THE MAIN REASONS WHY FOOD PRICES WON’T DROP IMMEDIATELY DESPITE THE NAIRA GAIN OVER THE DOLLAR
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, which are:
1. Foods that have been bought at the old exchange rate will still be tied to the old exchange rate. What people have in stock now was purchased at high prices. If they sell at lower prices, they are going to record losses. So until they replace the current one, that is when they will reduce their prices. We will only start seeing the current prices of things as current stock is sold and new stock is acquired.”
3. The Dollar rate has to either remain stable or continually fall for many months before it becomes wise for traders to reduce prices. The sellers will be watching the markets to see if the Central bank of Nigeria (CBN) will be able to sustain the stability of the naira. The present naira gain needs to be sustainable for a reasonable period of time to enable prices of commodities to go back to normal. Traders may reduce prices now and Naira will fall to 3k next two months, making it difficult for the traders to raise capital by then.
3. Also, some Nigerian traders are greedy and wicked. Always quick to increase prices, but very slow to decrease prices of goods. Still they will be the first to blame the government.
4. The rule of Gravity don’t work when it comes to price of Goods and services in Nigeria. What goes up don’t come down immediately in Nigeria.
5. It is easier to increase prices of commodities than to lower their prices. When prices increase, they don’t wait for their old stock to finish, they just raise the price immediately even with that old stock, but when price comes down they will be waiting to sell off old stock.
6. If the price of fuel and diesel are still high, then the price of foodstuffs won’t be reduced and come down immediately. It is the high costs of transporting this foodstuffs and goods to the market that are indirectly causing the high costs of foodstuffs and goods in the market.
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