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Naira: ‘Why prices of goods remain high’

By Akinnodi Francis,Victor Akinkuolie & Jimoh Ahmed

as Nigerians lament

Economic experts have explained reasons why prices of goods and services continued to shoot up despite the appreciation of the naira against the dollar.

In the last few weeks, the naira has continued to appreciate against the dollar in the country, the development which many Nigerians argued should have brought down  the prices of essential commodities by way of reducing the prices, particularly import dependent goods.

However, some experts and other stakeholders observed that Foreign Exchange (Forex) is not the only determinant of prices of goods and services in the country, as some other factors are also contributory.

They fingerered high electricity tariff which could negatively impact on the ease of doing business in the country.

A financial expert, Dr Taiwo Owoeye, listed high cost of petroleum products, scarcity of raw materials as a result of security challenges, among other determinants of the high cost of goods and services.

The Hope reports that the Naira had been fluctuating at the official market, trading between N1,150 and N1,080 to a dollar.

Owoeye said that the crash of the dollar being experienced at the official market might not have a significant effect on the prices of commodities.

“Traders still have stock of goods bought at a high exchange rate. The Naira only gained traction in the last few weeks. It is a short period therefore to ascertain stability. Fear of instability of Forex will also make traders retain old prices.

“Secondly, Forex is not the only determinant of high prices. High cost of petroleum products such as diesel and petrol are also major determinants.

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“Scarcity of food as a result of insecurity in the north where we have more farming activities is also another determinant, among others,” he explained.

Also, a Senior lecturer, Ekiti State University, Dr Yinusa Abdulganiyu, said one of the main reasons prices of commodities have not been coming down despite appreciation of the naira against the dollar is that some of the traders had bought their commodities when the dollar was still selling at higher prices.

He, however, expressed optimism that prices of goods and services would soon come down when such commodities are sold off.

On her part, an Ado-Ekiti based businessman, Mr Abimbola Fatukasi, submitted that the recent appreciation of the naira against the dollar would have positive effects on the prices of goods and services as soon as the new products storm the market.

On the hike in the electricity tariff, an economist, Professor Timothy Awe, said the hike would significantly impact businesses across various sectors of the economy.

He acknowledged the various challenges already faced by entrepreneurs and investors in the country.

Awe particularly expressed worry that the Small and Medium Enterprises (SMEs), which are crucial to the country’s economy, would be greatly affected by the hike in tariff.

“The ease of doing business is a critical factor for fostering economic growth, attracting investments, and creating job opportunities. Regrettably, the increase in electricity tariffs can hinder these efforts by imposing additional financial burdens on businesses, especially SMEs, which are the backbone of our economy”, he stressed.

Highlighting the importance of electricity in businesses, Awe said that any disruptions or cost increases associated with electricity supply could lead to higher operational expenses.

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He added that it would hinder businesses’ ability to invest in innovation and expansion and impede their competitiveness in both domestic and international markets.

Also, Dr. Emmanuel Adenegan, noted that the tariff hike, combined with other economic challenges such as the removal of fuel subsidy and foreign exchange unification, could further compound difficulties faced by businesses.

He explained that the current approach will create inflationary pressures, reduce the competitiveness of businesses both locally and internationally, impact the household budget that is already battered by harsh economic realities,  lead to business closure and resultant unemployment, and negatively impact economic growth.

They, however, called for an urgent need for the diversification of energy sources and intensifying infrastructure investment in the power sector.

Meanwhile, worried by the continued soaring prices of essential commodities in the country, some residents of Ondo State have called on President Bola Tinubu to establish a Price Monitoring Agency to effect the downward review of prices of goods.

According to them, it is expected that prices of goods should fall as the dollar which many traders blamed for the high prices is also falling.

Alhaji Kareem Olowosaudi said ordinarily one should be expecting that the prices of goods should also respond to the fall of the dollar since the naira is tied to it.

According to Olowosaudi, if goods imported to the country when a dollar was selling for N1,800 was being sold in the market at N50,000, common sense should be that the price ought to have also fallen and not remaining at the old price.

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He, therefore, called on the federal government to be proactive and monitor prices of goods as it is monitoring the exchange rate of the dollar.

Also, Mr Edward Oladeinde, who went to buy 75amps motor battery went back home without buying the product when he saw that the price has risen to N50,000 from the previous price of N35,000.

Similarly, Mrs Rachael Ajayi, who was worried over the continued high prices of food items said it is saddening to see that a congo measure of rice is still selling as high as N2,200 as well as  beans.

“Garri is N1,500 while guinea corn still remains N1,000 in addition to the high prices of beverages, drugs and other essential goods,” she lamented.

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