Despite Naira’s appreciation against Dollar, costs of goods, services still high

Despite the appreciation of the Naira against the US Dollar, it is worrisome to notice persistent high costs of goods and services; PAUL OKAH reports.

All over the country, the question on the lips of Nigerians is why the prices of goods and services are still high, despite the daily appreciation of the Naira against the US Dollar.

To some, their knowledge of elementary economics or mathematics is enough to tell them that prices of goods and services ought to have reduced drastically, following daily reports of the Dollar depreciating against the Naira.

Improved performance

The Naira gradually appreciated after the last Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) which was held on March 25 and 26.

The CBN announced further tightening of the monetary policy by raising the Monetary Policy Rate (MPR) by 200 basis points, to 24.75 per cent from 22.75 per cent raised in February to rein in inflation.

The Committee also took other monetary policy actions that have also led to the steady appreciation of the Naira against the Dollar and stability in the exchange market in the last few weeks.

The Naira exchanged for as high as N1, 900 to the Dollar in February, but as of March 31, the parallel market rate of the Naira was N1, 200 to the Dollar.

Market surveys

According to the National Bureau of Statistics (NBS), the inflation rate has been on the increase, with headline inflation rising for the 14th consecutive time in February to 31.70 per cent from 29.90 per cent in the previous month.

Food inflation, which constitutes 50 per cent of the inflation rate, rose to 37.91 per cent from 35.41 per cent, with many experts projecting it will still increase due to a combination of rising food demand, transportation costs and insecurity.

Nevertheless, on March 27, Indomie Instant Noodles, a Dufil Prima Foods Limited brand, reduced its prices, selling its 40-pack carton of 70gram Indomie Regular Chicken noodles: N7,500, Indomie Onions: N8,100, Superpack: N12,200, Hungryman: N11,200 and Belleful: N11,500.

However, Blueprint Weekend investigation showed that retail prices of Indomie packs are still on the high side as the price of 70g Indomie Regular Chicken noodles is presently sold for N250, which is the present case of other goods and services.

At Dutsen Alhaji market in Abuja on Wednesday, a mudu of white garri was sold for N600, while the yellow garri was sold for N800. In the same vein, a mudu of local rice was sold for N1, 800, while beans sold for N1, 600.

Five tubers of small size yam sold for N6, 000, while the bigger type was sold for N10, 000. A bunch of plantain with 15 fingers was sold for N4, 000, while bigger bunches were sold for N7, 000 or N8, 000.

Lamentations

Speaking with Blueprint Weekend, a civil servant, Mrs. Jacinta Onyemachi, said there has not been a change in the price of food items as she recently bought food items at high prices, despite the reported appreciation of the naira against the dollar.

She said: “Anyone who can understand this country is a miracle worker because Nigerians are always fond of keeping one in perpetual uncertainty and surprise. With the dollar falling daily, I went to the market yesterday and expected that prices of food items and other household materials must have reduced, but I was surprised to see that some have actually increased prices.

“I couldn’t get fresh tomatoes and pepper for N200 and N100, respectively. Spaghetti, noodles, garri, rice, beans and other items were still as costly as they were last month. My bathing soap even added N200 to what I bought last month, apart from detergents, which seems to be adding, instead of reducing everyday. Do you know you can no longer see N50 biscuits? Such is the incredible situation that you will wonder if the Dollar depreciation is a mirage.”

On his part, a taxi driver, Mr. Nathaniel Eteng, attributed the present cost of goods and services to greed.

He said: “Nigeria is always different in everything. Companies have slashed prices, but the greediness of traders won’t allow them to reduce their prices, instead they are adding and impoverishing already poor Nigerians. It is about the poor getting poorer because of the greediness of the few that ought to make life better for them at their own level.

“During Christmas, many countries offer slash in prices of goods and services, but Nigerians will use the opportunity to double their own. Easter has just been celebrated and the situation was not different as traders increased prices of their goods. Ramadan will soon be celebrated and I don’t see the prices coming down until after Ramadan. Hopefully, things will normalize this month, but it’s not fair what we are doing to ourselves in this country.”

Traders’ take

Traders who spoke with this reporter blamed the high costs of goods on old stock, saying they were yet to replenish their stocks and couldn’t sell at a loss.

A food stuff trader at Wuse Market, Alhaji Ibrahim Yaro, said the reason for high cost of items is because traders were yet to restock as many still had old stock, which they must offset before selling at the new market price.

He said: “Really, the prices of items are supposed to be coming down by now, but many of us still have old stock at higher prices. We can’t be selling at cheaper rates when we bought items at higher rates. We have to exhaust the products and restock before talking about reducing prices. It will take a while before the cost of certain items will come down. It will not be something of a rush. There is no one that ventures into business to lose, so I understand the complaints and concerns of many of our customers.

“Truly, we are getting feedback from our suppliers that some items have reduced prices, so it is just a matter of time. Nigerians should just be patient with us because it is not our fault that items are still costly, when the dollar rate has reduced. Once we finish the products we have and buy new ones, we will then sell at the new price for everyone because we understand the situation of the economy.”

An expert’s view

In his view, an economist, Dr. Charles Adetunji, said prices of goods and services would reduce in the coming months as a result of positive government policies that have seen the US Dollar depreciating against the Naira.

“Industry watchers will have to applaud the federal government and steps taken to address the free fall of the naira. It was not funny at all, especially since the removal of fuel subsidies last year by the present administration. The dollar nearly hit the roof as it seemed no one was interested in addressing the situation.

“Nevertheless, the efforts put in place by the CBN are beginning to record a positive impact on the economy. The federal government is doing its best to shake down currency speculators and foreign exchange manipulation in the market. A case in point is the $36 million action against Binance, a global company that operates one of the largest cryptocurrency exchanges.

“The CBN has also mandated banks to sell any money outside their Net Open Position (NOP) of 20 per cent, thereby encouraging an increased inflow of forex, both in Diaspora remittances and foreign portfolio investments, with accruing very high-interest rates. So, with the US Dollar daily depreciating against the Naira, many sectors will certainly record a decrease in prices of goods and services, especially those dependent on imported items, transportation, and diesel, among others.

“As you know, imported foods are transported across the country, so they depend on high cost of transportation. Manufacturers also use diesel to run their generators, while the high cost of transportation is then transferred for the final consumer to bear, which has been the reason for the astronomical cost of food and non-food items. Therefore, with the reduction of diesel from N1, 800 to N1, 000, the cost of food items and dependent products will come down because it is diesel that is used to run vehicles that transport the food items across the country.

“Therefore, inasmuch as I applaud the federal government over the measures taken to force the Dollar to come down, I would encourage the CBN governor not to rest on its oars as the battle is not over yet. There has to be more and sustained supply of forex to navigate the situation and difficult times we have faced as a nation. Also, Nigerians should be patient with the federal government as the policies of President Bola Ahmed Tinubu are for good intentions. It is just a matter of time and prices of goods and services will drop drastically.”