Economists have acknowledged that it’s going to take a while for Nigerians to really feel the impression of the present strengthening of the naira towards the greenback on the costs of commodities within the nation.
The Chief Govt Officer of Financial Associates, Ayo Teriba, defined to Sunday PUNCH that the impression of the naira on costs exhibited a time lag.
He famous, “Meals which have been purchased on the outdated trade charge will nonetheless be tied to the outdated trade charge.
“Whether or not a month or 1 / 4, it is dependent upon the period it takes to order and promote. The impact we should always hope to see is that the costs have stopped going up. We name it acceleration.”
Echoing related sentiments, President of Nigerian Financial Society, Adeola Adenikinju, highlighted the financial rationale behind the delay in worth changes.
Adenikinju acknowledged, “What folks have in inventory now was bought at excessive costs. In the event that they promote at decrease costs, they’re going to report losses.
“So till they exchange the present one, that’s when they’ll cut back their costs.
“However presently, to keep away from losses, they’ll nonetheless promote on the charge at which they purchased it. We are going to solely begin seeing the present costs of issues as present inventory is bought and new inventory is acquired.”
Based on Adenikinju, the central financial institution’s actions within the subsequent few weeks can even replicate what the sellers will do.
“They are going to be watching the markets to see if CBN will be capable to maintain the soundness of the naira,” he opined.
Nigeria has been battling hovering inflation, which accelerated to 31.70 per cent in February from 29.90 per cent within the earlier month, pushed primarily by meals inflation, which rose to 37.92 per cent.
To tame the pacing inflation, the CBN raised the benchmark rate of interest to 22.75 per cent in February from 18.75 per cent and additional reviewed it upward to 24.75 per cent on Tuesday.
Based on Professor of Economics, Babcock College, Onakoya Adegbei, the truth that costs go up and by no means come down shouldn’t be peculiar to Nigeria.
He mentioned, “Discount in manufacturing normally comes with a lag due to rigidity in manufacturing.”
He emphasised that market expectations normally drive the delay.
“There may be normally a lag and that’s because of the expectation theorem. For instance, for those who count on the worth of rice to extend, you’ll purchase extra and hold it in the home, So, it would improve your demand. However for those who count on that costs will fall, what you have already got you can not get rid of.
“Discount in manufacturing normally comes with a lag due to rigidity in manufacturing. Should you already produce a sure product at a sure worth and the worth available in the market is falling, you’ll then wait to see if the discount will probably be sustainable. Should you see that it’s sustainable, then you can also make a transfer to scale back the costs of your product. It’s a lag impact,” Adegbei defined.
Favour Uche, a foodstuff vendor at EFAB market, instructed Sunday PUNCH, “The worth of rice didn’t cut back even now that the greenback is down.”
Uche emphasised the challenges confronted by merchants, together with the bills incurred to keep up product high quality amid infrastructural constraints.
“The worth of rice didn’t lower. Even now that the greenback is down, it nonetheless hasn’t lowered. For instance, a carton of Titus fish value N90,000 two weeks in the past however at the moment, the identical carton of fish is bought at N95,000 as of March 29, 2024.
“Even with the truth that the greenback has lowered, however being within the system, I believe I perceive why. It’s as a result of they use one-third of their revenue to purchase diesel to chill these fish and hold them frozen. In any case, there isn’t any mild. So, I perceive their ache and why the costs are like that,” she added.
One other dealer, Abdul Yusuf, who sells meat, asserted, “Worth didn’t come down even with the greenback fall.
“Two weeks in the past the worth of 1 kilogramme of meat was promoting at N4,800 however now, it’s N5,000. So, the worth didn’t come down even with the greenback falling.”
