Economists: Delay Expected in Nigerian Commodities Price Adjustment Despite Strengthening Naira

Economists have elucidated that Nigerians may not immediately feel the impact of the current surge in the naira against the dollar on commodity prices due to inherent market dynamics and logistical challenges. Despite the apparent strengthening of the naira, Chief Executive Officer of Economic Associates, Ayo Teriba, highlighted a time lag in the adjustment process, particularly concerning goods purchased at previous exchange rates. This sentiment was echoed by President of the Nigerian Economic Society, Adeola Adenikinju, who emphasized that existing high-cost inventory must be sold before price reductions can be implemented.

The actions of the Central Bank of Nigeria (CBN) in the coming weeks will play a pivotal role in shaping market behaviors, according to Adenikinju, as market participants monitor the stability of the naira. Nigeria has been grappling with surging inflation rates, primarily driven by soaring food inflation, which reached 37.92 percent. To counteract inflationary pressures, the CBN has raised benchmark interest rates significantly.

Professor of Economics at Babcock University, Onakoya Adegbei, shed light on the phenomenon of prices rising but not falling, attributing it to production inertia and market expectations. He stressed that reductions in production and price adjustments often exhibit delays due to market perceptions and production rigidity.

Traders at EFAB market shared their experiences, noting that despite the decline in the dollar’s value, prices of commodities such as rice and meat have not decreased. They cited operational costs, particularly diesel expenses for refrigeration, as a significant factor contributing to sustained prices despite currency fluctuations.

The observations from economists and traders underscore the complexities of the Nigerian market and the multifaceted factors influencing commodity prices, suggesting that while the naira’s strengthening is a positive development, its effects on prices may take time to materialize.

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