AMIDST the declining and worsening value of the naira, imported goods,
including some that are locally produced have been hit by over 25 percent in price hike. Investigations by Weekend Observer revealed that the prices of pharmaceutical products, electronics as well as textiles have skyrocketed.
Some who spoke to Weekend Observer attributed the hike in prices to the falling naira in the international market. A pharmacist who spoke to Weekend Observer explained that devaluation of the naira has raised the prices of drugs all over the country which would definitely have negative impact on the country’s quest for effective health care delivery.
Meanwhile, a Petroleum Engineer and presidential candidate of National Conscience Party (NCP) Eng Onovo has explained how petroleum products importation has greatly weakened the naira.
“ His words: In the petroleum sector, there is no doubt that the devaluation of the naira implies an increase in petroleum products price, considering the lower purchasing power of the devalued naira especially for imported products.
Mr. Onovo explains further “If petroleum products were domestically supplied in Nigeria, the impact of the devaluation will be much less. In addition, the importation of petroleum using very large amount of foreign exchange increases the demand for foreign exchange and thereby increases the value of foreign currency against the local naira (which is the devaluation of the naira). If we had, like all other OPEC member developed and maintained sufficient domestic refining capacity, we would be enjoying lower costs of petroleum products; less pressure on the naira as the current demand for foreign exchange will be less the amount for the importation of petroleum products. “There will also be no subsidy payments as citizens will buy products domestically refined at much lower costs without a need for government subsidy; the waste associated with importation will be avoided: The pressure on the naira will be less and the value of the naira will be better protected; we will have more employment in the refining and associated sectors of the economy. “We must understand the current petroleum products importation process to understand the inherent risks and weakness that we can avoid but are forced to live with and corrupt rulers of Nigeria. In the process, the NNPC and private petroleum products importation companies approved by the governments, import products as approved by the government and distribute same.”
On the hike in the prices of drugs, a pharmacist says “The reasons for the sudden increase is because these drugs are imported and not manufactured locally, as such, we have to pay more money to bring these drugs, in the extra cost incurred during importation due to increase in foreign exchange is transferred to the patients.”
On why patients who patronize government hospitals where health care services are subsidised are also affected by increase in the prices of drugs, he said, “this is because doctors get the drugs from pharmaceutical companies. In government hospitals, the doctors would examine patients and make appropriate prescription, but the patients would still buy expensive drugs from private pharmaceutical firms, because in such hospitals, the patient can only be given multi-vitamins that are not really exorbitant like strong antibiotics.”
Right now only prices of drugs and other surgical pharmaceutical products made in Nigeria are still relatively stable, whereas, the price for all imported items needed for health services have increased. Another problem is low sales due to other high prices. Our concern is that when the naira eventually stabilizes, the prices may not come down again Metformin (500mg), which is used primarily for the treatment and control of excess blood sugar, has increased form about N400 to over N700 depending on the location of the pharmacy.
Also speaking, the chairman, Toiletries and Cosmetics (T&C) Group of Manufacturers Association of Nigeria (MAN), Mr. Ikong Umoh, said that manufacturers of toiletries and cosmetics are facing difficulties due to the continuous depreciation of the naira, calling on government to grant them waivers on the dollar content importation for raw materials that cannot be sourced in the country.
In the area of textiles, Weekend Observer was told that a nightgown that was sold at between N1, 500 – N2, 000 few months ago, now sells for betweenN2, 500 –N3, 000. “Mid last year I bought a night gown for N1, 500 – but when my friend went to the boutique to buy exactly the same gown last week she had to caught out N3,000 Edith, a hairdresser told The Weekend Observer.
APPROXIMATELY six months ago, the quagmire which the Nigerian economy now finds itself sparked off with what was played down as a temporary dark hour in the global oil market. The following days saw the federal government continue to bring down the oil benchmark for 2015 fiscal budget, in a bid to avoid bad deficit. At the other end, Nigeria’s apex bank continued to deepen our oil reserves to stable the economy until there was little or nothing left to take.
A few months down the line, especially with the continuous devaluation of the nation’s currency, it was clear that this global crisis in the oil market has come to stay. Some call it a Prophet in disguise who has come to expose us to the risks of operating a mono-product economy, solely dependent on oil in a world where the first solar-powered plane had just completed a test flight around the world.
The Naira has now gotten to an all-time low, the worst exchange rate in the history of Nigeria’s socio-economic life. Today, a US Dollar is exchanged for anything between N200 and N210. The Central Bank of Nigeria (CBN) may see devaluation as the best, if not only, option available to the nation (what some might call a necessary evil), we must not, however, fail to observe the unbearable hike in the prices of consumer goods, especially those imported into the country.
