There are indications that prices of goods and services may not come down soon despite the speedy appreciation of Naira against major foreign currencies in recent weeks.

On Thursday, US Dollars traded for N1,060, about N840 gain against N1,900 to US Dollar peak in February this year. But Vanguard findings show that prices of goods in the market are still on the rise contrary to the general expectations that with the continued positive trend in the exchange rate which started in late February, the market prices and general cost of living should be going down.

Most dealers and producers of goods and services blamed the high exchange rate for the spiral price increases in the market.

However, against the backdrop of the positive stability in the foreign exchange market, the National Bureau of Statistics, NBS, reported a further rise in inflation with a headline rate of 33.2 per cent in March as against 31.7 per cent in the previous month while food inflation rose to 40.02 per cent from 37 per cent.

Meanwhile, financial analysts and economists who spoke to Vanguard have indicated further rises in prices of goods and services in the months ahead before marginal stability can take place.

They also hinted that the current positive development in the foreign exchange market would have to be sustained over a longer period while other elements of the cost of doing business would have to come down before the impact of the lower exchange rate can positively affect the prices of goods and services.

Moreover, they explained that while price increases respond faster to upward increases in key factors of production, the reverse is the case when the factors are going down.

The analysts noted that positive exchange rate changes take time to trickle down to the prices of consumer goods. Explaining the discrepancy between the exchange rate stability against consumer price volatility, Victor Chiazor, Head, Research, FSL Securities, a Lagos-based investment house, said, ‘‘Apart from the time lag for the stability in the exchange rate to begin to reflect in the prices of goods and services, Nigerian price history shows that prices are sticky downwards but reflect immediately upwards.”

However, he gave further insight: “The rise in consumer goods prices was initially triggered by the currency devaluation along with high energy and transportation costs. But despite the recent appreciation of the Naira against the dollar, energy and transportation costs have remained high.

“Also, the appreciation in Naira will take some time to kick in before it begins to reflect in the price of goods and services.

“This price distortion shows how much dependence the economy has on foreign currency and shows that government policies towards locally manufactured goods in terms of infrastructure deficiency and incentives remain low.

“Just as we have seen inflation continue to rise despite consecutive increases in the monetary policy rate to curb it, the reality remains that the policy will require some time to kick in and take effect.

“A similar scenario is expected to play out around goods and services which are highly dependent on the exchange rate. It will take some time for the appreciation of the Naira to be transferred and trigger a drop in the cost of goods and services.”

Going forward, he said that the current policy decisions by the CBN Monetary Policy Committee, MPC, team will yield the desired result.

He, however, said that a prolonged duration of monetary tightening would become a headwind negative to economic growth.

“Hence, there is the need to effectively monitor the economy and know when to slow down on its tightening stance so as not to throw the economy into a session of negative growth.”

In his views, Ayorinde Akinloye, an Economic and Investment Strategist, said: “When economic policies are implemented, there is typically a time lag needed to see the impact of the policies on macroeconomic outcomes.
“Specific to the issue of appreciating Naira and still elevated prices of goods and services, the majority of consumer goods in circulation were produced or imported when the dollar was about N1,500 or more. As a result, we are yet to see the impact of the appreciation of the past month.

“Typically, a time lag of 60 – 90 days will be required to clear out the expensive goods before the ones imported at cheaper exchange rates begin to flow into the market.”

He, therefore, noted that the impact of the appreciation of the Naira will be felt from the end of May to June.

Speaking in the same vein, Gafar Bashiru, Senior Associate, Parthian Partners, another Lagos-based investment house, said though a stronger Naira is supposed to result in lower import costs and, eventually, a decrease in consumer goods prices, however, other factors, including structural issues, time tag, and speculative pricing, among others, have continued to fuel the current disparity.

He stated: “Exchange rate changes often take time to trickle down to consumer prices. Businesses may wait to adjust prices until they’re confident the currency appreciation is sustained. Inventory purchased at higher exchange rates may also need to be sold before price reductions occur.

“Also, factors like high transportation costs, insecurity, or inefficiencies in distribution networks can keep prices high despite a stronger currency and businesses might be hesitant to lower prices immediately, fearing future devaluation, leading to “sticky prices.”

“While prices are yet to drop, we are beginning to see a slower rate of increase. The month-on-month inflation figure for March reveals that the rate of increase in the average price level is less than the rate of increase in February 2024. This is a trend that is expected to be maintained in the coming months.

“It is also important to consider the base effect in the year-on-year figures. Considering that consumer prices were already high before the Naira appreciation occurred in the last two months (headline and food inflation stood respectively at 29.90% and 35.41% in January vs 33.20% and 40.00% in March), the decrease in prices might seem less significant.”

He further noted that in addition to the recent improvement in the strength of the Naira, policies that can help achieve sustainable price stability lie largely with the fiscal authority.

He cited structural reforms and focus on domestic production of competitive advantageous products as part of the fiscal solutions needed.

According to him, “Addressing structural bottlenecks in the economy, like improving transportation infrastructure and reducing bureaucratic hurdles, can make businesses more efficient and potentially lower production costs. This will translate to lower consumer prices.

“Implementing policies that incentivize local production of essential goods will lessen reliance on imports and make prices less vulnerable to fluctuations.”

Inflation bottleneck

Expressing similar views, David Adonri, Vice Chairman, Highcap Securities, argued that the main factor fueling Nigeria’s galloping inflation is insecurity, adding that import dependence on manufactured items is another cause. “When supply-side measures are taken, inflation will start declining. Inflation can start declining from the fourth quarter,” he stated.

Chinazom Izuora, Senior Associate, Parthian Securities, said: “It’s important to note that inflation is a lagging indicator.

