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Food prices won’t drop immediately despite naira appreciation – Economists

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Economists have indicated that Nigerians may not see an immediate reduction in commodity prices despite the recent appreciation of the naira against the dollar.

Ayo Teriba, the Chief Executive Officer of Economic Associates, explained that there’s typically a time lag between currency fluctuations and price adjustments. He emphasized that goods purchased at the previous exchange rate would still be tied to that rate until new stock is acquired.

Adeola Adenikinju, President of the Nigerian Economic Society, echoed similar sentiments, stating that businesses are likely to maintain current prices until they replace their existing stock with cheaper inventory.

Adenikinju added that the actions of the Central Bank of Nigeria (CBN) in the coming weeks would influence market behavior, as sellers monitor the stability of the naira.

Despite efforts to curb inflation, which reached 31.70% in February, primarily driven by food inflation at 37.92%, including a recent increase in the benchmark interest rate to 24.75%, prices may not immediately decrease.

Professor Onakoya Adegbei of Babcock University emphasized that price adjustments often lag behind changes in production due to market expectations and production rigidity.

Traders at EFAB market confirmed the challenges faced in maintaining prices, citing infrastructure costs and the need for quality preservation amid power outages.

Favour Uche, a foodstuff seller, noted that despite the reduction in the dollar’s value, prices remained unchanged due to operational expenses like diesel for refrigeration.

Abdul Yusuf, a meat vendor, similarly observed that meat prices remained stable despite the decline in the dollar’s value, attributing this to operational costs and market dynamics.

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