Muda Yusuf, Director-General LCCI
- Prices of commodities rise steeply
- Naira appreciates to N371/$1 on parallel market
Crusoe Osagie and Obinna Chima
Lagos Chambers of Commerce and Industry, LCCI, has lamented what it described as the "total collapse" of the country's economy.
According to the Director-General of the Chambers, Mr. Muda Yusuf, "If there is no confidence in your economy and your currency, then there will be capital flight.
"If there is no liquidity of the forex market, the volume of forex inflow will be low. If portfolio investors and foreign direct investors do not have confidence that they can seamlessly repatriate the forex they brought in without losing value, then they will hold back their investments."
Commenting further on the current economic crisis facing the country especially the forex crunch, Yusuf said the crisis would certainly take its toll on all products in the market whether made locally or imported.
Also yesterday, THISDAY investigations revealed that the Nigerian economic crisis was spiraling out of control, with the ordinary man on the street now feeling the pinch more than ever before.
The prices of basic food items and other consumables are now shooting beyond their reach.
The LCCI DG noted that the more of importation component a product contains, the more it will be affected by the foreign exchange crisis.
"There is a connection. Once there is a wave of price increases, it affects all other products and commodities. The woman who sells garri will have to raise the price of her locally produced garri to be able to buy other things that she needs which may be imported; so the prices of other things will certainly go up," Yusuf said.
He pointed out that the crisis was the result of a total collapse of confidence in the nation's economy and its currency.
"There is urgent need for a flexible exchange rate regime to manage the slide. One market cannot be exchanging at N197 to a dollar while the other is exchanging at N400 to a dollar within the same economy. You can't run an economy that way. We must liberalise the flow of forex in and out of the economy," Yusuf stressed.
In a related development, the market survey conducted by THISDAY across various markets in the country yesterday revealed price increases of between 30 and 50 per cent for various items.
According to the survey findings, the price of a bag of sachet (pure) water which contains 20 sachets rose between 50 and 100 per cent from N100 to N200, raising the budget of the common man for potable water significantly.
In Owerri, price of pure water rose from N5 to N15 per sachet.
Other items surveyed included rice which witnessed a 20 per cent price increase from N10,000 per 50 kg bag to N12,000.
The price of the nation's most popular source of carbohydrate, garri, also took a leap upwards, rising from N300 per measuring unit (empty paint container) to between N350 to N400.
A unit of vegetable oil, which is a 20-litter gallon, recorded a significant increase in price from N6,500 to N9,500, rising by around 30 per cent.
Although some of the items surveyed, such as garri, do not have any significant importation component, they however recorded similar price increases as did other commodities which are imported and are therefore directly impacted by the forex crisis, such as rice and vegetable oil.
Between 2014 and end of 2015, the neighbourhood of Apapa was virtually shutting down with trucks queuing from Apapa all the way to Ojuelegba on the one hand and all the way to Toyota bus stop on Oshodi-Apapa express way on the other artery into the busy Tin can port.
However, since the beginning of 2015, the pressure on the Apapa metropolis has drastically abated.
Probing to see if the marked reduction of traffic to and from the Apapa ports might have been the result of increased efficiency, THISDAY found that not much had happened in terms of the infrastructure or administration of the port.
According to THISDAY findings, the reduced Apapa gridlock was merely the result of the drastic reduction of the trade and importation activities happening in and around the ports.
A port official who asked not to be named told THISDAY that the trade activities in the ports in Apapa had declined by as much as 60 per cent, leaving many who used to earn a living as labourers and dock workers without jobs.
The source also hinted that clearing and forwarding agents who used to litter the port neighbourhood in Apapa in the recent past had all disappeared with only a fraction of them moving about without much to do apart from debating around newspaper vendor points and sports betting joints.
"The situation is severe. There is no work. No one seems to be importing anything and this is telling on the economy which has its 2016 budget mostly dependent on non-oil revenue. Even the boys who used to work as labourers within and around the port are now jobless and this will have a huge impact on the security situation," the source said.
Meanwhile as the week drew to a close yesterday, the value of the Naira however closed strong, with exchange rate for one dollar settling precariously at N371/$. The general state of the economy is taking its toll on the prices of goods consumed frequently by ordinary Nigerians.
Naira Appreciates to N371/$1 on Parallel Market…
Meanwhile, the naira yesterday clawed back some of the losses its incurred on the parallel market in the past few days, as it appreciated to N371 to a dollar in Lagos, up from the N391 to a dollar it closed on Thursday.
The upswing recorded by nation’s currency was largely attributed to weakening demand for the US dollar.
This was confirmed by currency traders located at Marina and the Murtala Muhammad Airport, Lagos.
"Demand for the dollar has weakened considerably as many people think it is over-priced on the parallel market. We expect the naira to appreciate further next week,” a currency trader who pleaded to remain anonymous said.
A senior official of the Central Bank of Nigeria (CBN) had told THISDAY that the black market rate was not a true reflection of the actual value of the naira.
“You don’t measure the value of a country’s currency with black market rate,” he said.
However, the CBN yesterday clarified that it had not stopped the allocation and sale of foreign exchange for purposes of paying school fees and settlement of medical bills overseas.
To this end, the Director, Corporate Communications, CBN, Ibrahim Mu’azu, urged members of the public to disregard any contrary information in respect thereof.
“Despite assurances from the CBN, some persons have continued to suggest that the Bank had stopped the allocation of foreign exchange to Nigerians seeking to pay school fees and medical bills overseas. The Bank urges members of the public to discountenance such misinformation.
“All genuine users desiring to obtain foreign exchange for the above-mentioned purposes are hereby urged to freely approach their banks with their requests and appropriate documentation,” he explained in a statement yesterday.
Meanwhile, the Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, has advised the federal government to implement policies that would stimulate foreign direct investments (FDIs) in the country so as to grow its sources of foreign exchange inflows.
This, he pointed out would help address Nigeria’s perennial exchange rate crisis.
According to the CBN, the country’s current monthly import bill is about $4 billion, while earnings are less than $1 billion.
“In effect, the focus of policy makers should be rather on encouraging the expansion of sources of forex supply against the current focus of demand management,” he added.
He however stressed the need for the adoption of a flexible exchange rate, which he described as a silver bullet that could be effective for both demand management and supply expansion.
Chukwu further argued that when the price of a currency is adjusted to reflect its earnings capacity, citizens’s capacity to consume imported goods would automatically reset at a lower level as they can no longer afford many of the non-essential imported items.
“Irrespective of the so called inelastic demand of Nigerians for imported goods, once the currency is devalued and their naira income is not adjusted in the same ratio, citizens will reorder their priorities and eliminate items that they can no longer afford.
“In many instances, citizens will look for local alternatives to the imported items and shift their patronage to such local substitutes. The increase in demand for the local substitute will spur increase in production and possible improvement in quality,” he added
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