Worried by the high cost of food items in the state, the Akwa-Ibom state government has instructed traders to bring down the price of food items. The government blamed the high prices on activities of trade unions in the state. While concern for the citizenry is justified, the government should look at the larger picture. The traders do not operate in isolation from the larger economy. A bit of Economics 101 for the Governor;
- A drop in crude oil prices and production volumes pushed the economy into recession.
- It also led to an FX crisis which lead to the depreciation of the naira against the dollar and other currencies and led to an increase in the prices of imported food items.
- Traders and farmers like everyone else buy imported goods and so have no choice but to pass on input prices.
- Nigeria’s inflation rate at over 17% and Akwa-Ibom State is high up with 43% according to the Select Food Price Watch data released by the Statistics Bureau in April.
Rather than set prices, the government can find ways of subsidizing the cost of production for farmers. It can do this by giving them loans or providing fertilizer and other inputs at a subsidized rate. Government can also create cluster areas for agro processing. The high cost of processing is one of the major reasons for expensive food items. Such clusters should have stable power supply and security.
Food is an essential commodity, and fixing its price is an exercise in futility. The traders will decide to hoard their stock or sell outside designated markets. The artificial scarcity will lead to even higher prices of the food items. Even essential goods like petrol which is regulated, does not sell at uniform prices In the country due to varying distance from the ports, and other factors.