The Premium Breadmakers Association of Nigeria (PBAN), an association comprising owners, managing directors and partners of premium bakeries in Nigeria have called on the federal government to review the Value Added Tax (VAT) on bread and 15 percent levy on wheat grain imports, which have had an adverse effect on their operations.
BusinessDay’s checks show that on July 20, 2012, the Federal Government introduced a 15-percent levy on wheat grain imports resulting in an increase of the effective duty from five percent to 20 percent.
The levy is said to be meant for the development of wheat cultivation in Nigeria, but about six years after the introduction of the levy, the effect on wheat cultivation in Nigeria is yet to be felt.
PBAN are therefore calling on the Federal Government to review downwards the 15 percent levy on wheat grain imports to help drive down the price of flour which constitutes about 75 percent of baking ingredient.
Speaking to journalists in Lagos, Tosan Jemide, President, PBAN explained that VAT act exempts certain goods including ‘basic food items’ from VAT. However, producers of premium bread over time have been made to pay VAT, penalised or threatened for not paying VAT on bread. We find that
“There is an ambiguity in the tax law and the clarification of the FIRS Act made by FIRS. We therefore demand that the federal government and FIRS look into this as a matter of urgency in order to clarify this ambiguity,” Jemide said.
He lamented that the challenges bread makers face as a result of incessant increases in the prices of baking ingredients has rendered most premium bakeries comatose from operating at a loss; capital injection through loans and equity investments have been pumped into a lot of these businesses and repayments are no longer possible.
He further explained that this has a ripple effect on the economy as a whole as it serves as a disincentive for investment.
“Between 2015 and now the price of flour which is our major ingredient has increased from N6,500 naira per 50kg bag to N11,500 naira per bag as at today, with the possibility of further price increases.
“In the last 3 years, the prices of flour, sugar and other baking ingredients have quintupled without a corresponding increase in prices of premium bread by PBAN members. As an Association, it is either we do something about the astronomic increases in prices of baking ingredients or we burst.
“Most of us got loans with double-digit interest rates from financial institutions to fund our bakery projects and are finding it extremely difficult to meet our loan repayment obligations,” he disclosed.
He stressed that another major challenge is the unbearable cost of power as bakeries suffer seriously due to the epileptic power supply and the high cost of alternative energy have made it a no go area for bread makers.
“Almost all our baking machines are powered by diesel generators. The cost of diesel has hit the roof top and is almost out of our reach. The consequence of high cost of diesel has led to the closure of some premium bakeries,” Jemide said.
He hinted that given the current situation, most premium bakeries may be forced to embark on a price increase which will further make bread (a staple food) unaffordable to the common man.
“As an association, we are totally committed to ensuring that Nigerians have healthy, quality, affordable and unharmful bread on their table.
It is in light of this that we appeal to the Federal government to look into the issues that currently threaten the existence of the premium bakery industry in Nigeria,” he added.