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Bread and bakery market overview in Nigeria

10 August 202110 min reading

The most populous country in Africa with abundant natural resources, Nigeria is the continent’s largest economy by GDP. Agriculture in Nigeria is so important to the economy and people’s daily lives. However, it is a net importer of food and major agricultural products. Bread, semolina, pasta and other wheat flour-based products are staples in the country and the demand for the products has continued to increase.

A key regional player in West Africa, with a population of approximately 211 million, Nigeria accounts for about 47% of West Africa’s population. The country has the largest population of any African nation and it has one of the largest populations of youth in the world. With an abundance of resources, it is Africa’s biggest oil exporter, and also has the largest natural gas reserves on the continent. Nigeria accounts for nearly 20% of continental GDP and about 75% of the West Africa economy.

While Nigeria has made some progress in socio-economic terms in recent years, it continues to face massive developmental challenges, which include the need to reduce the dependency on oil and diversify the economy, address insufficient infrastructure, and build strong and effective institutions, as well as governance issues and public financial management systems.

Agriculture in Nigeria is so important to the economy and people’s daily lives. The farming sector employs about 70 percent of the entire country’s labor force. Nigeria’s small farms produce 80 percent of the total food. This is the leading African country in farming because it has the highest levels of productivity and profitability in this particular sector. However, agriculture may remain affected by conflicts and climate and weather events; and the non-oil-non-agriculture will likely continue to struggle in the face of sluggish demand and constrained private sector credit growth.

The population, projected to grow to 392 million by 2050, will make Nigeria the world’s fourth most populous country. This population is increasingly reliant on domestic and imported processed food products. Bread, semolina, and durum pasta and other wheat flour-based products are major stables in Nigeria’s urban areas.

Nigeria continues to employ trade-restrictive measures, including high tariffs, foreign exchange controls, levies and import bans to protect its domestic agricultural production (including grains), despite its membership in the World Trade Organization (WTO).

In Nigeria, there are over 30 million hectares of farmland under cultivation season to season, falling substantially short of the estimated 78.5 million hectares of land that is required for farming to feed Nigeria’s growing population.

The people of Nigeria depend on produce from the local farms for their daily meals as more than 80 percent of Nigerians buy their farm produce from the market. This country is at a huge advantage in terms of agriculture profitability because of the huge demand for farm produce.

DEMAND FOR WHEAT INCREASING

Nigeria is a net importer of food and major agricultural products. Bread, semolina, pasta and other wheat flour-based products are staples in Nigeria and the demand for the products has continued to increase. Currently, the shares of wheat flour for bread, semolina, pasta and others, are estimated at 60 percent, 20 percent,10 percent, and 10 percent, respectively.

Nigeria’s wheat consumption is mostly filled by local production augmented by imports valued at about $1.5 billion in 2017 and $1.7 billion in 2018. Local wheat production remained inadequate and domestic supplies of substitute staples within Nigeria and neighboring countries have not kept pace with demand. USDA forecasts Nigeria’s wheat consumption in MY 2019/20 at 5.26 million metric tons (MT).

USDA forecasts Nigeria’s wheat production in marketing year (MY) 2019/20 (July-June) to reach 60,000 metric tons (MT), unchanged from the production figure for marketing year 2018/19. The area harvested to remain at 60,000 hectares, with yields holding steady at one metric ton per hectare, according to USDA Foreign Agricultural Service (FAS) report published in May.

Nigeria bakery product market is expected to grow due to the increasing consumption for ready to eat products owing to busy work schedules, increasing health concerns, rising demand for gluten-free, high-fiber and trans fat baked products along with health-benefits associated with bakery products is expected to promote the demand for bakery products in the coming years.

Nigeria Bakery Product Market size is expected to register significant growth during the forecast period 2020-2026. The outburst of coronavirus is expected to hinder the bakery product market growth as the country is highly dependent on the external sources for food supply but the lockdown measures imposed by the countries are reducing the exports due to which Nigeria fails to ensure the continuous imports of required food staples. Additionally, due to the absence of laborers on the farms, a major portion of crops remain unharvested which would obstruct the production of bakery products thereby, hampering the overall market growth. Based on product types, the bread segment acquires a major market share as the low-income households in Nigeria would opt for cheaper food staples. On the basis of distribution channels, the hypermarket/supermarket segment is gaining dominance in Nigeria bakery product market as these stores allow easier access to a wide variety of bakery items to consumers, thereby attributing to the growth of bakery product market.

After four years of growth, the Nigerien bread and bakery market decreased by -7.8% to $25.8B in 2015. The market value increased at an average annual rate of +1.1% from 2007 to 2015; the trend pattern remained relatively stable, with somewhat noticeable fluctuations being observed throughout the analyzed period. The pace of growth appeared the most rapid in 2008 when the market value increased by 10% year-to-year. Over the period under review, the market attained the maximum level at $28B in 2014, and then fell in the following year.

