• Login
  • Register
Nairametrics
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
    • Economy
    • Nairalytics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Company Results
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Sectors
    • Agriculture
    • Aviation
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Health
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Renewables & Sustainability
    • Tech News
  • Business News
    • Budget
    • Public Debt
    • Funds Management
    • Tax
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
    • Research Analysis
  • Recapitalization
    • Access Holdings Offer
    • Fidelity Bank Offer
    • GTCO Offer
    • Zenith Bank Offer
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
    • Economy
    • Nairalytics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Company Results
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Sectors
    • Agriculture
    • Aviation
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Health
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Renewables & Sustainability
    • Tech News
  • Business News
    • Budget
    • Public Debt
    • Funds Management
    • Tax
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
    • Research Analysis
  • Recapitalization
    • Access Holdings Offer
    • Fidelity Bank Offer
    • GTCO Offer
    • Zenith Bank Offer
Nairametrics
No Result
View All Result
Home Business News

Is Nigeria’s Bread price hike a result of price-fixing?

William Ukpe by William Ukpe
June 3, 2021
in Business News, Consumer Goods, Spotlight
Bread price hike looms as bakers association approves 30% increase
Share on FacebookShare on TwitterShare on Linkedin

“After considering the impact of the skyrocketed prices of baking ingredients/materials, for the survival of our noble business, which is presently bleeding, the association came to the conclusion to adjust our prices by 30 percent.

The incessant increase of prices of flour and other baking materials is responsible for the decision,”  Mansur Umar, National President, Association of Master Bakers and Caterers of Nigeria (AMBCN), declared in a statement last week, directing members to increase prices of bread and other bakery products by 30% due to higher raw material costs.

READ: Food inflation rate in Nigeria surges to highest in over 15 years

RelatedStories

Meet Dahiru Mangal, a Nigerian billionaire businessman who started out as a truck driver

Meet Dahiru Mangal, a Nigerian billionaire businessman who started out as a truck driver

June 3, 2023
How Deola Sagoe left her father's company, Elizade Motors, to build a global fashion brand

How Deola Sagoe left her father’s company, Elizade Motors, to build a global fashion brand

May 20, 2023

The increased price of raw materials, especially wheat, could be linked to the Central Bank of Nigeria recently announcing plans to place sugar and wheat on its FX restriction list. Governor Emefiele had said, “Sugar and Wheat are to go into our FX restriction list. We must work together to produce these items in Nigeria rather than import them.”

Another source of increase in raw materials cost is insecurity, which has affected local production in farming regions, making it harder for Nigerian bakers to break even on their operational costs.

READ: Open grazing: Nigeria is losing billions of dollars – Senator Okorocha

But is it price fixing?

According to the US Trade Commission, “Price fixing is an agreement (written, verbal, or inferred from conduct) among competitors that raises, lowers, or stabilizes prices or competitive terms.

When consumers make choices about what products and services to buy, they expect that the price has been determined freely on the basis of supply and demand, not by an agreement among competitors. When competitors agree to restrict competition, the result is often higher prices.”

READ: CBN blames herdsmen and bandits for galloping inflation rate

Basically, when the price of an item or product is not determined by market forces but by a union of producers, then price-fixing has happened. It is a grey area in the “ease of doing business” for most governments, as it gives a cartel power over a product.

Feyi Fawehinmi, accounting professional and author of Formation: The Making of Nigeria from Jihad to Amalgamation, tells Nairametrics that it is not only about price fixing in this scenario, but a union working to “prove its value to Nigerians.”

“In this this case, price-fixing is merely one of the byproducts of the larger nature of the industry,” Feyi said

“It is price-fixing, of course, but it’s also about a union flexing its muscles and trying to ‘prove’ its value to its members. So any member who doesn’t enforce the new price can be met with violence. It’s also a way to eliminate competition to make the union or association more attractive to join.

So overall, you can call it a protection racket which also does price-fixing on the side,” he added.

An investment analyst, who wants to remain anonymous, told Nairametrics that Nigerian bakers work with flour millers to transmit input price trends to bread prices, as bread prices reflect downward rigidities during periods of lower wheat prices but upward price flexibility during periods of higher wheat prices.

“While the combination of an increase in global wheat prices (+30-35% y/y) as well as that of other key inputs (sugar prices, palm oil etc.), alongside a weaker exchange rate, creates sufficient grounds for higher bread prices, the announcement by Nigerian bakers to coordinate a one-time price increase sits well within the definition of price-fixing. Ordinarily, bread prices should adjust in line with the trends in key inputs prices in both directions,” he said.

“The key input for bread is flour which is primarily milled from wheat. Nigeria’s tropical weather limits the prospect for large scale wheat cultivation which hovers between 50-100k MTPA, relative to annual wheat consumption at 4.9-5 million MTPA. Given high set-up costs and thin margins, the flour milling industry tends to be oligopolistic in nature with 3-4 major players. In most countries, flour millers are forward integrated with strong presence along intermediate and final consumer end via ownership of bakeries, confectionery, pasta, noodles divisions, etc.”

He adds that in Nigeria, the main intermediate segment of the value chain are unionized bakers who curtail the ability of flour millers to transmit input price trends to bread prices, citing that baker unionization and collusion prevents forward integration of flour millers into the key bread segment due fear of backlash from the unions.

