Naira Appreciates, But Why Are Food Prices Still On The Rise?

In recent weeks, the naira has appreciated significantly against the dollar, with the exchange rate now hovering around N1250 to a dollar. This marks a remarkable 35% drop from the tumultuous period when the Naira traded at N1900 in the black market. This remarkable appreciation can largely be attributed to the concerted efforts of the Central Bank of Nigeria (CBN), under the leadership of Yemi Cardozo, to address arbitrage, bolster dollar supply, clear backlogs, and stabilize the market for investment.

While many Nigerians have welcomed this development, there remains a lingering question: why hasn’t the strengthening of the Naira corresponded to a decrease in the prices of goods, particularly food items? Previously, food prices had skyrocketed due to the increased costs of importation driven by the Naira’s depreciation against the dollar. However, with the recent gain in the Naira, consumers are puzzled as to why they haven’t seen a corresponding drop in the prices of commodities.

Dr. Ayo Teriba, a renowned economist and Chief Executive Officer of Economic Associates, shed light on this conundrum. He says the challenge lies in stock time and traders’ reluctance to incur losses. “Foods that were purchased at the old exchange rate are still tied to that rate. The effect we should hope to see is that the prices have stopped going up,” he explained.

Adeola Adenikinju, President of the Nigerian Economic Society, echoed similar sentiments, emphasizing that traders are hesitant to lower prices to avoid losses on existing stock. “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,” he added.

However, the Coalition of Northern Groups (CNG) has urged traders to support the government’s efforts to ensure currency stability and refrain from manipulating prices for excessive profits. “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. Failure to do so may constitute deliberate economic sabotage and exploitative tendencies against Nigerians,” the group emphasized in a statement.

Most economists concur that over time, as long as the Naira continues to appreciate, the prices of food and other commodities are likely to trend downwards. The key lies in patience and collective efforts to navigate this transition period.