In value terms, bread and bakery production reached $26.3B in 2015 estimated in export prices. The total output value increased at an average annual rate of +3.9% from 2007 to 2015; the trend pattern indicated some noticeable fluctuations being recorded throughout the analyzed period. The growth pace was the most rapid in 2014 when the production volume increased by 38% against the previous year. Over the period under review, production hit record highs in 2015 and is likely to continue growth in the immediate term.

In 2015, consumption of bread and bakery increased by 1.3% to 9.4M tonnes, rising for the fifth consecutive year after two years of decline. Overall, consumption saw a relatively flat trend pattern. The most prominent rate of growth was recorded in 2012 when the consumption volume increased by 2.4% year-to-year. Over the period under review, consumption attained the peak volume in 2015 and is likely to see gradual growth in the near future.

The value of the bread and bakery market in Nigeria declined to $25.8B in 2015, which is down by -7.8% against the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers' margins, which will be included in the final consumer price). The market value increased at an average annual rate of +1.1% from 2007 to 2015; the trend pattern remained relatively stable, with somewhat noticeable fluctuations in certain years. The most prominent rate of growth was recorded in 2008 with an increase of 10% year-to-year. Over the period under review, the market reached the peak level at $28B in 2014, and then fell in the following year.

Consumption By Type

Fresh bread and miscellaneous bakery (8.5M tonnes) constituted the product with the largest volume of consumption, accounting for 91% of total volume. Moreover, fresh bread and miscellaneous bakery exceeded the figures recorded for the second-largest type, gingerbread, sweet biscuits and waffles (689K tonnes), more than tenfold.

From 2007 to 2015, the average annual growth rate of the volume of consumption of fresh bread and miscellaneous bakery was relatively modest. With regard to the other consumed products, the following average annual rates of growth were recorded: gingerbread, sweet biscuits and waffles (+0.8% per year) and crispbread and rusks (+2.0% per year).

In value terms, fresh bread and miscellaneous bakery ($23.1B) led the market, alone. The second position in the ranking was occupied by gingerbread, sweet biscuits and waffles ($2.1B).

From 2007 to 2015, the average annual rate of growth in terms of the market volume of fresh bread and miscellaneous bakery stood at +3.2%. With regard to the other consumed products, the following average annual rates of growth were recorded: gingerbread, sweet biscuits and waffles (+2.8% per year) and crispbread and rusks (+6.3% per year).

What are the leading suppliers of bread and bakery to Nigeria? In value terms, the UK ($5.6M) constituted the largest supplier of bread and bakery to Nigeria, comprising 29% of total imports. The second position in the ranking was occupied by China ($2.1M), with a 11% share of total imports. It was followed by India, with a 9.3% share.

What are the leading importers of bread and bakery from Nigeria? In value terms, Thailand ($1.3M) emerged as the key foreign market for bread and bakery exports from Nigeria, comprising 53% of total exports. The second position in the ranking was occupied by Ghana ($347K), with a 14% share of total exports. It was followed by China, with a 13% share.

What is the average export price for bread and bakery in Nigeria? The average bread and bakery export price stood at $2,449 per tonne in 2019, dropping by -23.9% against the previous year.

What is the average import price for bread and bakery in Nigeria? The average bread and bakery import price stood at $1,952 per tonne in 2019, waning by -27.5% against the previous year.

MASSIVE MARKET FOR BREAD

Although annual bread consumption per capita (10.5kg) is small in relation to South Africa (40.2kg), for example, given the size of the population (almost 192 million), it translates to a market size of 7.2 million loaves per day or $2bn annually. Wheat consumption grew by 4.5% per annum between 2009-2014 and 62% of this goes towards bread production. Similar dynamics hold for pastries with current consumption at 22 million units per day.

NUMBER ONE SUGAR BREAD IN NIGERIA

Sugar bread is Nigeria’s No. 1 bakery product. All Nigerians love this sweet sandwich bread, whatever their social class or ethnic origin. Consumers expect top quality at rock-bottom prices — a major challenge to both artisan and industrial bakeries.

No other food in Nigeria enjoys such wide popularity as sugar bread. The white pan loaf made from wheat flour finds its way onto the table at every meal. Filled as a succulent club sandwich, crisp out of the sandwich toaster, or fried as sweet French toast, the silky-soft slices have a multitude of uses and have long since overtaken traditional staple foods like “Garri,” a cooked cassava porridge.

A special feature of Nigerian sandwich bread is its sweetish taste, the origin of its name. Besides flour, salt (1.5% to 2%), fresh yeast (3% to 6%) and baking enzymes, the sugar bread recipe contains 7% to 12% sugar.

The Nigerian market is still dominated by artisan bakeries. According to the business consultants KPMG, the market share of the small and medium-sized companies was around 72% in 2016.

To ensure that fresh bread is available daily even in the most remote corners of the country, armies of middlemen and re-sellers provide distribution services. In many cases, the bakery products are sold by itinerant traders from small delivery vehicles.

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