Citing the
prevailing economic conditions and unfavourable regulatory frameworks, economic
analysts at the financial, business and economic information hub - Proshareng,
have warned the nation of an impending food crisis.
According to a
recently published review of the wheat value chain, the analysts explained that
due to the disruption to vital supply chains, globally and locally, as a result
of several COVID-19 curtailment policies, and unfavourable FX regimes, and
insecurity issues in the wheat-planting belt of Nigeria, securing food for the
average Nigerian is becoming tougher to sustain.
The report
highlighted the profit eroding effects of the shrinking global wheat production
levels, increasing cost and skyrocketing freight/ free on board (FOB) rates
placed on Nigeria-bound goods on the revenue of flour millers and bakers.
It submitted
that the current price hike in the global wheat market, which the local millers
rely upon to bridge the expansive supply short-fall occasioned by the low level
of domestic wheat production, constitute an operational strain that is heavily
impacting the cost of production of millers and have the potential to further
elevate wheat-based staples prices.
Highlighting recent
price volatility in the global wheat market, the analysts noted that from as
early as the first quarter of 2021 the global price of wheat rose to US$642 per
bushel in January 2021 and then US$650 per bushel by the end of the quarter.
Further market pressures saw price settle at US$726.75 per bushel in May. By
the end of June 2021, price dropped to US$693.5 per bushel, while yet another
spike pushed price to US$707 per bushel in July 2021.
The sector report revealed how the
millers and bakers absorb the inflationary burden and the impact of rising
global wheat cost on the cost of wheat-based products. Adding that wheat-based
food products are fairly price elastic and therefore any rise in the price of
these products in the local markets can potentially heighten pressure on the
disposable income of Nigerians, many of whom fall within the C, D, &
E
socio-economic spectrum. The experts at the well-respected economic information portal
revealed that a likely third wave of COVID-19 outbreak, considering the
widening spread of the new Delta variant in addition to several early knocks,
could see the bottom fall out entirely for the flour milling industry.
The flour
milling industry plays a significant role in providing Nigeria’s ever-growing
population access to relatively cheaper staples. Recent industry reports show
that 45% of the food variants served in Nigerian homes are wheat derivatives,
and account for 75 million of the daily food portions in Nigerian households.
They urged the
government to allow the millers to access FX at the I&E window, suspend the
15% cassava levy, explore other measures to support the millers and bakers, as
well as assist local wheat farmers to acquire improved wheat seed varieties.
They pointed to strategic tax concessions in areas that align with the backward
integration target of the CBN amongst others as further measures that would
forestall a cave-in of the flour milling industry.
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