Despite N1.4tr CBN lifeline, prices of goods to remain high
‘Impact of interventions to be felt in second half’
Althogh there are no less than 22 Central Bank of Nigeria (CBN)-initiated interventions for the foreign exchange market which amounted to $4.44 billion or N1.35 trillion (at N305.85/$), concerns persist about the high prices of goods and household items.
Consumers and industry observers, however, differed on the development, noting that the situation may be attributable to local manufacturers and retailers attempting to cash in on their losses when the naira fell to about N525 to the dollar in the first quarter of the year. The local producers, on their part, blamed the high cost of production for the spiralling price regime.
The situation calls for concern as disposable incomes continue to be insufficient to meet daily demands, despite assurances by government of the easing recession and continued defence of the national currency by the apex bank.
Although the CBN has stated that the country has started witnessing a fall in the prices of commodities, indicating a reduction in the rate of inflation, activities at the retail end point in the opposite. Operators believe that the impact of the interventions may not be felt until the second half of the year when old stocks would have been sold.
Already, local producers of consumer goods are struggling to maintain a balance in the management of costs and prices which consumers are willing to pay for products. Manufacturers have continued to increase their inventories for fear of volatility in the forex management as well as intensify their backward integration agenda.
With oil prices losing its rally from above $51 per barrel after a week of consecutive losses, the naira keeps hovering between N385 and N390, while it traded at N380/$ at the new window for investment flows and exports.
Retail prices have continued to remain static except for diesel whose worth crashed by five per cent to N190 per litre, thus reducing the operational cost of manufacturers. The generated electricity has been insufficient due to grid constraints despite increasing gas supply.
Though the Nigerian Stock Exchange (NSE) Consumer Goods Index closed at 616.12 points on Friday, manufacturers and other stakeholders in the value chain held that it was too early in the day for consumers to feel the impact of the interventions on the retail sector.
According to the President of the Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs, producers have for a very long time been finding it difficult to source foreign exchange.
His words: “Things began to improve in February this year. This is something that takes time. You do not expect an immediate change in the price of goods and products. It will take some time. I am talking of a timeline of about three to six months before we begin to see the effects. For traders, it is okay to buy and sell, but for manufacturers, it takes time to re-stock and sell.”
On the lag between interventions and outcomes, the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, said it was expected, as many of the manufacturers and retailers were still dealing in old stocks bought at exorbitant rates.
He noted: “We have to give some time for some of those stocks to be disposed of. We also need to give chance for confidence to fully return for the people need to be assured that the new relief has come to stay.
“They need to be sure that the improvement in the forex is sustainable. It is something that we will endure. Once things stabilise, prices will fall or competition will drive them down.”
The Secretary of Retail Council of Nigeria, Alhaji Kunle Hamzat, corroborated the MAN boss, saying the lifeline could only be felt in a couple of months.
According to him, the spiralling prices were a reflection of the old exchange rate, adding that consumers may have to wait for at least three months to feel the impact of the intervention, especially as the exchange rate remains unstable.
The CBN governor, Godwin Emefiele, had at a briefing on the state of the economy said: “You would have observed that in the last two months, the central bank has been involved in some form of intensive intervention in the foreign exchange market and this has fortunately resulted in a downward trend in the parallel market price of foreign exchange, from as high as N525 to as low as N370 to a dollar.
“Right now, it hovers between N370 and N380. I think it is an opportunity for me to say that we are going to continue this intervention because the reserves look very good. As I speak to you, our (external) reserves stand at above $31 billion and that provides us enough of firepower or ammunition to be able to defend the currency, and we will do so with all intensity to ensure that foreign exchange is procured by everybody.
“If you want to import raw materials, you will get foreign exchange; you want to import plant and equipment, you will get foreign exchange; you want to pay school fees or you are a small business that wants to buy foreign exchange to import, you will procure foreign exchange.”