“Accordingly, bread prices reflect downward rigidities during periods of lower wheat prices but upward price flexibility during periods of higher wheat prices. This ensures any gains are captured by millers and bakers with no benefit for the final consumer.”

How should bread prices be determined in Nigeria?

“In deciding how bread prices should be determined, it is important to note the maxim by Adam Smith, ‘Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer.’ (The Wealth of Nations, 1776).

With this in mind, the solutions appear clear; while flour millers have integrated into the other non-bread segments and are able to transmit price increases through SKU adjustments and product introductions/innovations, their inability to integrate into the bread space limits, plus a unionized bakery system means prices are trapped in an upward one-way street.

The solution is to break up the baker’s union to allow unrestricted entry and uncoordinated pricing. Without the union, the industry dynamics will become much more competitive. In the advanced economies, despite the wheat price increases, bread prices only increased slightly as the industry is intensely competitive to the advantage of the consumer, as it should be,” he adds.

Bottomline

Bread price-fixing is not to the advantage of the consumer in a period of high food inflation and reducing GDP per capita. However, the situation did not happen in a vacuum. Nigeria’s poor wheat production at 50-100k MTPA, relative to annual wheat consumption at 4.9-5million MTPA, leaves the entire wheat milling value chain in the hands of a few players who are poorly integrated into the retail value chain, creating a cartel that determines prices.


Follow us for Breaking News and Market Intelligence.
Tags: Bread price fixingFeatured
William Ukpe

William Ukpe

For further inquiries about this article contact: Email: william.ukpe@nairametrics.com or outreach@nairametrics.com. Twitter: @_sirwilliam_ @nairametrics.

Related Posts

Meet Dahiru Mangal, a Nigerian billionaire businessman who started out as a truck driver
Profiles

Meet Dahiru Mangal, a Nigerian billionaire businessman who started out as a truck driver

June 3, 2023
How Deola Sagoe left her father's company, Elizade Motors, to build a global fashion brand
Profiles

How Deola Sagoe left her father’s company, Elizade Motors, to build a global fashion brand

May 20, 2023
Nigerian weddings
Lifestyle

The economics of Nigerian weddings

April 30, 2023
CBN reduces over-the-counter withdrawals to N100k, N500k per week for individuals, companies
Currencies

Updated: Tracker of CBN’s monetary policy announcements since 2020

December 10, 2022
Redesigning or sensitizing; what's the way to go?
Economy

CBN’s Intervention Funds to private sector rises to N4.8 trillion as of November 2022

November 28, 2022
SWOOTs capitalization up by N122 billion
Equities

SWOOTs capitalization up by N122 billion

November 20, 2022
Next Post
Bord Bia to host World Milk Day campaigns in Africa

Bord Bia to host World Milk Day campaigns in Africa

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Emple
nlng
first bank








DUNS

Recent News

  • Sola Sobowale unveils Ilu Aseyori, Africa’s Premier Agro Smart City, where Nigerians can now own profitable Oil palm plantations 
  • LASEPA shuts Mania Lounge, Voda Beach Club, and others for persistent noise pollution 
  • President Tinubu to remove bottlenecks hindering livestock production export between Nigeria and Brazil  

Follow us on social media:

Recent News

Sola Sobowale unveils Ilu Aseyori, Africa’s Premier Agro Smart City, where Nigerians can now own profitable Oil palm plantations 

Sola Sobowale unveils Ilu Aseyori, Africa’s Premier Agro Smart City, where Nigerians can now own profitable Oil palm plantations 

July 6, 2025
Lagos govt mandates permits for amplified sound in nightclubs, worship centres 

LASEPA shuts Mania Lounge, Voda Beach Club, and others for persistent noise pollution 

July 6, 2025
  • iOS App
  • Android App
  • Contact Us
  • Home
  • Markets
  • Sectors
  • Economy
  • Business News
  • Financial Literacy
  • Disclaimer
  • Ads Disclaimer
  • Copyright Infringement

© 2025 Nairametrics

Welcome Back!

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Fill the forms below to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
Social Media Auto Publish Powered By : XYZScripts.com
No Result
View All Result
  • Home
  • Exclusives
    • Financial Analysis
    • Corporate Stories
    • Interviews
    • Investigations
    • Metrics
    • Economy
    • Nairalytics
  • Markets
    • Currencies
    • Cryptos
    • Commodities
    • Equities
      • Company Results
      • Dividends
      • Stock Market
    • Fixed Income
    • Market Views
    • Securities
  • Sectors
    • Agriculture
    • Aviation
    • Company News
    • Consumer Goods
    • Corporate Updates
    • Corporate deals
    • Corporate Press Releases
    • Energy
    • Entertainment
    • Financial Services
    • Health
    • Hospitality & Travel
    • Manufacturing
    • Real Estate and Construction
    • Renewables & Sustainability
    • Tech News
  • Business News
    • Budget
    • Public Debt
    • Funds Management
    • Tax
  • Financial Literacy
    • Career tips
    • Personal Finance
  • Lifestyle
    • Billionaire Watch
    • Profiles
  • Opinions
    • Blurb
    • Op-Eds
    • Research Analysis
  • Recapitalization
    • Access Holdings Offer
    • Fidelity Bank Offer
    • GTCO Offer
    • Zenith Bank Offer
  • Login
  • Sign Up

© 2025 Nairametrics