As Bakers Succumb to FX Volatility, Hike in Diesel Price

As Bakers Succumb to FX Volatility, Hike in Diesel Price

The current crises in energy, and foreign exchange markets are threatening to push Nigerian bread makers, like some other members of the manufacturing community, out of business amidst the federal government’s assurance to halt the dangerous trend, writes Festus Akanbi

In a country where the safety of its major revenue earner (crude oil) is still a major issue, certainly, the current tale of woes from the camp of the Manufacturers Association of Nigeria, (MAN) in general, and one of its affiliate bodies, the Premium Breadmakers Association of Nigeria (PBAN), should be taken very seriously.

Clutching to the Last Straw

In an emotion-laden appeal last week, the breadmakers body sought immediate intervention from the federal government to stem the tide of closure of business by members of the association who, like other players in the nation’s economy, have been battling the twin problem of high volatility in the forex exchange market and the prohibitive cost of diesel, which they use in running their bakeries. 

Economic analysts said the ominous signal from the camp of bread makers simply reflects the mood in other sectors of the economy where difficulty in accessing foreign exchange is exacerbating the biting effect of the high cost of diesel. The association lamented that the hike in diesel price and exchange rate volatility has caused many of its members across the country to shut down their business operations.

The federal government said it has disbursed over $3.2 billion to support the power supply to Nigerians in the last five years. The Central Bank of Nigeria Governor, Mr Godwin Emefiele said the monies were disbursed to electricity Generating and Distribution companies to acquire equipment, buy meters and improve electricity supply in the country. However, Nigerians have continued to battle poor power supply with the situation worsening a few weeks ago when the nation’s power grid collapsed twice, causing a huge blackout across most parts of the country.

Analysts said it will be a miracle for Nigerians to start experiencing a significant improvement in the forex market given the renewed political activities in the country.

This is compounded by the decline in FX inflows in the country. Recent data released by the National Bureau of Statistics reveals that Nigeria’s capital importation declined to its five-year low of $6.7 billion in 2021. The decline is attributed to the significant drop in both direct and portfolio investments.

 Not Peculiar to Nigeria

Virtually all products and services have experienced upward adjustments in their prices in recent times as a litre of diesel is sold between N600 and N700 per litre, but in all this, the federal government says Nigeria is not the only country experiencing high cost of food items and diesel.

Like every other thing, the Minister of Information, Mr. Lai Mohammed has risen in strong defence of the federal government, saying the price increase is a global trend. He added that the government is taking steps to address the situation. He described those criticising the handling of the situation as mischief.

Mohammed said, “The last issue I want to address is the figures being bandied around by the folks on the other side and a section of the press, comparing the prices of some foodstuffs, petrol, diesel, etc., pre-2015 and now,” he said.

“This misuse of statistics is clear mischief. Those who bandy around these figures without putting them in context are being clever by half. Let’s take the price of foodstuffs and petrol. Google the price of foodstuffs in other countries, especially the UK and the US, and you will discover a steep rise. Ditto for the price of gas or petrol.

“What we are saying is that this increase is a global trend, and it’s not limited to any country. Therefore, presenting it as a Nigerian problem is mischievous, disingenuous and a clear act of misinformation.

Things are Not Getting Better

While the federal government is busy reassuring Nigerians that it’s up to the task of addressing the issues, the President of the Bread Manufacturers body, Mr Emmanuel Onuorah, expressed concern that the challenges were affecting key sectors of the economy.

“Things are not getting better. We are still where we are. Diesel price is still hovering between N650 and N700,” Onuorah said.

“Even the price of the nylon that we put the bread in has just increased by about 20 per cent. It’s not looking any better. Light is still comatose.”

Corroborating complaints from other sectors, the PBAN president said, “The diesel is expensive. People are trying to right-size, scale down, drop workers to remain in business. The government doesn’t seem to be listening to anybody. It’s not even only the bakers, it’s an industry-wide thing. MAN is crying. Hospitals that are running diesel are also optimising.

Industry affairs commentators said the unfavourable development in the operation of bread makers would affect other forms of pastry, with the attendant worsening of the plight of the common man.

Price Adjustments

They pointed out that given the fact that bread is a common staple in many homes, the planned hike in the prices of bread and associated variants like cake will heighten the pervading food crisis in the country.

This was corroborated by the position of the PBAN President, who predicted a sharp increase in the prices of bread. He said, “It will certainly go up. Because if you don’t pass on the cost, how do you remain in business? But on the other hand, are we not Nigerians? Do customers have the income to bear this?

“You have to look at all these things and place everything in context. There is a human element to all these. “People are bending backwards to see what they can do. Things such as reducing the sizes of their bread or cutting down on the weight. This is so that we can just maintain what are we doing.”

Apart from the consumers’ agony, there is also the issue of the attendant job losses in the sector. Painting a rather sad picture of the fallout of the harsh operating condition, the president said, “many of our members are shutting down. For every shutdown, there are job losses. It’s saturating the already-saturated employment market. It’s exacerbating insecurity because when people don’t have jobs, they result in criminality because they need to survive.

“The further devaluation of the naira, the more it affects us because most of our inputs are imported. It affects nylon, margarine, groundnut oil.” Onuorah urged the government to tackle the persistent decline of the naira against the dollar to make life easier for importers.

Higher Cost of Production

Reacting to the rising cost of production, the Director-general, Lagos Chamber of Commerce and Industry, (LCCI), Dr Chinyere Almona explained that the immediate implication of the price of diesel at above N600 per litre is the increase in the cost of production and logistics which can translate to higher prices of products. 

“We should expect a rise in inflation above 15.60 per cent as of January. The rate of 13 per cent assumed for the MTEF 2022 to 2024 is threatened in the short-term and except the right interventions apply, we may miss this target even in the medium term,” she stated in a statement.

On the issue of job losses, the umbrella association for Nigerian workers, the Nigeria Labour Congress, (NLC), said there was a limit Nigerians could bear under the prevailing circumstances, warning that the energy and fuel crises were pushing Nigerians to the limit.

Members of the Organised Private Sector, on their part, are not folding their arms either. Reacting to the recent shutdown of flights over the scarcity of aviation fuel; hike in diesel price and looming darkness due to national grids collapse, the National President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Ide J.C. Udeagbala, stated: “Our association is extremely concerned about rising prices of petroleum products; particularly diesel and aviation fuel; a hike which is very possibly an effect of the ongoing conflict in Europe and made worse by a lack of domestic production to meet demand, despite the existence of refineries.

“The implications for the Nigerian economy are far-reaching as the use of these products is entrenched in the production and transportation processes of both the public and private sectors.

“We use this opportunity to stress once again our call for incisive policy implementation within the energy sector to limit our economy’s exposure to global shocks and serve as a springboard for sustained economic growth.”

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