Therefore, the effect of policy pronouncements in a given month will not be evident until subsequent months. However, it is noteworthy that headline inflation on a month-on-month basis moderated to 3.02% in March, which was 0.10% lower than the rate recorded in February 2024 (3.12%).

“This indicates a slowdown in the rate of inflation, though a marginal decline. We might not see a significant decline in the rate of inflation until Q3/Q4 but we expect to see gradual moderation month on month.”

https://www.vanguardngr.com/2024/04/exchange-rate-why-prices-of-goods-will-remain-high-despite-naira-appreciation/

Ok. Before na dollar. Now na wetin? Nigeria's situation defies any global economic assumption. Which way naija

The moment I saw government officials going around Super markets to check their prices , I just laugh.

I sell and resell local rice in abuja And I know what we go through to buy local rice.

So many factors contribute to the price increase.

The rice farmers paid huge some of money to cultivate and harvest their rice.

Some sellers buy and process the rice. If you goto the engine, you pay high to process it.

They now transfer the high cost to us the whole-sellers.

Whole-sellers like us transfer to the retailer and the retailers to the final consumers.

H

Make exchange rate go back to N1900 to $1 then if things wouldn't come down

Continue....

How can it come down when diesel is still sold at N1500 per liter. Abi no be lorry dey convey goods? How can it come down when everywhere is insecurity? Abi farmers are now free to go to their farms? Brain dead agbado gangs are calling Nigerians wicked for not reducing prices. Chai. Are we not running a capitalist economy? Are traders no longer in competition? Is it not the way you buy you will sell? Have you asked the amount they bought the goods they are selling? Who doesn't want to sell fast and do a turn over? People who cannot even do AKARA business, only relying on the 30k per post will open their mouth to be saying nye nye nye.

Only fuulish people that are falling for agbado propaganda? APC gathered jobless youths in one computer location and started paying them to create multiple social media accounts to spread propaganda and decieve the gullible.

They should continue, if dolar goes up again, the prices of good will go further up. That may be the elastic limit for even their agbado supporters. Na watch we dey watch

It's greed that has kept the prices high. People who made criminally high profits when FX was high don't want to take the loss of market shifts.

Shit systemic corruption an lack of openness and accountability arbitiary policymaking and the deception of bad leadership by those who are ruled.

The way dollar will jump 🦘🦘🦘 back to 2000 like a kangaroo will be brutal this time because what they have been doing is artificial depreciation of the dollar. Once the reserves they used in servicing the forex finishes, it will go back to high. It's not the first time, Buhari did the same thing. That's the reason Nigerian foreign reserves went down recently. If the naira is naturally appreciating against the dollar, it will instantly reflect on the prices of Products in the country

Their excuse is they still have old stocks to sell. But once they hear naira has depreciated, they immediately inflate their price not minding if it’s an old stock.

Na we Dey do ourselves for this country. We too get ojukoko eyes

You guys will continue to justify this evil things markets are doing to Nigerians.

If petrol was being sold for 617 naira per litre when 1 dollar was equal to 1,600 naira, then it should sell for 424 naira now that dollar is equal to 1,100 naira.

If NNPC doesn't reduce the price of petrol to 424 naira, then inflation will be on our faces.

Why did it go up in the 1st place?
Because of Fuel Subsidy Removal & Floating of Naira, (Petrol increased from ~2h to ~7h and Dollar from ~6h to >1k).

&Prices will remain high until there are measures to effectively counter the effects of the FS removal & Naira floating.

Balabloo-blu-bulavism voodoo economic policies of a drug baron and certificate forger.

All these monikers ahead of me no get work dem they all find FTC... Grow up please... Naija which way... Tinubu is a time bomb that is walking

Ẹ don even tìrẹ person

E affect agbalumo, affect mango, affect poison sef

una papa !!

Wether Prices go down or not, HMU for your Mobile apps and Backend development gigs.

The manufacturers, middlemen, retailers, Road blocker's , are all guilty of it.
The government on their own part still have a lot of work to do.

When it comes to price of goods and services in Nigeria, gravity no dey work, what goes up (price of goods and services) go remain there.

Antiurchins:
The way dollar will jump 🦘🦘🦘 back to 2000 like a kangaroo will be brutal this time because what they have been doing is artificial depreciation of the dollar. Once the reserves they used in servicing the forex finishes, it will go back to high. It's not the first time, Buhari did the same thing. That's the reason Nigerian foreign reserves went down recently. If the naira is naturally appreciating against the dollar, it will instantly reflect on the prices of Products in the country

God will bless you. Emiefele did that nonsense with buhari... Fix our export and see how Nigeria will improve. But wait how do you fix exports when Nigeria is suffering from incessant power supply, insecurity and high logistics and transportation cost... Nigeria is a walking corpse

Tinubu though economy is built by wasting foreign reserves to stabilize dollar.

K

Just greedy Nigerians... No need for any other grammar. We are greedy

Nigerian factor

That's why it would have been better to fix the refineries then before removal but thiefnubuconomics is the mask of corruption

Bring down the price of fuel, diesel and electricity, provide us with at least twelve to fifteen hours of light daily, everything in Nigeria will surely come down within two weeks....it will be like miracle ney...

"The analysts noted that positive exchange rate changes take time to trickle down to the prices of consumer goods"

Nothing like the above...we are just being wicked to ourselves!

When exchange rate shoot up, sellers immediately jack up their prices...even those with old stocks bought at reduced prices..

Now, when exchange rate is coming down, we are saying sellers have old stocks bought at high prices and will take time to come down

Why not the same rule when the exchange rate went up and they increased prices of goods bought at old rate

We never ready.