By Clement Adeyi, Linus Aleke, Ben Adoga, and David Lawani, Abuja
Despite the remarkable appreciation of the naira against the dollar, the cost of goods has remained high and Nigerians are lamenting that soaring inflation is making life unbearable for the citizens.
Yesterday, the naira exchanged for N1, 297 to US$1.
There had been insinuations that the Federal Government defending the naira as the external reserves declined to their lowest level in nearly seven years.
The latest data provided by the Central Bank of Nigeria (CBN) indicated that the external reserves currently stand at $32.612bn, the lowest level that the country has seen since September 29, 2017, when the reserves depleted to $32.49bn. Between then and now, the reserves had achieved a high point of $47.86bn on May 15, 2018.
But the Governor of CBN, Dr Olayemi Cardoso, has said the bank was not strengthening the naira with the country’s foreign reserves.
Speaking at the Spring Meetings of the International Monetary Fund (IMF) and the World Bank, Cardoso said the naira was performing independently, and not as is being speculated by the public.
However, speaking exclusively with ThisNigeria over the weekend, analysts, experts, distributors, and consumers who gave an insight into the ugly scenario, attributed the continued soaring prices of goods to multifarious factors.
Chairman of Guild of Public Affairs Analysts of Nigeria, Enugu State chapter, Dr Ambrose Igboke, said that the continual appreciation of the naira against the dollar, in recent weeks, was not backed with sound economic policies, hence the lack of corresponding effect on prices of goods and services.
He added that prices were hitting the roof because the country was not running a productive economy.
While explaining another factor responsible for the high cost of goods despite the naira appreciation, he said, “What are we manufacturing? The Ajaokuta Steel is still moribund. We are importing everything.
“Nigerians are dying of hunger because of border closure. We can no longer feed ourselves because terrorists and bandits are not allowing farmers in Nigeria to go to farms. The government must address the issue of insecurity before thinking of enforcement of price control.”
On whether the Federal Government should deploy its agency, the Federal Competition and Consumer Protection Commission (FCCPC), to regulate prices of goods and services, Igboke who is a Fellow of Chartered Mediators, noted that the government lacked moral justification to enforce price control since it has not addressed the root cause of price instability.
He added that if it did, it risked grounding the economy.
“The appreciation of a country’s local currency, be it naira or any other local currency, means that the country has a productive output. Production output is when your goods and services are sold at the international market and you earn forex.
“That is what appreciates the currency because as you are earning, you are setting aside a part of the funds in a dedicated account called foreign reserve, where you have your foreign currency reserved in dollars, or gold bar, or some other financial instruments,” Igboke said.
“That helps to improve the value of your currency in the international market. Regrettably, Nigeria has nothing to offer. Nigeria is the only country in the world that is in a coastal line, where ships bring in container loads of products and dump at our ports and go back empty because there is nothing to export to the world,” he added.
The communications scholar said the only thing Nigeria could export as a country was petroleum products but in its raw form.
Igboke noted that the quantum of crude oil that Nigeria needed for domestic use was being exported and paid for in foreign currency to refine them in foreign countries.
She also pays for transportation to import it back into the country and sells it in naira, which also weakens our currency.
According to him, “Our manufacturing sector is dead. There was a time in this country when we were exporting automobiles, steel, textiles, and agricultural products, and we were running our airlines. Everything we needed in this country was manufactured here and we were exporting things. Naira was very strong at the time.
“In 1983, the naira was still stronger than the dollar in the international market. What happened was that our manufacturing sector started depreciating and finally collapsed.”
He added, “We have nothing to give back to the international market. What previous administrations did to prevent the continual free fall of the naira at the forex market was to deplete our foreign reserve in a bid to stabilise the naira.
“That practice gave rise to parallel price regimes in the forest market, the official and black market rate. This is so because the government offered rebates for some things requiring huge forex like importation of pharmaceutical and agricultural products, payment of school fees abroad, and even payment of daily travel allowance (DTA), for those attending conferences outside of the country.
“The CBN gave this class of people dollars at a controlled price. But when this government came, it collapsed that arrangement and said that we would be buying at the international market rate and that is laughable. Then, a few months later, they floated the naira and said that there was no parallel market anymore and there was no CBN rate.
“Such a move does not just make any economic sense at all. They also removed subsidies and floated the naira and our currency began to lose value with the speed of light. What they did was to leave the control of our currency in the hands of capitalists, no serious country does that.”
