Wheat Flour Mill
Price increment on flour-based products may be imminent, following additional 20 per cent import levy on wheat, writes Raheem Akingbolu
There has been heat in the polity in the last few months over the consequence of what might be the result of the increment of the import duty on wheat as contained in the 2012 Appropriation Bill that was recently presented. While government and its relevant regulatory agencies on agricultural products and importation are arguing that the decision was taking to effect a marginal growth in the country’s Gross Domestic Product (GDP) and save the country some earnings by reducing importation, millers; whose primary raw material is ‘wheat’ and bakers are of the opinion that it will only succeed in hiking the price of flour based products like Noodles, Pasta, Bread, and Spaghetti.
To cushion the effect of the increment of the import duty as well as encouraging local farmers, 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 of all equipment for processing or blending cassava flour.
The government explained that there was no way the country could experience the desired growth in the face of unbridled importation of consumer items and, specifically, stated that the jacking up of the duties was intended to challenge farmers on the need to work harder so that Nigeria can become sufficient in food production.
Consequences and reactions
Meanwhile, findings revealed that, on the eve of the introduction of a 15 per cent increase in duties on wheat imports, the annual cost of Nigerian wheat imports rose to US$4.1 billion. This measure, which according to USDA increased the import levy from 5 to 20 per cent, was introduced as part of the policy to promote a substitution of cassava flour for wheat flour in bread. The measure is to be accompanied by an additional 65 per cent levy on wheat flour, to bring the applied duty to 100 per cent.
While bakeries are to be allowed 18 months to comply with new requirements, 10 per cent blending of cassava flour with wheat flour is to be introduced this year, increasing to 40 per cent by 2015. Government had explained that the development became necessary to create new market opportunities for Nigerian farmers. But despite initial political controversy over the health effects of the use of cassava flour in bread, the National President of the Nutrition Society of Nigeria, Prof. Ignatius Onimawo, who lent his voice to the raging debate, had debunked the claim by a member of the national assembly that cassava flour causes diabetes.
In an interview published by Trade Newswire, a local online publication, he argued that by lowering the glycaemic index of bread, cassava-blended bread will help combat diabetes and will in addition be more nutritious.
Also, some companies have publicly endorsed the initiative and pledged support for the government’s blending objectives. In June, the Association of Small Scale Agro Producers in Nigeria (ASSAPIN) came out in favour of the use of cassava flour in bread. However, ASSAPIN warned that the government needed to consult and carry small-scale farmers along with the new initiative.
Meanwhile, Minister of Agriculture, Dr. Akinwunmi Adesina, had recently said that flour manufacturers in the country were planning to kill the on-going agriculture transformation agenda of the Federal Government.
Adesina held that the flour millers were misinforming Nigerians that using 40 per cent cassava flour in bread was unhealthy.
According to him, the statements credited to some flour millers that cassava consumption was not good for those with diabetes is untrue, scientifically baseless and is a deliberate attempt to disconnect Nigerians from a viable and patriotic programme. The minister said the millers were so doing to protect their abnormal profits.
Adesina argued: “Cassava, for which Nigeria is the largest producer in the world, is being used to produce high quality cassava flour to replace some of the wheat. The flour mills and their surrogates are doing all they can to misinform Nigerians so as to protect their super profits, which they siphon out of Nigeria. They are fighting to make Nigerian farmers poor and wretched, while making farmers of wheat exporting countries happy.”
Considering previous policy instabilities in the country and lack of sustainability of similar initiatives, there is fear in some quarters that this may turn out to be another still born baby that will only, at the end frustrate stakeholders; including farmers, manufacturers of wheat-based products and consumers.
As it is, there remains scepticism over the initiative, given the failure of a similar 10 per cent blending requirement in 2005.
The 2005 experience and similar shortcomings in the 2002 presidential initiative on cassava have been cited as past examples that had discouraged investors from engaging with the new policy.
Manufacturers of wheat and flour do not also see Nigeria as being ripped for the new development.
Speaking recently at the annual Customers’ Forum of Honeywell Flour Mills Plc, in Lagos, the company’s Executive Vice-Chairman, Mr. Babatunde Odunayo, lamented that despite the good intention of government to use cassava as a springboard for rural development and urban decongestion, its unavailability and lack of technology by local milers to process the volume required will frustrate the effort.
