Aderemi Yussuf
Having set a binocular to conduct a special focus on the market forces affecting the persistent movement of prices of money and commodity market on daily basis.There is no gainsaying that the last consumer is at the receiving ends while the middlemen and the retailers are in total control of the market.
Nevertheless,the changes in the operational foreign FX market is that the Apex bank has ease it’s control on the naira by allowing it to flow freely.
Free- floating of the foreign exchange is when the government allow the market forces to determine the value of the local currency, in this case there is no undue influence fron the apex bank to fix value from the external value of foreign exchange.
The Naira exchange for dollar as at Wednesday is N1542.58 while the black market exchange for a dollar in N1650 despite the government insist on unification of all the market segment.
Yesterday, there was a clamped down on bureau de change operations in Abuja and Lagos. According to CBN reports, it really means some unscrupulous elements are speculating and hoarding the currency in all segments of the market.
Recently,the CBN in it’s regulatory capacity mandated the commercial banks to maintain their FX savings to a benchmark of 20% of the shareholders fund.These are official middlemen between the government and last users of FX.
Also, it’s to be observed that falling Naira value has affected virtually every consumer goods and services in the market.
The present inflation figure has climbed to about 33% and still moving up. Nigeria must do everything possible to avoid hyper inflation.
On the persistence rise in the prices of goods and services, the basic elementary economics is that even when goods are not composite or complementary demands, sellers mark-up their costs to get more profit without minding the turnover. A Garri seller ordinarily is not affected by increase in exchange rate but he will bring up his prices in other to meet up and purchase other goods or services.
According to a school of thought, you can only control what belongs to you. How does price control works here??? Will government price control agents force themselves into a bread vendor’s shop and ask for a downward review of prices without “centeri paribus” (everything being equal)
The market price of a bag of cement stood at N10,000 to N11,000.Sequel a chat with a senior officer in charge of sales at Dangote cement.He said the organization has not sold to any distributor in the last two weeks and that Middlemen are inflating the prices of their old stocks based on speculations.There was a meeting between the stakeholders and the government on agreed price of between N7,000 and N8,000.
Presently, a bag of pure water is sold for N300 per bag and selling for N50 per sachet, it indicates that there is now a profit margin of N700 on a bag before charging other costs( if any).
The President in his recent pronouncement said instead of establishing the price control agencies to force the prices down, he would rather allow more productions or allow the market forces to determine the shift in the curve.
My Submission:
However, the government should discourage uniform prices by association of trade unions and artisans.
This is possible through regulating the “modus operands” of these association. What is their mission statement? Were they formed only to fix uniform prices as a matter of extortion?
There should be level playing ground for all investors and businesses to thrive. Undue gang-up by trade associations must be disallowed. For instance, I can decide to produce my own pure water and sell at my own price without any influence by any group. The associations are taking undue advantage of the situation on ground. They are forcing members to sell at an agreed prices. They have formed monopoly market. All we required now is a perfect market. There should be free entry and free exit.Total proscription of any group or associations that is found wanting is highly imperative. Their gimmicks and strategies has been to give a strike notice to retailers only to go on planned strike and call-off within a short while with a new price.
For instance, I am yet to see Garri sellers association. On a particular street trading, there are three different prices of N2,800, N3000 and N3,500. This is a perfect competition.An average consumer- rational in thinking and nature is left with the choices of whom to patronize.
I could remember in those days in the photo industry, a seasons and popular photo studio in Lagos- Newstar studios chose to fix his passport pictures for just N50 for 4 copies. There was always a long queue in his studio because of the lowest price strategy.The Lagos state association of photographers (LASPAN) sue him to court for this ridiculous charges according to their modus operandis. Newstar in his defence, explained how shylock they are charging N200 for 4 copies. To Newstar, it’s profit-teering. Hence, Newstar photo studio became an household name in the city of Lagos.
Finally, the living standard of Nigeriahs has continue to be worrisome. The minimum wage of N30,000 is nothing to write home about. Presently, an average Nigerian is living below 1$, something like 50 cent.
I suggest the Federal government should creat a special fund from the oil Savings to further cater for the welfare of the citizen. All things must be equal. There must be a equilibrium in the earned income and disposable income so that the propensity to safe index will be higher among salary earners.Despite Late General Abacha’s tyranic rule, he created a Petroleum Trust Fund account(PTF) to cater for infrastructures and welfare.
This is a case study from my own modest perspective of the current upward movement of prices of goods and services.
In view of the above, which places more emphasis on practical happenstances of the market research and not just on economic theories and hypothesis.We stand to benefit more from our collective responsibility as people than waiting for government sanctions.
By Aderemi Yussuf.
