Economists Say Despite Naira Appreciation, Food Prices will not Decrease Immediately

Economists caution that even with the naira’s appreciation, consumers should not expect an immediate decrease in food prices.

Economists have indicated that Nigerians may not immediately notice the effects of the recent appreciation of the naira against the dollar on commodity prices in the country.

The CEO of Economic Associates, Ayo Teriba said, “Foods that have been bought at the old exchange rate will still be tied to the old exchange rate.

“Whether a month or a quarter, it depends on the duration it takes to order and sell. The effect we should hope to see is that the prices have stopped going up. We call it acceleration.”

Echoing similar sentiments, President of Nigerian Economic Society, Adeola Adenikinju, highlighted the economic rationale behind the delay in price adjustments.

Adenikinju said, “What people have in stock now was purchased at high prices. If they sell at lower prices, they are going to record losses.

“So until they replace the current one, that is when they will reduce their prices.

“But currently, to avoid losses, they will still sell at the rate at which they bought it. We will only start seeing the current prices of things as current stock is sold and new stock is acquired.”

Professor Onakoya Adegbei from Babcock University in the Economics department says that prices going up and staying there isn’t just a Nigeria thing – it happens in other places too.

“There is usually a lag and that is due to the expectation theorem. For example, if you expect the price of rice to increase, you will buy more and keep it in the house, So, it will increase your demand. But if you expect that prices will fall, what you already have you cannot dispose of.

“Reduction in production usually comes with a lag because of rigidity in production. If you already produce a certain product at a certain price and the price in the market is falling, you will then wait to see if the reduction will be sustainable. If you see that it is sustainable, then you can make a move to reduce the prices of your product. It is a lag effect,”

He said, “Reduction in production usually comes with a lag because of rigidity in production.”

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