Why naira appreciation is yet to have impact on the prices of goods – Expert

In a recent analysis of Nigeria’s economic landscape, experts have shed light on the complex relationship between currency exchange rates and consumer prices. Despite the recent appreciation of the Naira against foreign currencies, consumers have yet to see a corresponding reduction in the prices of goods and services. This phenomenon has prompted economists to delve deeper into the underlying factors influencing this disconnect.

Dr. Adeola Adenikinju, a prominent economist and professor at the University of Ibadan, offered insights into this perplexing issue. According to Dr. Adenikinju, the lack of immediate price decreases following Naira appreciation can be attributed to several key factors.

Dr. Adenikinju emphasized that the impact of currency fluctuations on consumer prices is not instantaneous. Changes in exchange rates often take time to cascade through the economy, affecting various sectors and pricing structures. While the Naira’s strengthening is a positive development, its effects on consumer prices may be gradual.

Also, Yinka Ogunnubi, President of the Association of Corporate Treasurers of Nigeria (ACTN) said that the volatility in the exchange rate over the past two days is driving fear among producers whether the recent gain in the naira is sustainable.

According to him, the naira is appreciating too fast, and it is not good for long term planning. He noted that the many companies will sustain significant FX losses in Q1 over the volatility in the FX market.

He stated, “The issue here is that can we sustain the level of price that we have right now. That’s why from the ACTN angle we are talking about price stability. If naira is going to be N1500 let it be for six months. Don’t let it be N1500 today, N1200 tomorrow and so on. You can’t plan and that’s why even as we speak today we see that the naira is appreciating, it’s appreciating too fast.”

“When you sit down and look at the analysis, people are concerned saying should I reduce my costing rate to what the market is, but I’m scared that if I reduce my costing rate, what is my replacement cost? Will it go back up? That’s the reason why prices of things have not come down. Yes, the naira is appreciating but people are not in a place of comfort to say Yes, it is sustainable. The only answer to that is time. We have to wait it out for a few weeks or months. Is this sustainable over a long period? if it is, then you’ll see prices coming down.”