Why there is hike in flour price – Crown Flour MD

Anurag Shukla is the Managing Director of Crown Flour Mill Limited, a mill owned by Olam group. In this interview, he explains the efforts by the Flour Millers Association of Nigeria (FMAN) to assist local wheat farmers in the areas of improved seeds and ready market: Excerpt. Flour price hike presses Nigerians harder Foreigners manipulating […]

Anurag Shukla is the Managing Director of Crown Flour Mill Limited, a mill owned by Olam group.

In this interview, he explains the efforts by the Flour Millers Association of Nigeria (FMAN) to assist local wheat farmers in the areas of improved seeds and ready market: Excerpt.

Flour price hike presses Nigerians harder

Foreigners manipulating flour market in Nigeria

There have been complaints by local bakers as well as the consumers of hike in the price of flour in recent time. In some states, bread bakers are on strike in protest against the price increase while some have increased the price of bread, one of the stable foods for many Nigerians, as a major player in the sector, what do you think is responsible for this?

The principal determinant of cost of production of flour is the landed price of wheat.

Since the wheat is majorly imported, the price of wheat is significantly dependent upon the NGN/USD exchange rate.

In March 2020, with the onset of the COVID-19 crisis and the resultant collapse of oil prices, the Naira started devaluing.

The applicable rate for wheat import went from N337 in Feb 20 to N455 in June 20 – a devaluation of over 35%.

This has a direct impact on the cost of flour produced.

Cost of packaging and energy also have a big impact on the flour cost. These went up 40% and 24%. In this same period, Feb 20 – June 20, the flour prices have been corrected by only 15%.

In the same period, the prices of other inputs for the bakers went up even more – Sugar 30% and Yeast 17%.

Preceding the naira devaluation, the wheat millers had largely managed to keep the flour prices almost unchanged for almost two years, despite inflation but helped by a stable exchange rate.

The wheat milling sector is a critical component of the Nigeria economy – providing direct and indirect livelihood for over 10 million Nigerians. It is imperative that we all do our best to ensure its survival.

On our part, we have looked to invest in technology and in our people to continually improve our production efficiency – this allows us to provide our consumers with good quality products at the lowest prices.

Over the past 10 years, Olam has invested over N300 billion to acquire and upgrade various flour milling companies in Nigeria.

Through these investments, we ensure that the benefits of higher efficiency and scale translate into a lower wheat import bill for the country and a lower flour price for the consumer.

 

Aside from the hike in the price of flour, local wheat farmers are complaining of unfair treatment by the flour companies majorly owned by the foreigners. Parts of the complaints by the farmers were that they don’t get necessary support before and after the farming season from the key players, For instance, the flour companies do complain of poor quality of locally produced wheat but you are not doing much to assist the farmers with improved seeds that will meet your standard. Also, they complain of poor price for locally produced wheat. What is your take on this?

Over the years, Flour Millers Association of Nigeria (FMAN) has been a steady partner to the Wheat Farmers Association of Nigeria (WFAN).

We have provided an open market to the farmers – guaranteeing to buy all their wheat production at prices over 50% higher than international wheat prices.

We understand that it will take time for the wheat farmers to improve their productivity and quality of the wheat.

FMAN members have not complained about the wheat quality, but have accepted all the grades that the farmers have to offer.

Our biggest concern is that enough local wheat is not available to fully supplant the imported wheat.

 

As a major stakeholder in the flour industry, what do you think can be done to make our local wheat farmers produce acceptable wheat and as well make them relevant in the sector. Also, how do you think government can come in to make life better for the wheat farmers and encourage more production in the country?

FMAN has established a Research and Development grant to the Lake Chad Research Institute aimed at improving wheat varieties.

FMAN also initiated an out-grower programme in 2019 with 400 farmers. We plan to build this further.

It is important to understand that wheat is not a tropical crop and as such a very difficult crop to be grown profitably in Nigeria.

Recently, the Federal Government and the CBN have launched a programme to support the wheat farmers and develop this sector.

This is very laudable and FMAN stands ready to support this initiative.

However, for the programme to be successful, it requires long term planning and support for the Nigerian farmers in the form of inputs such as access to land irrigation, high quality seeds, fertilizers and farming equipment, access to low cost working capital and training for the farmers, and finally a ready market for the produce.

A successful programme will depend upon all the stakeholders – millers, farmers, the state & federal governments and the CBN – working in concert to build the sector, while ensuring that the livelihood of the 10 million Nigerians, dependent upon the flour sector, is protected.