultural sector, stating that the bank planned to “focus attention on the wheat value chain for dry season planting in 2021/2022 after making sustainable progress throughout the rice and maize value chains.”
Yusuf said, “The CBN plans to address key problems in the value chain through financing massive production of wheat in Nigeria and seeks to facilitate sustained availability of high yield seed variety in the country and improve general productivity.”