Bakers Lament 34% Lending Rates, Rising Energy Costs

Bakers in Nigeria have lamented the high cost of borrowing and rising energy expenses, warning that the challenges are threatening the survival of businesses in the industry.

The operators said commercial banks were still charging interest rates of between 33 and 34 per cent on loans to small businesses despite recent reductions in the Central Bank of Nigeria’s (CBN) Monetary Policy Rate (MPR).

The Premium Breadmakers Association of Nigeria (PBAN) also disclosed that about 40 per cent of its membership had been lost in the last two years due to the harsh operating environment, rising energy costs and difficulties accessing affordable credit.

President of PBAN, Emmanuel Onuorah, disclosed this on the sidelines of the association’s 2026 Day-Out event in Lagos, themed: ‘Baking Through the Economic Storm: Innovation, Efficiency and Growth for a Sustainable Industry.’

Onuorah said the prevailing lending rates had made it almost impossible for bakery operators to access funds for expansion, modernisation and investment in alternative energy sources.

He cited his experience seeking a N12 million loan to finance a solar energy project for his business, saying he was offered the facility at 34 per cent interest, alongside a requirement for 20 per cent counterpart funding.

The CBN had in September reduced the MPR from 26.5 per cent to 23 per cent, but Onuorah said the adjustment had yet to translate into lower borrowing costs for businesses.

“How do I pay back the loan when you are charging 34 per cent interest? We are not asking for free money. We are asking for single-digit interest rates that can help small businesses grow,” he said.

He also accused financial institutions, particularly the Bank of Industry (BoI), of failing to provide adequate financial support to genuine entrepreneurs.

“Quote me on this, no PBAN member has received a Bank of Industry loan. They give these facilities to politically exposed people and those who do not need them, rather than businesses that require the money for growth and development,” he alleged.

Onuorah said stringent lending requirements had further frustrated efforts by small businesses to secure financing, adding that rising energy costs had compounded the challenges facing bakery operators.

He disclosed that the association was exploring alternative energy arrangements, including Compressed Natural Gas (CNG) and hybrid oven burners capable of operating on both diesel and gas.

However, he estimated that switching to alternative energy systems would require between N40 million and N50 million for a small bakery, an investment many operators could not afford without government support.

Also speaking, Chairman of the Organising Committee of PBAN Day-Out, Hadijat Olopade, said the high cost of borrowing and energy expenses had continued to undermine the profitability of bakeries.

She noted that while banks charged between 33 and 34 per cent interest on loans, profit margins in breadmaking were below 30 per cent.

Olopade appealed to the federal government to intervene by facilitating access to cheaper financing, warning that more businesses could collapse without urgent support.

She disclosed that energy accounted for about 50 per cent of production costs in the industry, adding that her bakery’s monthly diesel expenditure had risen from an average of N9 million to N19 million.

According to her, operators had been unable to increase bread prices despite the sharp rise in production costs, putting further pressure on their businesses.

“Unfortunately, we have not been able to increase the price of bread. So, you can imagine if your cost of doing business had doubled and you can’t increase your output,” she said.

Meanwhile, Manager of Crown Flour Mill Limited, Gbenga Sotimirin, urged bakery operators to embrace innovation and take advantage of opportunities in Nigeria’s growing market.

He said the country’s expanding population presented significant opportunities for the baking industry, stressing the need for operators to develop products that catered to the changing needs of different consumer groups.

Sotimirin argued that contrary to the perception that the Nigerian bread market was saturated, considerable opportunities remained for operators willing to adopt innovative approaches and improve production efficiency.

He urged bakers to embrace data-driven decision-making, digital technologies and improved production processes to manage operating costs, remain profitable and compete effectively.

PBAN, which comprises owners, managing directors and partners of premium bakeries across Nigeria, was established about seven years ago to promote standards, professionalism and sustainable growth in the baking industry.