Nigerians may have to wait for some time before feeling the impact of the current strengthening of the naira against the dollar on the prices of commodities in the country.
This is because economists have predicted that it will take some time to feel impact of the recent development in the market.
The naira, on Friday, appreciated to N1, 280 per dollar at the parallel section of the foreign exchange (FX) market. The current FX rate signifies a 5.19 percent appreciation from the N1, 350/$ reported on March 27.
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Grassroots Parrot had reported how the Central Bank of Nigeria (CBN) sold dollars to the Bureau De Change operators at the rate of N1, 251/$1.
Thereafter, the BDCs were directed not to sell the dollars at a rate which exceeds 1.5 per cent above the purchase price, meaning that it should not be sold beyond N1, 269 per dollar.
Reacting to the development on Saturday, the Chief Executive Officer of Economic Associates, Ayo Teriba, explained that the impact of the naira on prices exhibited a time lag.
Teriba told newsmen that “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. We call it acceleration.”
In the same vein, President of Nigerian Economic Society, Adeola Adenikinju, highlighted the economic rationale behind the delay in price adjustments.
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According to him, “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.
“But currently, to avoid losses, they will still sell at the rate at which they bought it. We will only start seeing the current prices of things as current stock is sold and new stock is acquired.”
Adenikinju, however, suggested that the central bank’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,” he said.
On his part, Professor of Economics, Babcock University, Onakoya Adegbei, noted that the fact that prices go up and never come down is not peculiar to Nigeria.
He said, “Reduction in production usually comes with a lag because of rigidity in production.”
