Prices of goods and services are likely to rise due to some shifts in policies in the management of the nation’s economy late last year, some analysts have predicted pointing to the tariff of electricity for manufacturers and industrial users which according to government went up in a reviewed Multi- Year Tariff Order (MYTO) on the 1st of January.
Also, the Central Bank of Nigeria (CBN) increased the Monetary Policy Rate (MPR) from 12 per cent to 13 per cent.
The increment of MPR, according to CBN, was to save the naira and the economy from the negative impact of declining oil prices and mop up liquidity from the banks.
At the same time, the naira has been devalued by about 8 percent, a development that will also make manufacturers who relied on imported raw materials to pay more in bringing such materials into the country, according to Professor Garba Ibrahim Sheka of Bayero University, Kano.
Sheka, professor of economics, said these policies could have varying impact on prices, like the devaluation of Naira in the short run will affect imported commodities but the locally produced commodities may not be affected, especially those that do not depend on imported raw materials.
He said the devaluation meant that if before now you were importing raw materials of $1 million, needing N160 million, now you will be forced to sources for N180 million and above, adding: “So it means directly your costs have been increased. So it will have direct effect on the prices of the final commodity.”
Food items locally produced will not be affected in the short run unless the producers use imported fertilisers in the farms.
On the interest rate, Professor Sheka said that those who want to borrow to invest in manufacturing will have to source for fund at higher cost.
On the recent electricity tariff increment, he said it would have direct impact on the prices of commodities, adding that producers must either use power from the electricity companies or buy generators that use diesel.
“Definitely these policies will consequently increase the burden on the common people. They are the ones to suffer, because the manufacturers will transfer the costs to the consumers in order to survive.”
Sheka said, there is no short term solution to the imminent inflationary pressure but at the long run if the government will be serious on the diversification strategy and development agriculture and sources more raw material locally, the country will overcome it.
Another economist and Chief Executive Officer, Global Analytics Consulting Ltd, Tope Fasua, said prices will definitely go up in the nearest future due to the recent happenings in the economy.
“When an economy was forced to depend on importation, there must be inflation,” he said, adding: “There is tendency that whatever you are bringing, especially when the currency is devalued, there going to be an inflationary element to it.”
Fasua said apart from that there are psychology thing, some people will always like to increases prices when there even slight increment for instance in oil prices of devalue naira.