Weekend Observer recently visited the markets in Benin to examine the development, and confirm the fears allayed by Nigerians as they concern recent cost of goods in the market. The worst hit are electronics, household items, durables, and other “essential commodities.”
Nnamdi Chikezie, an electronics dealer at Lagos Market, Benin city expressed the difficulty now experienced in their bid to convince customers to still buy goods at higher prices. According to him, “everything has gone up now. What we used to sell for N15000 is now about N18,000. Everything is now very expensive.”
Another dealer, Emmanuel Sanni exclaimed angrily, “i don’t know where we are going in this country. What you bought for N2,000 two months ago is now as high as N3,000. Yesterday, Dollar was exchanged for N202, and it affects the prices of goods in Nigeria because most of our goods are imported from overseas.
Obviously, the unfolding events were not anticipated by those managing the nation’s economy, Ngozi Okonjo Iweala, the Coordinating Minister of the Economy had in November 2014, tried to allay the fears of Nigerians who cried out in view of an impending financial crisis.
Dr. Iweala had said that Nigeria was ready to absorb the shock from continued fall of crude oil prices. She stated this at the 4th Capital Market Committee (CMC) retreat, organised by the Securities and Exchange Commission (SEC) in Abuja.
The CME affirmed that it would not be wise for the country to panic, adding, “panic is not a strategy. We are managing the situation to keep the economy on a stable sustainable course and we will not listen to those who want us to throw up our hands in despair and give up.
“Our scenario based approach to managing the impact of the oil price drop is proactive and comprehensive. Even if the price drops to 60 dollars we are ready.”
“The common man is a priority in our strategy for the fall in oil price. His interests are a priority. That’s why even in implementing cuts in capital budget for 2015, the areas that are of most benefit to the common man, critical infrastructural projects like the Lagos-Ibadan expressway, the second Niger Bridge, rail and power projects etc which will create jobs and enhance the comfort of our people will go on.
“This pro-common man focus can also be seen in the safety nets which is a major priority for the President. The projection is for two to three million families across Nigeria will benefit from a conditional cash transfer scheme to encourage school attendance, improve health and nutrition, reduce infant and maternal mortality, among others,”
A customer, Sekiatu Kabiru, was quick to express her view on the matter. Although she had little or no understanding of the actual cause of the hike in price, she, however, decried the amount now paid on certain items. For her, “it is a usual thing in Nigeria for prices to go up and never come down. So i think we are getting used to the situation.”
Some might begin to wonder why even those goods imported from the Middle East and Asia have also attracted a higher commanding monetary value. The issue is that the naira has fallen, and the reason why Dollar is used for measuring the value of the country’s currency is because the US Dollar is an independent currency, not determined by a body, but by the forces of global economic interactions.
To expound, the value of the Dollar is not determined by America. However, it has a way of determining the value of most currencies around the world. It is arguably the most used currency in the world, and some other countries have adopted its variations as their national currencies.
But what the average Nigerian is battling to understand is what this essentially means. Nigeria’s economy thrives on importation, which makes the naira susceptible to international changes in monetary value. The surprising fact as shown by investigations conducted by Weekend Observer is that not many average Nigerians know what the devaluation of the naira means or its adverse effect on the economy.
Other traders who spoke to us shared similar opinions. “It affected everything. The cost price has increased. Tops that usually go for N1,500 are now sold for N1,800 and the ones that go for N1,800 are now N2,000. I do not know if it’s because of the festive period,” Sarah, a business woman who owns a boutique market stated.
It’s not just private businesses that are affected; currently the devaluation of the naira has also stretched its depressing tentacles into some federal government ministries as payment is pending on some staff salaries, which usually would have been sorted by now.
At the moment the federal government is having difficulty paying its staff, and so there is not enough money in circulation. Some states are not being paid, so it will affect things. The only solution is for Nigeria to decimate their currency. When they decimate the currency, the value of naira to dollar will be equated.
The former economic adviser to ex-president of Nigeria, Olusegun Obasanjo, Professor Ode Ojowo, had warned in the past months that one of the vital ways to prevent further fall of the naira is to prevent importation of foreign items and encourage Nigerians to consume locally, adding that it was not entirely a monetary problem, but a production fiscal problem.
It is the general expectation, however, that this tide will pass, regardless of how long it lasts. Nonetheless, many hope that Nigeria is able to weather the storm in this correct dire situation, even as government makes the right decisions in the future to avoid a reoccurrence.