BY FRANKLIN ALLI & PROVIDENCE OBUH

The 15 per cent import duty slammed by the Federal Government on imported wheat flour as contained in the 2012 Appropriation Bill, has escalated the prices of flour-based commodities.

As a result of this, flour millers, bakery firms and other businesses that depend on imported wheat flour as their raw material, have been reeling under the high cost of their raw materials.

“Wheat is a major raw material in the production of all our products. It actually accounts for over 90 per cent of the total raw material input and it is wholly imported. The price of wheat is influenced by so many factors most of which are beyond us as local users. For example, the Federal Government recently announced an introduction of a 15 per cent duty on wheat. This necessarily means an increase in the production cost of flour and other wheat-based products,” said Executive Vice-Chairman, Honeywell Flour Mills Plc., Mr. Babatunde Odunayo.

Market position showed that a bag of wheat flour which sold for N6,000 before now sells for N8,000, while a bucket of Topper baking margarine initially sold for N2,500 now sells for N5,000; sliced bread which sold for N220, has gone up to N240. Biscuits now range from N15.00 upwards.

Investigation conducted by Financial Vanguard, showed that noodles, biscuits, bread and other confectionery bakers are not finding it easy due to the cost of wheat flour which they say has skyrocked in recent months.

“The hike is causing low patronage as customers are not willing to buy due to the development,” said Mama Chidera who operates a retail shop at Awodi-ora market, Ajegunle, Apapa, Lagos.
“Before the price increase, if you go to the market with about N200,000 ,you can buy enough goods as you want, but now that price has increased, when you go to the market with N200, 000, you will not see the worth of that money,” she said.

On biscuits, she said; “Before, when I go to the market, I buy varieties of biscuits, but because of the increase, some producers have ceased producing biscuits; and companies that are still producing, produce less. So, instead of buying as many varieties as I wanted, I buy the available ones.” According to her, the recently introduced Yale bread which has become the favourite of most consumers because of its cost advantage, is very scarce in the market.
Similarly, Caroline Agyo, who bakes cakes, puff-puff, fish-roll, buns, among other snacks, said that she has stopped baking.

“I can’t cope with the price increase and rather than lose capital base and profit, I had better look for something else to do.”

A noodle retailer said; “We are facing so many challenges. If the price can be reduced, we will appreciate it. If the price of flour comes down, then you can buy the quantity you want and prices of flour-based food items will come down. For instance, the price of noodles per carton has moved from N1,750 to N2000. The difference is much no matter how you look at it, especially Chiki-Chiki brand of noodles.”

A government source said the decision to increase duty on wheat was taken to effect a marginal growth in the country’s Gross Domestic Product (GDP) and save the country some earnings by reducing importation.

He stated that primary goal of the new cassava policy is to cut wheat imports by 40 per cent by 2015 to conserve foreign exchange earnings and increase employment.

To cushion the effect of the increment in the import duty as well as encourage local farmers, the government has urged flour millers to add at least 40 per cent of cassava flour to their products. As part of this policy, the government said it was not only increasing the import duties but had also offered corporate tax rebates to millers, with duty-free imports on all equipment for processing or blending cassava flour.

According to Manufacturers Association of Nigeria, MAN, in order to discourage dependence on imported wheat flour, the Federal Government should again review upward tariff on wheat flour in the 2013/2017 Common External Tariff regimes.

MAN president, Kola Jamodu, said the association believes an upward review of the tariff will accelerate the manufacture of composite flour locally.

Speaking during a consultative forum on the review of Common External Tariff 2008/2012 which will expire in December this year, Chief Kola Jamodu said that the introduction of 10 per cent composite cassava flour in bread has necessitated the need for upward review of duty imposed on wheat flour from the current 15 per cent.

“We are aware that duty is a veritable instrument for generating revenue for Government. To this end, we recommend the following tariff rates as worthy of retention/adoption: Industrial machinery – zero per cent duty, raw materials not locally available – five per cent duty, raw materials that are sufficiently/adequately produced locally – 10 per cent duty; intermediate products – 10 per cent duty, finished goods locally available in adequate and consistent supply – 20 per cent duty + levy; finished goods with excess local capacity – 35 per cent duty + levy,” said Jamodu.

Corroborating, Gloria Elemo, the Director-General of the Federal Institute of Industrial Research Oshodi, FIIRO, said use of composite cassava flour in baking can save domestic economy about N318 billion yearly.

“This figure is half of the N635 billion (about $3.9 billion) being spent annually to import wheat into Nigeria by flour millers for bread making and other confectioneries.

“Since wheat is not produced in Nigeria, it has to be imported. Furthermore, bread, cake and other confectioneries are produced from 100 per cent wheat flour and as such, huge amount of hard earned foreign exchange is used every year for its importation,” she disclosed.

“We are trying to encourage consumption of cassava bread so that the money spent on cassava flour can be diverted to other areas and in the process, it will cause a chain reaction back to the producers. This would better the lives of farmers and in the process, rural life will be developed through cassava and it will add value to the economy,” she said.

According to her, in a bid to redress the country’s undue dependence on 100 per cent wheat flour for bread-making and other confectionery products, the Federal Government came up with the policy of gradually increasing the substitution of high grade cassava flour from 10 per cent to 40 per cent.

“High Quality Cassava Flour (HQCF) inclusion in wheat flour has the capacity to generate internal revenue of N24 billion based on about 300,000 metric tons per annum demand estimated by the flour millers and save the nation’s foreign exchange. “It is estimated that the HQCF industry alone can generate over 3 million jobs from over 75,000 small and medium cassava processing plants required to produce 300,000 tonnes of HQCF per annum,” she said.

Accordingly, she said that FIIRO has trained Nigerian master bakers in the use of 10 per cent cassava flour for bread and confectionery products. “Till date, bakers in Akwa Ibom, Oyo, Ogun, Rivers and Lagos states have been trained.” She disclosed that in addition to this, the Institute wants to embark on commercial production of cassava bread in order to make it available to Nigerian consumers nationwide.

“Many people are complaining that they don’t have the bread, they don’t know what it looks like and they don’t know how it tastes. So, the whole idea is to showcase this technology for people to see the prospects of investing in commercial cassava bread production.

“And because of the dimension and the direction we are going now, very soon, you will be seeing these products in the markets. FIIRO alone cannot satisfy the population of 160 million people. We can’t satisfy the population of Oshodi let alone the entire country. Indeed, it will be my joy if all of us can buy one or two of this technology and establish them in the market,” she said.

http://www.vanguardngr.com/2011/12/how-govt-lost-n355bn-from-privatised-firms/jonathan-and-bread/