• Manufacturers urge govt to fix real sector problems to encourage price reduction
• ‘Cost of local raw materials, OpEx still going up daily, we cannot keep up’
• Oligopoly in cement, household items maintain price stronghold
Despite naira maintaining a steady rise against foreign currencies in the foreign exchange market, prices of goods and food items are still high in most markets and retail outlets.
Notwithstanding the concerns and complaints by many consumers about the affordability of many goods, the hope of getting the government to sanction sellers that engage in price hikes has been dashed by the Federal Competition and Consumer Protection Commission (FCCPC).
Many consumers worry that prices have remained sticky with no indication of prices getting better, considering that the same goods were adjusted daily in line with price movement in the exchange rate, but the same is not being witnessed with the naira making a recovery.
Falling short of saying ‘Nigerians are on their own’, the Commission said yesterday through its X handle that while it sympathises with the masses, price control is not a part of its mandates.
It said: “While we recognise that the Commission cannot directly control prices, we are committed to safeguarding consumers’ interests and ensuring fair market practices, necessitating fair pricing.”
This comes as the existence of oligopoly in some sectors seems to be conspiring against price reduction despite the rising value of the naira.
In cement manufacturing, only a handful of manufacturers are in this sector. The price of cement is hovering between N8,500 and N7,500. It was around N5,500 per bag before it jumped to N14,500 and now settles around half of that.
Prices of tiles that were between N2,700 is now sold for N5,800 and above depending on the design and the maker. Prices of nails and paints are prohibitive.
On household utensils such as fridges, cookers and air conditioners, a price reduction is yet to be implemented.
Double-door fridges range between N250,000 and N500,000 while single-doors are sold for around N150,000.
A four-burner gas cooker is sold for N145,000 while a cylinder of 12.5 kilogrammes of cooking gas goes for N14,500.
The prices of onions, hot pepper and tomatoes seem to be going down as a bag of onions now is sold for N31,000 while a basket of tomatoes is now N10,000.
Aminat Lawal a seller of yam in Kubwa, an Abuja suburb, said transport logistics are largely responsible for the rise in the prices of local food such garri, yam, yam flour, corn, millet, and palm oil.
“The prices of yam, palm oil, beans and other local food items are expensive because of transport costs. The cost of moving food items from agrarian states such as Benue known for yam production, Jos which is noted for vegetables, and Taraba and Adamawa for beans are battling with high costs of transportation. Apart from the high cost of petrol, lorry and car spare parts are very expensive. It is the final consumers that bear the brunt. All the costs are inserted into the final price. Naira gaining strength will make meaning in the prices of imported rice, baked beans, vegetable oils and other high-end food items of the upper class of the Nigerian society.”
A wholesale dealer in the provision at the Wuse and Suleja markets, Mr Benjamin Obayi said the prices of his items are not expected to come down except the government brings back the oil subsidy regime.
“There is no way the prices of goods and commodities will come down because of the crash of the dollar against the Naira except if the government brings back the subsidy. Transporters and manufacturing companies increase prices because of the high cost of diesel and petrol for production and transportation,” he stated.
On his part the President, Institute of Fiscal Studies (IFS), Mr Godwin Ighedosa informed that for food items to be affordable once again, there is a need for the government to tackle insecurity.
Chief Executive Officer (CEO), Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said grace should be extended to manufacturers and distributors as there is usually a lag when changes such as these occur in the cost of input, raw materials or inventory and when it would translate in the cost of retail prices.He pointed out that many supermarkets and wholesalers have already bought/paid for goods months ahead at high prices and until they exhaust the old stock, they cannot drop prices overnight so as not to run at a loss. “If they bought goods that will last them two months or more and prices drop midway, we cannot expect prices to drop overnight. FX just started dropping, let us give it some time till when they restock.”
Reacting to the argument that prices were jerked up immediately when the dollar was at N1,950, he explained that producers and distributors have to raise prices to hedge against losses when they try to restock so they don’t run at a loss.
“For items like local foodstuff, the impact of FX on them is indirect in terms of diesel, transport and seed/feeds cost but they also hedge against inflation by raising prices so that they can afford living costs. FX is a systemic issue and they want to be able to afford other things being sold in the market. The rains are also coming so this might help to bring down the cost of food items more,” he said.
He went on to add that price reduction would most likely come from producers and manufacturers but for most of them, their import cycle is 90 days or more. “FX just started dropping and it would be a while before we start feeling the impact. There are some essential products that the government can directly engage the manufacturers on reducing prices, in addition to waiting for the market to adjust on its own.
“The government should step in, engage the producers and through the latter, engage major distributors. These kinds of interventions are not out of place and happen all over the world,” he said.
For the former chairperson, Manufacturers Association of Nigeria (MAN), Apapa branch and Executive Director, Universal Luggage Ltd, Frank Ike Onyebu, until most of the problems that hinder manufacturing are solved, prices cannot come down.
