It could be very annoying when you get to the local market and then the market woman will tell you that a cup of pepper that sold for #100 last week is now #150. And when you ask why, she will tell you, ‘you no hear say dollar don increase?`
What is your business with dollar, madam? That is what some of us would be asking.
Could she be right?
Don’t you think you should know why even the price of garri that we get from our backyard is on the increase simply because one ‘dollar’ somewhere is putting the naira on the back sit?
Well, this is it:
First, the naira, basically is depreciating because the price of oil has dipped rapidly, which in turn had led to a falling demand for the naira. There is alot more to know here, but I will only go to how the falling naira is affecting the prices in the local market. You might want to know how the dipped oil price has led to the fall of the naira. The comment box is there for you.
Now, some of the goods we consume in the local market are either imported or produced locally with imported equipments and or raw materials. This means some of the goods we buy in the local market are in a way affiliated to foreign currencies like the US dollar.
So this is the reality: let’s say i am an importer of rice from the US. Before i start making my importation i will have to buy the US dollar. This means i will have to change my naira to the dollar in accordance with the exchange rate. Assuming I usually import 100 bags of rice at the cost of #5 M, if the exchange rate has soared drastically, my #5 M might only end up purchasing 70 bags of rice. It means i will have to add more naira to import the regular 100 bags of rice.
Let’s get a bit more practical. If i am stepping into the international market with #200,000 to buy Toyota spare parts, i will first have to buy the dollar, because i can’t make purchase with the naira. Let’s say 8 months ago i bought the dollar at the rate of $1 to #180, my #200,000 turned to $1,111 which purchased 5 carton of Toyota spare parts. But now, since naira has slipped to $1 to #320, my #200,000 will turn to $625 which can only purchase 2 carton of Toyota spare parts. This means importers will add more naira to meet up demand.
You see why importers could raise the price of goods.
How about the local goods?
Prices of locally produced goods should not be affected because naira is falling or dollar is rising. For instance our garri and tomato that are all done within. But if the Aboki who is bringing the tomato from the north says the price has increased, he could as well justify his reason.
Pure water that sold for #70 per bag some months ago now sells for #150. You might not entirely blame them. It could be true their cost of processing and transportation has increased. Which could be because fuel is still affiliated to the dollar.
The truth is, every body wants to cast undue blame on the weak naira, even the groundnut seller. Well, why won’t they when there is a loophole to make some extra money.