CEM ANALYSIS | The threat by Bread Producers Association to shut down if the government did not do anything about the price of diesel has raised concern over the entire commotion the sudden hike in price has created in the manufacturing sector
Gabriel Imomoh, Analyst at Continental Economy Magazine Analyst and Senior Consultant at PearGrade Consult Limited, throws more light into the entire situation while advising against any shut down and profiling some adjustment strategies for manufacturers.
To Imomoh, “threatening to shut down goes to shows that most Nigerian manufacturers have not come to terms with the market base economy Nigeria is operating.
“Though the threat is a reflection of the difficulty manufacturers are going through presently following the hike in diesel price which has raised their operating cost reducing profit, but threatening to shut down is not the best response.
“Even ASUU which is an association of employees are often still condemned for resorting to strikes when they are at dispute with the government. Talk less of private business such as bread producers that have a level control in the market”;Imomoh said.
He continued by connecting the hike of diesel to the Russian invasion of Ukraine which has caused disruption in the supply of petroleum products in the market.
He said; “The high price of diesel is not unconnected with the war between Russia and Ukraine which disrupted the supply of petroleum products to the market. Any product that is price elastic will usually result in increment in price when there is shortage in supply. Let us understand that this will linger on till the warring countries resolve their dispute for the general good of humanity as a whole.
“We must understand that Nigeria is entirely a capitalist country operating a market base economy. Rational producers are expected to get together their factors of production to produce and sell at a price that will at least recover cost and make a margin.
“This is the time for manufacturers to put on their thinking cap and step up their management strategies to enable them cope with the current hash market forces while we hope for things to normalize soon. This is not the time to issue out threats of shutting down. The best I expect a rational producer to do right now is to try as much as possible to recover their cost.
“Shutting down production of any commodity right now will definitely affect the industry, especially a commodity such as bread that have quick and close substitute. Though it will affect consumers of bread, consumers can also easily make an adjustment to their meals and shift to consuming yam, potato or eba as breakfast. Like I said, this will definitely affect the industry”.
Gabriel concluded by saying; “Right now, the looser here is the final consumer who either chose to pay the high price or quit the consumption of the product until the market itself finds its price equilibrium when people can now accept the price as a norm and adjust their consumption patter or priorities”.