- “Anybody still in the bread-making business is doing so because he cannot find any other thing to do and wants to save capital. There is no profit in this business,” Mr. Francis Afisoye, Manager of Lofty Bread, told Nairametrics in a sober tone.
This sentiment is shared by many bakers who are grappling with high input costs caused majorly by foreign exchange crunch in Nigeria.
There are currently dramatic price increases in the cost of inputs for baking bread. In fact, prices of essential raw materials such as wheat flour, butter, sugar, and even packaging materials have more than doubled in the last 12 months. Consequently, bread prices have risen by 40-80 percent over the period, according to Nairametrics’ findings.
Wheat Flour
Bakers have reported nearly a 100% increase in the cost of wheat flour since April 2023. Mr. Banjo Adeyanju, a Lagos-based bakery manager, noted that the price of a bag of wheat flour has jumped from about N32,000 in May 2023 to around N62,000 in May 2024, representing 94% price increase. The National Bureau of Statistics (NBS) had noted in its March 2024 Food Price Watch that wheat flour prices have soared by 94.29% over the past year.
Sugar
Similarly, the cost of sugar has also skyrocketed. According to bread makers, a 50kg bag of sugar now costs around N88,000, marking a 167% increase from last year’s price of about N33,000. The Nigerian Sugar Development Council (NSDC) reported that as of March 2024, the wholesale average price for a 50kg bag of sugar was N84,099, with retail prices slightly higher at N85,329.
Cost of other materials
Other significant cost increases have been observed in less noticeable materials such as label sachets (packaging material). Mr. Afisoye said that he now spends almost N700,000 on label sachets, up from N350,000 to N400,000 obtained in early 2024. Costs for other essential ingredients like butter, eggs, and yeast have also risen by over 100% over the past year.
Why the increase?
Mr. Raji Omotunde, the Vice President of the Association of Master Bakers and Caterers in Lagos, attributed these cost increases primarily to the significant depreciation of the naira. He explained that since many baking ingredients are imported, any depreciation in the naira directly impacts their prices. He also criticized flour millers for exploiting the naira’s depreciation to continually raise prices.
Prices vs profit
Despite the doubling of input costs, bakers have struggled to raise their prices accordingly. Though bread prices have increased in the last 12 months, they are not in the same proportion as inputs.
A piece of bread sold at Kubwa, Abuja, sold for N700 in May 2023 has had its price increased to N1,100 in May 2024, representing 58 percent increase. A piece of jumbo bread sold for N1,500 at Lagos stalls in 2023 are now sold for N2,500, indicating a 67% jump.
Some loaves have risen by 80% to N100%, but not in the same proportion as inputs.
- “Even when we increased bread prices by N400 in Kubwa, Abuja, they were not raised at the same time. We started by adding N100, then another N100, then N200. If you add N400 at once, many people will stop eating bread,” said a baker in Kubwa, Mr John Adejumo.
Bakers are facing price ceilings that, if exceeded, could significantly reduce demand since bread competes with other staples such as yam and plantain.
This situation has led to a severe erosion of their profit margins. The NBS data indicate that bread prices have risen by nearly 100% year-on-year, yet this has not sufficed to offset the increased costs of inputs, leaving many bakery managers reporting that they are no longer making profits.
For Mr. Adeyanju, earlier quoted, running his bakery has become more of a perfunctory act than a profitable business, and he anticipates exiting the industry soon if the current conditions remain or worsen.
Closure of bakeries
The shrinking profit margins, compounded by rising costs, are forcing many bakeries to shut down. Mr. Banjo, who recently closed his bakery, cited unprofitability as his main reason and has shifted his focus to his water business. Mr. Omotunde, earlier quoted, noted that Mr. Banjo’s case is not isolated, as about 35% to 40% of the association’s members have closed their facilities in the past year.
- He said, “So many of our members have shut down since 2023. Around 35% to 40% of bakeries have shut down and more are on the horizon if the spate of increase continues unabated.”
