In recent weeks, the Nigerian Naira has witnessed a significant gain against the dollar, trading at around N1250 to a dollar, marking a notable 35% drop from its previous tumultuous period at N1900 in the black market. This commendable appreciation is attributed to the concerted efforts by the Central Bank of Nigeria (CBN), spearheaded by Yemi Cardozo, aimed at curbing arbitrage, bolstering dollar supply, clearing backlogs, and fostering market stability for investment.
While this strengthening of the currency is undoubtedly a positive development, many Nigerians find themselves perplexed by the lack of a corresponding drop in the prices of goods, particularly food items. Historically, food prices had surged due to the escalated costs of importation stemming from the Naira’s depreciation against the dollar. The recent gain in the Naira prompts a fundamental question: if the ‘rise’ in dollars led to food price spikes, why hasn’t the ‘fall’ of dollars translated into cheaper commodities?
Leading economist Dr. Ayo Teriba, CEO of Economic Associates, sheds light on this conundrum, attributing it to stock time and traders’ reluctance to incur losses. He explains, “Foods 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.”
Adeola Adenikinju, President of the Nigerian Economic Society, echoes this sentiment, emphasizing that traders are hesitant to sell at lower rates to avoid losses. He emphasizes, “We will only start seeing the current prices of things as current stock is sold and new stock is acquired. They will be watching the markets to see if CBN will be able to sustain the stability of the Naira.”
However, amidst these economic intricacies, the Coalition of Northern Groups (CNG) advocates for traders’ cooperation with the government’s efforts to ensure stability. They caution against manipulating prices for excessive profits, especially at the expense of vulnerable members of the population in need of affordable access to food staples. “Businesses must take positive steps to reciprocate the Naira’s stability by lowering the price of their products for the benefit of the common man,” the CNG emphasizes.
Despite the current economic nuances, most economists remain optimistic that the prices of food and other commodities will gradually trend downwards over time, as long as the Naira continues its trajectory of appreciation. This evolution underscores the intricate interplay between currency dynamics, market forces, and consumer welfare in the Nigerian economic landscape.
