May 27, 2022/CSL Research
Importation of durum wheat into Nigeria continues to rise. Trade Data Publication released
by the National Bureau of Statistics (NBS) stated that Nigeria imported N1.29tn worth of wheat in 2021, a growth of 71.1% y/y when compared to 2020. Though devaluation of the currency could account for some of the increase, insecurity in the food-producing areas is a major factor that has limited production in the past few years. Nigeria’s wheat consumption is projected to increase by 3.5% in 2022/23 according to the United States Department of Agriculture (USDA). Wheat is the third most consumed grain in Nigeria after corn and rice.
Nigeria relies mainly on imported wheat. The high cost of wheat production in Nigeria implies that imported wheat is cheaper. The volume of imports has been on the increase as local production continues to decline due to the high cost of production and, more lately, insecurity in regions known to produce wheat. Data from the United States Department of Agriculture shows that between 2010 and 2020, as the consumption level of wheat rose, production volumes failed to meet up, resulting in a significant rise in wheat imports.
On average, the country produced just 2.1% of the total amount of wheat consumed during
that period. The USDA reports that the Federal Ministry of Agriculture released 1,035 metric tons (MT) of seeds and other inputs to farmers in the northern states in late December 2021. There has been a surge in wheat consumption since 2021, due to an increase in the demand for semolina, pasta, noodles, and bread.
Flour-based products tend to be in high demand in the dry season when other food crops are in short supply. FAS Lagos estimates consumption in 2021 at 6.48 million metric tons (MMT). The unavailability of foreign exchange also compels flour millers to buy hard currency from different sources, including the parallel market at prices significantly higher than the official rate. In addition, increasing freight costs also weigh on flour millers.
These factors have been largely responsible for the increase in the price of wheat products, like bread. Any price increases of flour-based products in local markets impose an additional burden on the earnings of low and middleincome consumers for whom bread represents a major part of their daily diet.
The price of wheat influences the market share of major suppliers. Black Sea wheat exports to Nigeria have increased over the past years due to lower prices. To reduce the domestic price of wheat flour and sustain profitability, most Nigerian flour millers have shifted to buying cheaper wheat from Latvia and Lithuania and blending them with high-quality wheat from the United States.
Meanwhile, a prolonged crisis in Russia and Ukraine will further put bread out of reach of the masses due to the ever-decreasing consumer purchasing power. The government has been giving renewed attention to wheat production in Nigeria to achieve self-sufficiency in production. The Central Bank of Nigeria, through its Anchor Borrowers Program (ABP), is collaborating with the Wheat Farmers Association of Nigeria (WFAN) to extend wheat production from 5 states to 15 states. Amid the current global wheat situation, Nigeria faces two choices-to either invest massively in backward integration in the wheat production and boost wheat self-sufficiency-or look at alternative import sources – away from Russia, Ukraine, and the Black Sea region.
