economist He said it will take time for Nigerians to realize the impact of the current appreciation of the naira against the dollar on domestic commodity prices.
Economic Associates CEO Ayo Teriba told Sunday Punch that there is a lag in the impact of the naira on prices.
“Food purchased at the old exchange rate will continue to be bound by the old exchange rate,” he said.
“Whether it’s a month or a quarter depends on how long it takes from ordering to selling. The effect we should expect is that prices have stopped rising. We call that an acceleration. Masu.”
The President of the Economic Association of Nigeria, Adeola Adenikinju, echoed similar sentiments, stressing the economic rationale behind the delay in price adjustment.
Adenikinju said, “What people currently have in stock was bought at a high price. If they were to sell it at a lower price, they would be recording a loss.
“So until we replace what we have now, we will be lowering the price at that point.
“But now, to avoid losses, they end up selling at the rate they bought them at. As current inventory is sold and new inventory is acquired, you will see the current price. Masu.”
The central bank’s actions in the coming weeks will also reflect the actions of sellers, Adenikinju said.
“They will be watching the market closely to see if the CBN can maintain the stability of the naira,” he said.
Nigeria is battling a spike in inflation, with the rate accelerating to 31.70% in February from 29.90% in the previous month, which rose to 37.92%, mainly due to food inflation.
In a bid to curb the pace of inflation, the CBN raised the benchmark interest rate from 18.75% to 22.75% in February, and revised it further upward to 24.75% on Tuesday.
Onakoya Adegbey, a professor of economics at Babcock University, said the fact that prices rise but not fall is not unique to Nigeria.
“Due to production rigidities, there is usually a delay in production cuts,” he said.
He emphasized that market expectations are usually the cause of delays.
“Normally there is a delay, but that is because of the expectation theorem. For example, if we expect the price of rice to go up, we will buy more and keep it at home, so demand will increase. But if the price goes down, then the demand will increase. If you anticipate, you can’t get rid of what you already have.
“Due to production rigidities, production cuts are usually accompanied by delays. If you are already producing a certain product at a certain price and the market price is falling, then you have to wonder whether the reduction is sustainable. We will see if it is sustainable. Once we find that it is sustainable, we can take steps to reduce the price of the product. It is a lag effect,” Adegbey explained.
Favor Uche, who sells groceries at EFAB market, said: sunday punch, “Even though the dollar has fallen, the price of rice has not fallen.”
Mr Uche highlighted the challenges faced by traders, including the costs incurred in maintaining product quality amid infrastructure constraints.
“The price of rice hasn’t come down. Even though the dollar has gone down, it still hasn’t come down. For example, a carton of Titus fish cost N90,000 two weeks ago, but now a carton of the same fish costs N90,000. Sold for 95,000 Naira as of March 29, 2024.
“Despite the fact that the dollar has fallen, if you put yourself in this system, you can understand why. Because they spend on buying diesel to do it. At the end of the day, there is no light. So I understand their pain and why it’s priced like that,” she added. Ta.
Abdul Yusuf, another meat trader, said: “Prices did not go down even though the dollar fell.
“Two weeks ago, the price of a kilogram of meat was selling for N4,800, now it is N5,000. So even though the dollar has fallen, the price has not fallen.”
