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Business News of Sunday, 19 November 2023


Soaring prices of ingredients force bakers out of business

National Bureau of Statistics (NBS) logo National Bureau of Statistics (NBS) logo

Everyone knows that these are not the best of times in business. Prices of virtually all goods have gone astronomically high but one of the worst hit are the small-time Confectioners and bakers who cannot afford bulk buying of ingredients.

These are confectioners and bakers that retailers measure out flour, butter, sugar, oil, baking soda etcetera in paint/custard buckets, bowls, cups to buy and they sell with minimal profits but as prices continue to go up, majority of them are closing shop.

Just last Wednesday the National Bureau of Statistics (NBS) released a report that Nigeria’s headline inflation rate rose to 27.33 per cent in October from 26.72 per cent in September.

The bureau said the October 2023 headline inflation rate showed an increase of 0.61 percentage points in the October 2023 headline inflation rate compared to September 2023.

On a year-on-year basis, the headline inflation rate in October 2023 was 6.24 percentage points higher than the rate recorded in October 2022, which stood at 21.09%.

This indicates an increase in the year-on-year headline inflation rate in October 2023 compared to the same month in the previous year, October 2022.

According to the report, the food inflation rate in October 2023 accelerated to 31.52% on a year-on-year basis, which was 7.80% points higher compared to the rate recorded in October 2022 (23.72%).

The increase in food inflation on a year-on-year basis was attributed to higher prices of bread and cereals, oil and fat, potatoes, yam and other tubers, fish, fruit, meat, vegetables, milk, cheese, and eggs.

On a month-on-month basis, the food inflation rate in October 2023 was 1.91%, which was 0.54% lower compared to the rate recorded in September 2023 (2.45%).

Per the report, “The decline in Food inflation on a month-over-month basis was caused by the decline in the rate of increase in the average prices of Fruits, Oil and fat, Coffee, Tea and Cocoa, Bread and Cereals.”

Food prices have been steadily increasing in Nigeria in recent years, and the situation worsened due to the impact of government policies, including the removal of subsidies on petrol, among other factors.

There are projections Nigeria’s inflation will keep increasing till the year ends, possibly reaching a record level of 30%, the highest seen since the country’s modern democratic era.

In an interview with Mama Esther who has been selling confectionery at Ipodo market Ikeja, she said she can no longer remain in the business as she is selling at a loss. “Sometimes at the end of the day I find out that I made little or no profit. I have reduced the size of my products to the anger of my customers but am still selling at a loss most times.”

Lamenting about the price of sugar and other ingredients, she said she was changing her line of business adding that her family will go hungry and bankrupt if she remains in this business.

Mrs. Anthony Onwu, a retired teacher who delved into the business to augment her pension said she closed her shop early this year as the ingredients became unaffordable. “I now go to people’s houses to do lessons and make do with whatever I am paid.”

No matter what you are buying, these days you are going to pay more for it. “Small businesses across the country are paying more for ingredients. One week it is cocoa powder, the next week, it is butter,” said Mrs. Onwu. “The week after that, it is going to be eggs, any diary, just across the board, everything has been on the increase.”

Investigations revealed that a bag of 50kg Dangote sugar that used to sell N43,600 just two months ago, as at Thursday last week, sells for N55,000. A 50kg bag of Mama gold flour which was less than N30,000 just some months back, currently sells for N45,500. A crate of average sized eggs which cost N1,200 is now N2,600. Small size baking powder of N800 now sells for N1,500. There has been a horrendous increase in all prices of goods.

Bread, a favourite Nigerian fathers welcome home gifts for their children, is disappearing in homes. Most households have now jettisoned the pastry from their diet lists, as the prices of flour and other ingredients for making bread have continued to increase, leaving bread prices on a high side.

To worsen the situation, many bakery owners are shutting down, due to their inability to meet up with increasing cost of ingredients.

Several increases have been done in the prices of bread since the Russian-Ukraine war, which has resulted in unavailability of enough flour all around the world.

Mr. Abayomi Olorunfemi, a baker noted that apart from shutting down business, some bakery owners are reducing the sizes and increasing the prices of bread to make ends meet.

“This country’s economy is really dealing with businesses. It has turned smart business men into people who aren’t smart anymore. Many of my colleagues in the business are shutting down. Those who have three to four bakeries now have two.

“Some are now reducing the size of their bread and increasing the prices. This year, bakers have increased the prices of bread over three times. It is very traumatic because customers no longer patronize bread due to the increased prices and small quantity and lessened quality.”

Mrs. Are Toluwalase, a business woman, said she had to stop buying bread when the price of a family size bread was increased to N1,200 from N1,100.

“I stopped buying bread when the price of a family size bread was increased to N1,200 from N1,100 two months ago. The quantity is nothing to write home about. With two cuttings, a family size bread is finished. Before you get such bread for N500. I have a family of six.”

Mr. Aderotimi Samuel, a bakery owner, said he has two bakeries in Ikorodu but recently shut down one to be able to meet the cost of maintenance.