Why consumer goods are still under-performing despite lower exchange rates
Nairametrics| The Central Bank of Nigeria has, through about 22 initiatives, battled the dwindling value of the Naira over the course of about 3 months.
This battle, which has resulted in the strengthening of the Naira from about N525/$1 to $380/$1, has however not impacted positively on prices of consumer goods. In fact, the latest figures from the National Bureau of Statistics show that food inflation is still on the rise. This is surprising considering that the weakening Naira was blamed for spiking the costs of goods.
A report by Guardian, highlights some of the reasons provided by manufacturers and other stakeholders for this situation.
Here is a summary.
- Prices of manufacturing raw inputs have remained static, meaning that manufacturers have continued to produce at high rates. Electricity supply, for example, has continued to be poor due to grid constraints despite increasing gas supply.
- The impact of the CBN interventions will take some time to be felt as manufacturers require time to restock and sell. “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 about 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.” President of the Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs observed
- Several traders are still selling stock purchased when the exchange rate was far higher than it is now. Thus they are still trying to at least break even in their sales of those stocks. “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.” noted the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf.
- There is also a likelihood that local manufacturers and retailers are attempting to cash in on the losses they incurred when the naira fell to about N525 to the dollar in the first quarter of the year. As soon as they believe that they have done this, then they can reflect the true market situation.
With these reasons, the general consensus from the stakeholders is that it’s too soon to expect changes. Rather, Nigerians should wait until the second quarter of the year to begin enjoying the benefits of the dwindling inflation rate.