The spike in the market prices of major commodities globally has been a concern for many nations around the world. Nigeria, like others, also faces severe threats to its already wobbly food security position.
Stakeholders believe that Nigeria, a country that is heavily dependent on food importation need to urgently review certain structures, bureaucracies and bottlenecks within its agencies’ systems and operations.
They said while the federal can do little about the prices of the global commodities, at least, it can review the nation’s local port duties, charges and levies that add to the overall import bills of food commodities sourced from elsewhere to bridge the shortfall in the segments where local capacity is well below demand level.
According to an agriculture economist, Emo Fasina, precisely, the port tariffs slapped on imported food commodities is making life difficult for food manufacturers. He specifically, said that the Nigeria Customs’ arbitrary duty evaluation structure strongly impacts operating costs for food processors.
He said, ‘‘This reality is quite disturbing. The prevailing local operating conditions are austere. Of course, epileptic power supply, high fuel prices and a dearth of reliable logistic infrastructure, multiple taxation, inadequate FX, multiple exchange rate, high inflation, among others, keep raising the cost of goods produced in the country. When the prices of the locally produced goods are used as bases for determining tariffs to be slapped on food commodities produced in, and imported from countries where the cost of production is lower, the overall duty evaluation of imported food inputs would skyrocket.
‘‘This explains why food inflation is getting out of hand. The National Bureau of Statistics (NBS) revealed in June that the composite food index rose to a staggering 20.60%. The food inflation trend provides a challenge for a larger percentage of the population whose incomes are not keeping up with the pace of inflation.’’
According to the experts, one of the affected food inputs is wheat, a major ingredient in most local staples such as bread, noodles, pasta and semolina, consumed daily in millions of households. The Central Bank of Nigeria (CBN), disclosed that wheat is the third most-consumed grain in Nigeria after maize and rice, with domestic production accounting for only 1% of the 5 to 6 million metric tons of wheat consumed annually.
Experts believe that although the country is taking steps to scale up local production of wheat, it is still far from producing enough to meet the robust demand level for foods derived from the commodity.
A baker, Thomas Chukwu, said that considering the economic importance and role of wheat in the daily food composition of millions of Nigerian households, as well as its importance to local food processing firms, bakers and other businesses allied to the industry, it would be wise, therefore, to lower tariffs at least on essential commodities until the country has built sufficient local capacity in these segments.
‘‘The refusal to lower tariffs on the commodity until the various trials and researches embarked upon by private and public agencies to raise total wheat crop yield begin to pay off is piling woe on the entire value chain, the millions of people whose livelihoods stem from the commodity and consumers. This woe is already becoming evident from the threat by bakers to increase the prices of bread and other baked products by 30%, citing escalating cost of raw material. Premium bread which sold for between N350 and N500 early in the year now goes for N650 and N800,’’he said.
The president of Premium Bakers Association of Nigeria, Emmanuel Onuorah, during a TV appearance, blamed the development on the country’s unfavourable business environment.
He said, “We have not even increased the cost of our bread commensurate with the increase in the cost of materials, because for you to be able to run the business, cost and revenue must match each other. In our instance, the cost has overshot revenue. If you buy a six hundred trailer of flour to use in your company, most of us, by the time we finish baking, our revenue will be enough to pay for only four hundred. You will have a shortfall of two hundred.
‘‘Between February 10, 2022, and April 25, 2022, flour rose from N19,000 per bag to N24,500. Sugar, another bakery production ingredient, has also risen from N20,500 to N25,000, while the flavour is currently at N8,000, up from the N6,500 sold on February 10 this year. Diesel prices rose from N350 to around N700 per litre thereby bloating the production cost. Before now you never looked at diesel cost as something so paramount, but diesel cost today has doubled,” Onuorah said.
He also called on the federal government to look into the matter.
Investigation showed that the manufacturers of noodles, biscuits and confectioneries are also not finding it easy due to the cost of wheat flour which they say has skyrocketed in recent months.
“The hike is causing low patronage as customers are not willing to buy due to the development,” said Mama Chidera who operates a retail shop at Awodi-ora market, Ajegunle, Apapa, Lagos.
“Before the price increase, if you go to the market with about N200,000, you can buy enough goods as you want, but now that price has increased, when you go to the market with N200, 000, you will not see the worth of that money,” she said.
On biscuits, she said, “Before, when I go to the market, I buy varieties of biscuits, but because of the increase, some producers have ceased producing biscuits; and companies that are still producing, produce less. So, instead of buying as many varieties as I wanted, I buy the available ones.”
Similarly, Caroline Agyo, who bakes cakes, puff-puff, fish-roll, and buns, among other snacks, said that she has stopped baking.
Manufacturers and importers are, therefore, calling on the federal government to intervene urgently by removing the various bottlenecks such as the arbitrary import duty valuation regime that makes accessing critical production inputs challenging.
Speaking on the issue, the national president of the National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Lucky Amiwero, said the Nigeria Customs’ use of an arbitrary tariff structure to determine import duties of commodities is illegal.
He said whatever steps the customs take in raising tariffs should conform to the WTO agreement on customs valuation which aims for a fair, uniform and neutral system for the valuation of goods for customs purposes.
He mentioned that the WTO agreement which was domesticated in Nigeria as Act 20, 2003 stipulated that the customs duties should conform to prevailing economic realities. The agreement outlaws the use of arbitrary or fictitious customs values in any form.
Amiwero said that based on the domesticated agreement, the Customs has no power to base its duty evaluation on the consumer price index (CPI). He explained that the application of CPI by the custom has led many importers to abandon their cargoes at the port and those who manage to clear their goods often pass the cost burden to the final consumers in pricing.
In sum, public outcry against the indiscretion of the customs is reaching a crescendo. The outcry won’t be quelled until measures are taken to review the government’s position on important food commodities in this period of global supply chain meltdown and escalating food insecurity levels. Hence, the considerate policy step to take for now is to lower or remove excessive import tariffs on valuable food commodities to reduce the pains on food manufacturers and the consumers who always gets the short end of the stick in these situations.
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