Why Bread Is Expensive

Bake House Bakery, located in Kaduna has had to downsize operations due to the high cost of production. Manager of the bakery, Mallam Mohmud Modibbo, said the increase in the cost of flour and other inputs had led to an increase in prices, which in turn resulted in a drop in demand. Ninety percent of inputs involved in production of bread are imported.

The struggle by the company is one that is common place among manufacturers in the country. Almost everything manufacturer has some forms of imported inputs: from packaging and raw materials to alternative sources of energy like petrol and diesel. Difficulties in accessing foreign exchange and the depreciation of the Naira against the Dollar have led to firms either increasing prices, or in extreme cases lowering product sizes and quality.

The Cassava Bread Development Fund (CBDF) and cassava flour policy pursued by previous administrations seem to no longer be in operation. Under the policy, 5% of the wheat milled in the country was meant to be replaced with cassava. Flour mill operators were also billed to be given loans to buy cassava milling equipments. In the same vein, cassava farmers were meant to access loans at 5% per annum with repayment periods of three to four years.

Revenue for the fund was derived from duties on wheat imported into the country. Had the fund been successful, the cost of flour would not have doubled from N6000 per bag to almost N12,000 per bag. Unfortunately, the scheme seems to have fizzled out as the present government seems to be more interested in boosting rice production through the CBN Anchor Borrowers Scheme than other crops.

The discretionary foreign exchange rate for flour that was present in the past is no longer available as foreign exchange available in the country has dropped drastically. Flour producers will thus have to rely on the parallel market to meet their FX needs. The option available now is to cut cost like Bake House did, but that is only feasible to an extent. Nigerians may have to get used to expensive bread for the foreseeable future.