Breadmakers canvass downward review of 15% levy on wheat

Premium Breadmakers Association of Nigeria (PBAN) has called 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.

The body said the 15 per cent  reduction in the levy on wheat grain will lead to a substantial reduction in the price of flour by millers.

Its President, Tosan Jemide disclosed this in an interview.

Jemide said since 2012, when the government introduced a 15-percent levy on wheat grain imports, it has resulted in an increase of five to 20 per cent.

The levy, he said was meant for the development of wheat cultivation in Nigeria, but , they said six years its introduction, they were yet to see its effect on wheat cultivation.

The Nigerian bread industry, Jemide said , is estimated at N122.1 billion with a Compound Annual Growth Rate (CAGR) of three per cent  He said  premium breadmakers contribute significantly to job creation, food security and economic growth in Nigeria; affirming that the industry should be supported to remain sustainable.

One of the ways, government could support, he said include:  access to  low interest loans from financial institutions to enable operators stimulate growth and the attendant job creation capabilities.

He said breadmakers were grappling with a myraid of challenges. Jemide said : ” The serious challenges we are facing as an industry. The premium bread making industry currently employs well over seven hundred thousand Nigerians directly and indirectly, making it a significant employer of labour, by implication, there will be adverse effects on the economy  if allowed to go into extinction.  The role of premium bread in food security of Nigeria cannot be over emphasized, it therefore behooves on the government to do everything within their means to ensure that the industry does not go extinct.

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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. 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. See the data analysis of the percentage increase in prices of baking ingredients in the pages below over the last 3 years to enable you know how precarious the situation of the premium baking industry is.

On the increase in the price of bread ingredients, Jemide said: “In the last 3 years, the prices of flour, 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.

On the challenges of power supply, Jemide said: “Our bakeries suffer seriously due to epileptic power supply and the high cost of alternative energy has made it a no go area for us.

Almost all our baking machines are powered by diesel generators. The cost of diesel has hit the roof top and is almost out of our reach.

The consequences of high cost of diesel have led to the closure of some premium bakeries.”

He called for the exemption of bread, as basic food item from Value Added Tax (VAT). He said: ” As we all know, bread is a staple food which Nigerian families have as part of their daily meals. 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.”

He further said: “Distributors in the premium bread making industry are the channel through which the bulk of the product is moved and sold to the general public. The near collapse of the premium breadmaking industry is having an adverse effect on their businesses equally. Due to the technicalities involved in obtaining loans for their businesses, they are unable to have enough cash outlay for purchase of premium bread; even when they do sell the bread, their margins are almost non-existent due to the uncompetitive price of premium bread, thus leading to so many of them going out of business.

“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.”