He described the situation as a serious challenge, currently being faced by flour makers, despite their willingness to use cassava.
As a result of this, Odunayo argued that the manufacturers may not have any choice at the end but to maximise profit with the new import duty, which he said could lead to increase of prices of other things, especially bread and wheat.
According to him, “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 levy, in addition to the 5 per cent import duty for wheat. This necessarily, means an increase in the production cost of flour and other wheat based products from millers,”
It is not only the manufacturers who kicked against the initiative, some consumers and analysts see it as a policy that would bring about another phase of hardship to consumers, especially now that they are just adjusting to realities of the January hike in prices of petrol caused by the aborted outright removal of fuel subsidy.
An analyst and publisher of the Chicago-based Esteem International Magazine, Mr Femi Odere, told THISDAY in Lagos that Nigeria had always embarked on unplanned and poorly researched policies, which at the end boomerangs.
According to him, “There is nothing bad in cassava components but the fact remains that necessary research and consultation among stakeholders have not been done and this is dangerous to the market.”
“To me, this is another bandage approach that will later expose the wound and create hardship for the masses, who either earn their living or consume the wheat based products because as it is, it is obvious that price of these commodities would be jacked up,” he added.
Again, despite government insistence that that the 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, there are insinuations that its estimation that wheat imports worth N635 billion (about $4.2billion) in 2011 was overstated to demonstrate that wheat imports hurt Nigeria’s foreign exchange earnings and worsen the rate of unemployment.
It is believed that, these figures, even if they include cost, freight, insurance and duty, were on the high side. Mr. Ismail Quadri, an agric-economist based in Lagos, who hold this opinion argued that no more than $1.8 billion was spent on wheat imports annually using the same cost, freight, insurance and duty schedule.
The Lagos State chairman of the Association of Master Bakers and Confectioneries, Mr. Jacob Adejorin, had confirmed that price of bread would be increased as from September 1, following the increment of price of flour and other ingredients by N1, 000.
He said: “Members of our association has no option but to increase the price of bread because of the N1, 000 additions on the price of flour but consumers can be assure of more quality products as we will on 28 of this month hold a seminar to further standardise our products.”
Prince Adejorin, who disclosed that the Standard Organisation of Nigeria would oversee the seminal further, added that the master bakers would not work on 31st of this month as they would be going on sensitisation exercise across the state.
On the introduction of cassava flour, he said his association had nothing against it, adding that they had no power to oppose government decision.
He however urged government to put all the necessary machineries in place to implement the plan.
“Currently, the machinery available is meant for wheat based bread, we will be ready to support the government in the crusade if the new initiative can come with machinery for cassava flour that can be demonstrated and found effective,”
According to a former President of the Association, Mr. Lateef Oguntoyinbo, stated that, while the official price of flour from the flour mills was over N5, 400 per 50kg bag, an average baker did not have access to the flour mills and so will have to buy from middlemen for between N5, 450 and N5, 500 per bag.
He said: “ Look at it this way, a 50kg bag of sugar now sells for N10,600, when you quantify that and other ingredients such as yeast, salt, flavour, as well as staff salaries, you’ll find that not much profit is
made at the end of the day,”.
A consumer, Cynthia Abaribe, who feared that the current increment on import duty will affect noodles and other products, said the policy would only make life more difficult for an average Nigeria.
“As a student, noodles and bread are always my last result whenever I think of taking a quick food that would be affordable, when the sons and daughters of the rich might settled for fast food joints. Now that the price of these commodities is set to go up, what is the hope? I think government need to consider the masses and have a rethink,” she said.
For a long time, bakers have been on the edge over rising cost of ingredients needed for the production of bread and other confectioneries. As a result, many small scale bakers have been compelled to abandon baking.
Although industrial researchers believe that the inclusion of five per cent cassava flour in wheat flour could lead to a drop in the cost of baking flour; but not all flour millers have heeded this government’s policy, hence, its impact on the price of flour is not yet felt by bakers.
Apart from the above, industry operators said they still grappled with the usual infrastructural constraints of erratic power supply, poor road network and insufficient health care facilities.