One of the prevalent phenomena in Nigeria is that each time the prices of goods goes up, perhaps by virtue of dollar rate to naira or any other factor at all, it is almost impossible for the prices of those goods to come down again.
Most times it looks like the sellers unnecessarily take undue advantages over the buyers, as many of them sale different prices at different time of the days. For instance, there’s morning, afternoon and night prices respectively.
Economist’s Opinion
Ayo Teriba, The Chief Executive Officer of Economic Associates have explained why sometimes the price of goods are not quickly adjusted even when the naira appreciates against the dollar.
He said that, “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.”
Similarly, Adeola Adenikinju, President of Nigerian Economic Society contributing to the subject, highlighted the economic rationale behind the delay in price adjustments.
He 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.”
He also opined that, the central bank’s actions in the next few weeks will also reflect what the sellers will do. “They will be watching the markets to see if CBN will be able to sustain the stability of the naira,”
According to Professor of Economics, Babcock University, Onakoya Adegbei, the fact that prices go up and never come down is not peculiar to Nigeria. He said, “Reduction in production usually comes with a lag because of rigidity in production.”
“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.
