Thursday, January 21, 2016

Prices of Goods Inflated Over Forex Scarcity in Nigeria
By Hamisu Muhammad, Chris Agabi & Nazifi Dawud Khalid, Kano
Nigeria Daily Trust
Jan 21 2016 12:36AM

The scarcity of foreign exchange (forex) takes heavy toll as the prices of some imported goods in the country were inflated in recent times. The consistent rise of the United States’ Dollar and other foreign currencies such as CFA, Pound Sterling and Euro against the naira has virtually affected the prices of electronics, stationaries, and cloths, building materials, food such as sugar, rice vegetable and palm oil among others.

A dollar at the Bureau De Change (BDC) yesterday sold at N305 in Abuja and Lagos findings from our correspondent shows this. The dollar drought at the BDCs followed CBN’s last week of stoppage of forex sales to the BDCs in a new control on forex operations to save Nigeria’s foreign reserve currently standing at some $28 billion. Also the CBN policy which closed the RDAS and WDAS windows last year also stopped the banks from selling foreign currencies to BDCs. Prices of some goods as gathered by our reporters increased by as high as 15 per cent in some instances.

A bag of sugar in some markets in Abuja are now N9,000 up from N7,500 two weeks ago, a 25 litre of Vegetable and Palm oils now sold at between N7,500 to N8,000 from N6,700. Battery pack AA size was N250 now is N350. Rice, a staple food in almost all the households in the country was affected by the price hike in the market, a 50 kg of imported rice is now between N10,700 to N11,000 and the 25 kg as high N5,500 from about N10,000 and N4,800 respectively in the December 2015.

At the electronic markets, phone such as BlackBerry, Infinix, Samsung, Nokia, and LG and their accessories went up sharply as some distributors increased the prices by almost 5 per cent when the naira crashed to about N300 per dollar two weeks ago. A phone retailer at Banex Plaza, Abuja,  Mr Alex Obiora told our reporters that since the crash of  naira against the dollar at the parallel market, some distributors stopped supplying the phone which shut the price up in the market. Some residents in Kano city who have been grappling with rising prices of commodities including food stuffs, electronic gadgets and clothes.

Our correspondent reports that as the value of the Naira crashes, business people are also readjusting values of their wares so as not to incur losses while consumers groan over the increase. A dealer in imported clothes in Sabon Gari area, Dayyabu Muhammed told Daily Trust that he had to constantly adjust the prices of his wares because if the prices remain fixed, the losses he would incur could cripple the business.

He said a new shirt for men which previously sold at N1,200 is now sold between N1,700 to N2,000 while a denim trouser rose from N2,000 to N3,000 or N3,500.

Likewise,  a housewife said she bought an imported brand of diapers which used trade at N3,500 previously  at an increased rate of N5,000 while a tin of milk that sold at N1,200 was jerked up to N1,600.

An Associate Professor and Head of Economics Department,  Bayero University, Kano, Mustapha Muktar said what is happening now is called imported inflation due to the falling of the price of the naira against the dollar. He said the economy which rely 80 per cent on imported goods has must witnessed such inflation any moment the devaluation of the local currency drops.

He said the implication is that the purchasing power of the local currency is affected which affect the welfare of the people. He suggested that the government should come up with both strong monetary and fiscal policies that will encourage local production, cheap capital and reduced unnecessary imports.

But according to Mr Manz Denga, a former Managing Director of Transnational Corporation (Transcorp) and former regional managing director of UBA, East Africa, said CBN’s stoppage of forex sales to BDCs is unwise. Mr. Denga, who is currently the chairman of AfriBusiness ExpertEase (AfBEE) in Johannesburg, South Africa, said the CBN committed the biggest gaffe by stopping sales to BDCs.

“The correct thing to have done was to increase allocations to BDCS and increase supervision of that sector. The N305 rate may worsen, even up to N500 in a month or two. When viewed against the official rate of N200, there is a window for round-tripping dollars, profiteering without real activities, through currency speculation”, he noted.

However, the BDCs are still mounting pressure on the CBN to reverse the decision banning sales of forex to BDCs. The President, Association of Bureau De Change Operators of Nigeria, (ABCON) Alhaji Aminu M. Gwadabe told our correspondent they are still anticipating further action from the CBN over the issue.


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