On the way forward, Igboke said, “The best thing to do is to return to the status quo. For instance, when we talk of subsidies for petroleum products government had returned to the status quo before May 29, but the price remained high.”
*Closure of factories
A major commodities distributor, Abubakar Yakubu, said another factor responsible for the soaring inflation is the relocation of factories from Nigeria due to poor power supply and other unfavourable policies.
Yakubu said, “When ignorant people accuse traders of unreasonably increasing prices, I simply wonder. My warehouse cannot sell as it used to sell. People’s purchasing power now is very low.”
“Check the cost of production. Dollar could be part of it. Most factories have shut down while some have stopped production. There is no adequate energy to power any plant. Plants are running on diesel and petrol which is also very expensive.
“The price of low electricity that cannot power generators and refrigerators is high because of increase in electricity tariff. Tell me how producers will make a profit if they don’t recover their production costs. So, distributors will follow suit.
“Government should urgently address the issue of the hike in electricity tariff and also ensure increased power supply accordingly,” he said.
Similarly, a major yam dealer in Abuja simply identified as Madam Hembadough, said, “Ordinarily, the fall in dollar should not affect local food items, but it’s not so. Some of the agrochemicals are imported. Apart from the cost of agro-inputs, the high cost of transportation is majorly responsible for the high cost of food in the city.”
*Extortion by security agents at checkpoints
Hembadough narrated the ordeal of transporting yams from Benue State to Abuja. According to her, after paying local government taxes at the motor park, there are innumerable security checkpoints from Benue State to parts of Nasarawa State where security agencies collect bribes from distributors to transport them.
“They can delay trucks on the roads for days for refusing to give the bribe. By the time you get to your destination, due to the high sun and heat, you lose products because some will rot away and waste,” she said.
Hembadough also attributed the high cost of goods and services to the high cost of petrol which, she said, also led to the high cost of transportation.
She also fingered multiple taxation on goods and services as another factor for the soaring prices of consumables.
On whether the FCCPC should regulate prices of goods and commodities, she said such a move could trigger looting of goods in the market.
A shop owner, Bartholomew Ogbu, called on the Federal Government to apply the magic wand that it used to ensure appreciation of the naira against the dollar in bringing down prices of things in the market.
“To ensure stability of prices of food and other items, insecurity in the food basket areas should be tackled. Herder farmer clashes and killings in farming communities of Benue, Plateau, and Niger states will affect food production.
“If farmers in grain-producing areas like Zamfara can go to the farm, food produce will be abundant and their prices will fall.
He also urged the government to look into the cost of chemicals and fertilizers. Without this, farmers and all of us will be chasing shadows,” he said.
Ogbu, however, commended the proactive steps recently taken by the FCCPC, in protecting consumers at shops where customers are deceived to pay more at cash points than prices displayed at the counter.
He said the FCCPC would, however, be handicapped to protect consumers’ interest in other areas as there were no expiry dates on garri, beans, yams, and other consumables.
“As planting season sets in, the government should the insecurity challenge, make agrochemicals and fertilisers available to farmers at affordable costs and expect a bumper harvest season but not to think of forcefully bringing prices of things down because it is a difficult task to achieve.”
*We’ll address anti-competitive practices by cartels that restrict supply -FCCPC
In response, the FCCPC has admitted that the drastic increase in prices of things was largely due to higher transportation expenses, the rising cost of pesticides, and security concerns in certain areas.
The Director of Surveillance and Investigations, Boladale Adeyinka, on said the commission had received complaints from consumers that despite the appreciation of the naira against the dollar, prices of goods were still increasing.
According to her, the FCCPC’s investigations also confirmed that the high cost of things was due to insecurity, especially herdsmen’s attack on rural farmers as well as the lack of security agencies’ intervention in the affected areas.
While proffering solutions, Adeyinka noted, “Our first step is to compile a report on the multiple taxes affecting the market and advise the government on potential solutions.
“We aim to unlock the market by reducing these taxes, thereby easing the financial burden on both sellers and consumers.
“The FCCPC plans to engage with executives of the markets to ensure there are no restrictions on bringing goods to the market.
“An increase in the availability of goods will naturally lead to lower prices. Additionally, we will address anti-competitive practices by cartels that restrict supply, to ensure a fair and competitive marketplace.”
