FOLLOWING Federal Government’s removal of fuel subsidy and the floating of naira, there was hyperinflation. The exchange rate rose from ₦440/USD to an all-time high of ₦1,900/USD. As it increased, the prices of commodities soared. Recently, efforts by the Central Bank of Nigeria to arrest the free fall of Naira have seen it appreciate marginally against foreign currencies especially the dollar, leading to relative stability in the forex market.

ON Tuesday February 27, 2024, the Apex Bank resumed the sale of dollars to Bureau de Change (BDC) operators three years after its suspension. With the development, $20,000 will be available to each eligible BDC operator at the rate of N1,301/$.Following the move and others such as the revocation of licence of 4,173 BDC operators taken to address the naira free fall, the forex market has witnessed relative stability in recent weeks, with the country’s currency appreciating from N1,900 to as low as ₦1,150/USD at the last count against dollar in the parallel market.Despite this, prices of many essential commodities, especially locally produced ones have not dropped, against the expectation of many Nigerians who thought the food prices would drop as the naira gradually recovers. Petrol pump price has never come down, spare parts also became more expensive.

ECONOMISTS have stated that it will take some time for Nigerians to feel the impact of the current strengthening of the naira against the dollar on the prices of commodities in the country; the impact of the naira on prices exhibited a time lag. “Goods that have been bought at the old exchange rate will still be tied to the old exchange rate. Whether a month or a quarter, it depends on the duration it takes to order and sell. The effect we should hope to see is that the prices have stopped going up. We call it acceleration.”

 ACCORDING to the economists, the “CBN’s actions in the next few weeks will also reflect what the sellers will do. “They will be watching the markets to see if CBN will be able to sustain the stability of the naira. Nigeria has been battling soaring inflation, which accelerated to 31.70 per cent in February from 29.90 per cent in the previous month, driven primarily by food inflation, which rose to 37.92 per cent”.

EXPERTS  also observed that the marginal gain in naira against the greenback might not necessarily translate to reduction in the prices of imported goods considering that the CBN on February 14, 2024 increased the exchange rate for computing Customs duties at the nation’s seaports by 2.6 per cent, the fifth increase this year.The rate was reviewed upward on from N1, 444.56/$ to N1, 481.482/$, according to information obtained from the official trade portal of the Nigeria Customs Service. This means importers will pay more to clear their goods as import duties are benchmarked against the dollar.

TO tame the pacing inflation, the CBN raised the benchmark interest rate to 22.75 per cent in February from 18.75 per cent and further reviewed it upward to 24.75 per cent. The apex bank hopes the auctions can attract sufficient foreign interest to boost dollar liquidity. “While forex liquidity has improved, it is still well below pre-pandemic levels and a boost in dollar supply will be needed to support further naira appreciation.”

THE Hope spoke gathered that the challenges faced by traders include the expenses incurred to maintain product quality amid infrastructural constraints. According to them,  “the price of rice didn’t decrease. Even now that the dollar is down, it still hasn’t reduced. For example, a carton of Titus fish cost N90,000 two weeks ago but now, the same carton of fish is sold at N95,000. “Even with the fact that the dollar has reduced, but being in the system, I think I understand why. It is because they use one-third of their profit to buy diesel to cool these fish and keep them frozen. After all, there is no light. So, I understand their pain and why the prices are like that.”

PEOPLE  should be encouraged to reject products when the prices are too high while government should do more to increase productivity. Government should enforce price control system to reduce prices of commodities especially the local items.

THE federal government is, however, advised to reopen land borders, allow importation and force companies to bring out their stored commodities to the market to meet the country’s demand. “Supply rigidity, structural problems and border closure as some of the factors, leading to less or no reduction in prices of goods and services even when naira is gradually appreciating at the global market.

WE must understand that the Nigerian economy is an import dependent economy in terms of manufacturing goods. If you have an import dependent economy, your economy is vulnerable to volatility of exchange rate, so whatever happens to the exchange rate, the economy will be affected whether positively or negatively.So, government should also open the economy and enable competition so that adequate supply will force the price to go down.”