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JUST IN: “Naira Strengthening: Nigerians Await Impact On Price of Commodities As Economist Predict Delay”

Economists: Nigerians to Experience Delayed Impact of Strengthened Naira on Commodity Prices.

Economic experts have indicated that it will take some time for Nigerians to notice the effects of the recent strengthening of the naira against the dollar on commodity prices in the country.

Ayo Teriba, the Chief Executive Officer of Economic Associates, explained to Sunday PUNCH that there typically exists a time lag between changes in the exchange rate and their impact on prices.

Teriba stated, “Commodities purchased at the old exchange rate will still be priced accordingly. The duration of this lag varies, depending on factors such as the time it takes to order and sell. We can anticipate that prices will stabilize, marking the end of price increases. This is what we refer to as acceleration.”

Echoing similar sentiments, Adeola Adenikinju, President of the Nigerian Economic Society, elucidated the economic rationale behind the delay in adjusting prices.

Adenikinju pointed out, “The current stock available was purchased at higher prices. Selling at lower prices would result in losses for sellers. Therefore, until they replenish their stock with items purchased at the new exchange rate, prices are unlikely to decrease.”

He added, “The actions of the central bank in the coming weeks will also influence the decisions of sellers. They will be observing the market to assess if the stability of the naira can be sustained.”

Nigeria has been grappling with soaring inflation, which rose to 31.70 percent in February, primarily driven by a surge in food prices, which reached 37.92 percent.

In an attempt to curb inflation, the Central Bank of Nigeria (CBN) raised the benchmark interest rate to 22.75 percent in February, further increasing it to 24.75 percent in March.

Professor of Economics at Babcock University, Onakoya Adegbei, emphasized that the phenomenon of prices increasing and not decreasing immediately is not unique to Nigeria.

Adegbei explained, “Reductions in production typically come with a lag due to production rigidity. Market expectations also contribute to this delay.”

He elaborated, “If consumers anticipate a decrease in prices, they may delay purchasing, leading to a reduction in demand. Sellers, in turn, may wait to observe if price reductions are sustained before adjusting their prices accordingly.”

Traders in various markets corroborated these observations, noting that despite the decrease in the value of the dollar, commodity prices have not yet declined.

Favour Uche, a foodstuff seller, highlighted the challenges faced by traders in maintaining product quality amid infrastructural constraints, which impacts pricing decisions.

Similarly, Abdul Yusuf, a meat seller, echoed Uche’s sentiments, stating that despite the decline in the dollar, meat prices have remained unchanged.

Overall, economists suggest that while the recent strengthening of the naira may eventually lead to lower commodity prices, the full impact may not be immediately felt by consumers due to various economic factors and market dynamics.