He said that when FX started reducing, most people did not expect it would come down and had bought materials and produced when the dollar was high.
He added that until these inputs are sold off, prices cannot go down overnight. “Also, there is a lot of uncertainty and manufacturers are afraid to absorb temporary losses as prices can shoot up overnight again. Who then will bear these losses?”
Lamenting that the cost of raw materials is still very high, he said local materials are now almost at par with imported raw materials. “Manufacturers are usually the last people to increase prices because of stiff competition. Necessities like foodstuffs are usually the first to increase prices because they are essential commodities. Most of us that produce non-essentials cannot afford to increase prices anyhow because, in the scale of preference for the average Nigerian, we would lose.”
He revealed that the high cost and poor electricity remain another major factor in the high cost of production. Revealing that no manufacturer depends on the grid to produce, he said the high tariff is a big burden also affecting production. “People are happy that the dollar is coming down and we are too but is that the only factor in production? If the dollar price remains steady (uninterrupted for a year) or even goes lower, it is to our joy and benefit but we are realistic enough to know this may not happen. We have lost faith in the system. Government policy flip-flop is also another issue we deal with. One policy today that we plan with, another one tomorrow that will upend whatever we have planned and we have to start running up and down for solutions.”
Revealing that the cost of local input has risen sharply instead of going down, he pointed out that the cost of a key raw material- recycled plastics, has doubled overnight because of increased demand.
“We were asked to look inwards and reduce imports as much as possible, which we did but it is backfiring on us now. Many companies that use plastic had to dump virgin plastics because of FX costs that shot prices sky-high and depend on recycled plastics. Now, a tonne of recycled plastics is about N450-500, 000, from N250, 000 while broken crates that used to go for N350 per kg now go for N750 per kg. This is even when you see to buy as competition for these materials is tough. Prices of materials are not coming down, how then are we supposed to reduce prices?”
He added that the recent tariff increase is a blow to the real sector and the government needs to reconsider. “There is a lot of inefficiency with the discos that we absorb and have gotten tired of complaining about. We pay about N80 million monthly for light and still augment with millions of Naira worth of diesel and petrol to run generators. With this increase, we may most likely have to pay more, and it is not like the light situation is better, it is worse. Who will absorb these costs? When we have problems with the light, you would expect that the DisCo covering this axis would be eager to come to fix it as we collectively generate millions for them monthly, but the reverse is the case. We have to run after them to fix the issue, give them money to buy the parts needed and pay ‘labour money’ to get it fixed quickly. I ask again, who will absorb these costs? The cost of labour has also gone up, we cannot pay our workers minimum wage, or else nobody would show up to work. How do we expect the cost of goods to reduce?” he queried.
“Transportation and logistics is also another major headache. To clear goods at the port costs millions of Naira, and to move said goods from the ports to where they are needed costs millions of Naira. When moving said goods, the amount of legal and illegal taxes we pay costs millions of Naira as well and the government cannot say they are unaware of what their state and non-state agents do to us on the roads because they were empowered by the same government and have become a thorn in our flesh. How then do we expect the cost of goods to reduce?”
He added that if the problems in the sector are not holistically and truthfully addressed, prices would go higher, despite falling FX.
She, however, went on to add that the cost of raw materials, local and imported, is still very high and as long as they remain expensive, it would continue to affect production. “Diesel that they are saying has come down is still N1,300; how can we expect prices to come down with that high cost? Tariffs have tripled and power supply is non-existent, transport and logistics costs are alarming, all these contribute to the high cost of goods. Once all the factors of production don’t align, we would have this problem as we are experiencing. Yes, the dollar price coming down is a relief, but we all know this is not the only factor that affects production. Let the other factors be fixed and prices would come down,” she said.
While sympathising with Nigerians, FCCPC admitted that the rising cost of essential goods impacts consumers’ well-being and economic stability, stating that arbitrary price increases stemming from untoward practices like price gouging and conspiracy to manipulate supply violate existing laws.
It added: “The Commission will not hesitate to invoke Section 17(s) of the Federal Competition and Consumer Protection Act (FCCPA) 2018 against any perpetrator of such acts. This section prohibits obnoxious trade practices and unscrupulous exploitation of consumers.”
Even when it admitted its helplessness, the FCCPC said it remains committed to promoting fair competition, protecting consumers, and fostering a regulated marketplace.
It then added: “We appreciate citizens’ vigilance and encourage active participation in reporting any violations. Together, we can create an environment where consumers are safeguarded and businesses operate ethically within the provisions of existing laws.”
On the idea of establishing a price control agency, experts have cautioned against such a move. They hold that price controls are dangerous because such bodies could politicise prices.
They believe that this will make it harder to adjust the prices to meet realities and that the country will end up with oligopolies and state capture.
At the moment, marketers confront many obstacles such as checkpoint taxes, and bad roads while transporting food items to the cities.
They are also made to confront middlemen and women, profiting from arbitrage by exploiting an asymmetry of information and access.
THEGUARDIAN
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