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BusinessRising price of bread and Inflation Rate.

Rising price of bread and Inflation Rate.

October 14, 2024

 

The prices of bread and other flour based food items that are already gradually going out the reach of the ordinary Nigerian would continue to rise as and operators would continue to pass the costs to final consumers as the market condition dictates.

This is as bakers and flour millers, have said there is no end in sight for solutions to the key drivers of the cost in the sector

However, findings show that leading companies and operators in the sector are recording increases in revenue and profit than the rise in their cost of production, an indication that they may be passing more than actual cost of production to the consumers.

Operators insist that the cost drivers in the sector is the price of flour which also drives the price of bread in Nigeria and is still rising due to dependence on imported wheat.

According to them Nigeria produces less than 1% of its wheat needs, indicating the local supply quantity is actually decreasing despite the two decades of operating backward integration to building local production capacity.

In the midst of proclaimed challenge, the three biggest and most dominant companies in the sector recorded combined 45 percent increase in cost of production to N2.2 trillion in the full year 2023 from N1.5 trillion in 2022.

But their combined turnover at N2.5 trillion in the period under review, represents an 47.2% increase from N1.7 trillion in the previous period.

They said while local output has declined from about 10 percent peak local consumption has increased by more than 40 percent in the past one decade.

They believe this trend is not going to change soon adding that more challenges have now come into the basket of troubles in the industry.

Listing the additional challenges, the industry operators included high exchange rate and scarcity of foreign exchange, rising cost of transportation due to rising prices of petrol and diesel as well as cost of energy in running the factories.

READ MORE; NNPC hikes petrol price by 15%

They also added insecurity and instability in wheat  producing regions, inadequate storage facilities and poor infrastructure.

Interaction with retail dealers indicate that consumer prices for bread is now higher than inflation rate.

The retail price for premium category as at last week was put at market average of N2,500 for large sizes, about 51.5 percent year-on-year, increase as against inflation rate of 32.15 percent.

The price increase is even much faster in the low income category where average price is now N1,500  for large sizes, up by 76.5 percent year on year, from N850 a year ago.

Bread vendors in some parts of Lagos, lamented that even before the recent petrol price increases prices of bread have been going up.

They noted that they have experienced a drop in patronage  which has also reflected in their low demands from bakeries.

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