Thursday, 8th June 2023

Hike in price of animal feeds amid tax incentives

By Gbenga Akinfenwa
12 April 2020   |   3:06 am
Despite the Federal Government’s endorsement of tax holiday on Animal Feeds to boost the livestock sector, the price of the feeds has continued to soar across board in the last one month.

VAT Holiday Is Not Enough, Incentive Is The Way To Go—Egbebe
• Maize Price, Micro Inputs Responsible For Soaring Price—Akpa
• VAT Waiver Is Just A Respite, Not Solution To Price Increase—Daramola
• Our Prices Have Been Stable— Aller Aqua

Despite the Federal Government’s endorsement of the tax holiday on Animal Feeds to boost the livestock sector, the price of the feeds has continued to soar across the board in the last month.

Though in no particular order, The Guardian observed that the product, ranging from poultry, fish, pig feeds and others have attracted as high as three to five per cent increase to the detriment of farmers.

For instance, feed finisher for chickens, previously in the region of N3, 600, irrespective of brand, has increased to between N3, 900 to N4, 000, in the last two weeks. The same goes for starters mash, layers mash and others.

On March 6, 2020, President Muhammadu Buhari forwarded a bill to the Senate for the total exemption of animal feeds from the new 7.5 per cent Value Added Tax (VAT), which took effect from February 1, 2020. The President’s letter was titled: “Transmission of the Finance Act, 2019 (Amendment) Bill for consideration and passage into law.”

The letter read: that “Animal Feeds are included in the list of Basic Food items that are exempted from Value Added Tax; and aspects of the tax holiday incentive for agriculture, by targeting this incentive to small and medium-sized companies that invest in the primary crop, livestock, forestry and fishing agricultural production. This incentive is also to be administered by the Nigerian Investment Promotion Commission pursuant to the Industrial Development (Income Tax Relief) Act.”

But one month after, the farmers and other stakeholders who had hitherto received the news with jubilation have begun to groan under the soaring price, in the midst of low sales occasioned by COVID-19 pandemic and other factors.

A poultry farmer, Daramola Toluwalope, who disclosed that she wasn’t aware of any VAT increase exemption, said she does not expect that implementation of the tax holiday should trigger a drop in price per session despite that it would serve as a respite for the feed mills.

“Feed is scarce. So, whenever you see, you buy at asking price of the seller. Top Feed Finisher used to be N3, 700 to N3, 900 maximum, but last week, I got the same size for N4, 000. This was blamed on scarcity. 

“I don’t think there should be sanction for any manufacturer who increases his price because so many conditions must be put into consideration—is the miller buying corn and other inputs at the same prices? Considering the cost of raw materials and logistics, in my view, VAT waiver is just a respite, not the solution to address price increase.

“Adequate infrastructure is what would impact prices. Price of feed is impacted by the availability of raw materials. Government will always find a way to skim the money off you. So, we are not impressed with the waiver.”

Chairman, Lagos State Chapter, Poultry Association of Nigeria (PAN), Godwin Egbebe, who confirmed the price hike of the feeds, attributed the upsurge in price to the rising cost of raw materials and other inputs. “It is not as if the manufacturers are arbitrarily increasing their prices. You’ll be surprised that the price of the egg has remained the same.

“Government needs to regulate the industry by giving the feed producers incentives; the person increasing his own price might have a genuine reason for doing it. Assuming I am operating in Agege now and somebody in Lekki is also manufacturing the same thing and he is having electricity to use, while I use a generator, the cost of my feeds will increase more than the person having electricity because of the extra money used for fuel. That’s the way it is. So, I can justify why I increase my own price in this area.

“But assuming the government gives incentives, irrespective of where you are, prices will be stabilised. VAT holiday is not enough, the incentive is the way to go; because when you are giving incentives, you have control.”

The Director-General, PAN, Onallo Akpa, said: “The price of maize has gone up, likewise other micro inputs for feeds production, because the exchange rate between naira and dollar has gone up, you can’t even see dollar to buy now.

“So, those micro ingredients constitute almost 15 to 20 per cent of poultry feeds and they are very essential. So, those things have contributed to the increase in feed price, not necessarily because they remove VAT and prices of other ingredients have gone down, no. So, invariably they’ll increase their prices.

“This is not peculiar to the poultry industry. You can see that immediately the COVID-19 pandemic struck, prices of everything have gone up. The chickens in the farms do not know that there is COVID-19, they must eat. Price of everything has gone up. Even the farmworkers are difficult to get because of a restriction order.

“As of today, you’ll see that poultries are shutting down. Some have goods in stock but unable to sell. It is not enough to give people money, why can’t government buy eggs from farmers and give to the people, in the area of Social Investment Programme (SIP)? We should look beyond indigent Nigerians. Government should buy the produce from farmers and give to Nigerians.”

The Marketing Coordinator, Aller Aqua Nigeria, producers of fish feeds, Dada ‘Foluso, told The Guardian that prices of their feeds had been stable. “There has been no price adjustment from our end. Our prices have been the same, just to help more farmers achieve good harvests affordably. 

“It’s too early to measure compliance. Our government and bankers are always playing give-and take-games. They removed 2.5 per cent VAT increment and increase exchange rate from N360 to N380. Which of them is detrimental to cost, VAT increment or exchange rate?

“There should be more discussions with cost accountants first to elaborate on the indices that make up products cost before the effect can be really ascertained. 

“I am not sure of the situation with other manufacturers in the industry, but the cost of ingredients, labour and other factors of production must be considered to determine if an increase in the price of their products was justified even if VAT was not increased on their final product.”