Why the exchange rate gain may not translate to reduction in prices of goods in the markets soon

By Anayo Nwosu

The effects of the reduction in the price of dollar in the black market or the sustained supply of FX at official rate by the CBN will not immediately be felt in the prices of imported goods in a our various markets because of the following reasons:

1. Even if the importers of finished goods have accessed the lower priced dollars, it would take about 35 days (i.e shipment period +clearing) to arrive the retail shops, if the goods are from Europe or USA; while it will take about two months or slightly less for goods from China and other far eastern countries to get to the shop.

Therefore, the retailers will continue to sell their goods at the old prices until they receive new consignments reflecting reduced prices .

2. The sellers of imported goods shall attempt to offload their current stock of goods at the current price to maximize profit.

They would brandish before their customers  invoices showing the prices at which they  bought from the importers as righteous justification.

3. It would even take a longer time for the prices to be reduced for goods manufactured locally which raw materials are imported.

Yes, the raw materials would still have to be processed into finished goods and it takes a while for some goods.

HOW TO DRIVE DOWN THE PRICES

It is all about confidence building.

A simple announcement by the CBN that it has set aside about $8bn from the Reserves to sustain the supply of FX to users and a 30-day demonstration of with actions shall make the manufacturers, importers and retailers do a composite cost-price analyses that will lead to downwards repricing of goods and services.

But, what is the basis of the confidence of CBN to guarantee a steady supply of FX when the stable sources of the FX it distributes can't be guaranteed?

That is where the problem lies. Nobody can guarantee what he or she doesn't control.

THE OTHER OCTOPUS

I fear that the manufacturers and importers of major goods would still not reduce their selling prices even with reduced price of dollar due to increased energy costs and the cost of transportation of their goods to various consumer locations.

In addition, during inflation, only a mad person would sell at a reduced price.

Akwoi problems, Nsogbu makpu, Wahala o wa!