Premium breadmakers seek review of VAT, 15% wheat import tariff

The Premium Breadmakers Association of Nigeria (PBAN) has asked the federal government to review the extra tariff on wheat importation, describing its impact on cost of production as extremely adverse to their business.

The association is also seeking government intervention in salvaging them from the lack of steady power supply, exorbitant cost of powering alternative sources of energy and the enforcement of value added tax (VAT) on bread factories despite their product being a staple food in the country.

PBAN is particularly concerned that the astronomical increases seen in wheat prices in the last three years have been a clog in its wheel of profitability and could invariably lead to collapse of major players.

Should the high production cost persist, the association might be forced to hike the average price of loaves by at least 90 percent to bridge the gap between their operating cost and profit.

Tosan Jemide, the PBAN president speaking on Monday at a press briefing in Ikeja lamented that: “In the last three years, the prices of flour, sugar and other baking ingredients have quintupled without a corresponding increase in prices of premium bread by PBAN members. It is either we do something about the astronomic increase 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 very difficult to meet our loan repayment obligations.

“Bread is a staple food. Hence, we are crying out. The bakeries have served as the shock absorbers for the industry. The millers have increased their prices as and when needed. But we bakeries have not been able to pass under cost because we are the ones closer to our consumers through our distributors and the distributors are always in touch telling us it’s not possible to increase price to a certain level. So we are in a dilemma. We cannot increase to a price that will be the actual value of loaves currently. But we are also running businesses and we must be doing business profitably otherwise it will kill the industry,” the president added.

Wheat, a core raw material for the baking industry in Nigeria has seen high rising levels since 2015, skyrocketing from N6,500 per 50 kilogramme to N11,500. This has made business unusually tough for bakers who are equally limited in the options when turning to local market.

According to Jemide, the seeming alternative of domestically sourcing flour from millers is neither an effective option because the quality is slightly deficient for the requirements of bread baking.

Moreso, the association believes that the rationale behind government’s imposition of additional levy on wheat importation begs questioning, with the evidence of increased local production capacity hardly felt by industry stakeholders.

“We are not aware that local wheat production has been successful and if it has, it has not tricked down to us because prices are still astronomical,” Jemide said.