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Mr Balogun Abiodun is a Business expert with over 20 years of experience in Business Management. He is a Business Instructor at the Lagos State University International School. He holds a first Degree in Business Administration at the Lagos State University(LASU) and his Second Degree at the Lagos State University(LASU) and Olabisi Onabanjo University(OOU). He is currently doing his PhD at Leadcity University and has gained insight into retail, Manufacturing, market trends, and economic fluctuations.
In this interview with Abiodun Saheed Omodara, he speaks on the factors driving high market prices, Naira, and the dollar exchange rate, among other economic trends.
Excerpt:
Recently, we have seen the Nigerian Naira appreciate against major currencies. What's your take on this?
The appreciation of the Naira against major currencies does not always translate to lower prices of goods in the markets. There are several factors at play that contributes to the persistence of high prices despite currency appreciation. One major factor is inflationary pressures within the economy.
When the value of the Naira increases, it can lead to a decrease in the cost of imported goods, as it becomes cheaper to purchase foreign currency. However, if the overall cost of production within the country remains high due to factors such as rising inflation, transportation costs, or electricity tariffs, businesses may not be able to pass on the savings from a stronger Naira to consumers.
Additionally, businesses may also seek to maintain profit margins by keeping prices high, especially if consumer demand remains strong. This can create a situation where prices of goods remain elevated even as the currency strengthens.
How do you think businesses should navigate this situation to ensure both profitability and affordability for consumers?
In navigating this situation, businesses need to carefully analyze their costs structures and pricing strategies. It is essential for businesses to streamline their operations, negotiate better deals with suppliers, and seek efficiencies in their production processes to mitigate the impact of high costs on their bottom line.
At the same time, businesses need to strike a balance between maintaining profitability and ensuring affordability for consumers. This may involve implementing targeted pricing strategies, offering discounts or promotions, or exploring alternative sourcing options to control costs.
Businesses can also focus on enhancing the value proposition of their products or services to justify price levels to consumers.
By highlighting quality, innovation, or unique features, businesses can differentiate themselves in the market and justify their pricing decisions.
Ultimately, businesses need to adapt to the changing economic landscape and consumer preferences to remain competitive and sustain growth in the long term.
Do you think government policies can play a role in addressing the challenge of high prices despite currency appreciation?
Government policies certainly influence the business environment and impact on prices in the market. One way the government can address high prices is by implementing measures to tackle inflation and reduce production costs for businesses.
Policies that focus on improving infrastructure, enhancing the ease of doing business, and promoting a competitive business environment can help businesses lower their operating costs and, in turn, reduce prices for consumers.
Additionally, targeted interventions such as subsidies for essential goods, price controls on key commodities, or incentives for domestic production can also help mitigate the impact of high prices on consumers.
However, it is essential for government policies to strike a balance between addressing price stability and ensuring a conducive environment for businesses to thrive. Overly restrictive measures or interventions can hinder market dynamics and distort pricing mechanisms, leading to unintended consequences.
It is important to note that government policies should be strategic, well-calibrated, and aimed at creating a sustainable and competitive business environment that benefits both businesses and consumers.
The FCCPC says that multiple taxes are among the causes of increase in market price, what can you say?
It is important to recognize that price increases are influenced by a combination of factors beyond currency exchange rates and multiple taxes as claimed by the FCCPC.
Inflation plays a significant role in driving up prices across various sectors. Inflation erodes the purchasing power of consumers and can lead to higher production costs for businesses. Even with a stronger Naira, if inflation remains high due to factors such as supply chain disruptions, rising energy costs, or government policies, businesses may struggle to keep prices in check.
Supply chain challenges and logistical constraints can also contribute to price increases. Delays in transportation, limited availability of raw materials, or bottlenecks in production processes can all lead to higher costs for businesses, which may be passed on to consumers irrespective of currency movements.
Market competition, demand-supply dynamics, and consumer behavior play a pivotal role in shaping pricing strategies. Businesses may adjust their prices based on market conditions, competitor actions, or consumer preferences, regardless of currency fluctuations.
Therefore, while the appreciation of the Naira against the Dollar can have some impact on import costs and overall price levels, it is just one piece of the puzzle in the broader pricing environment.
Do we now say multiple taxes are not a barrier to the market price?
The impact of multiple taxes on businesses cannot be overlooked. Taxes levied on businesses, such as value-added tax (VAT), corporate income tax, customs duties, and other regulatory charges, can significantly add to the cost of doing business. These taxes contribute to the overall cost structure of businesses, affecting their pricing decisions and potentially leading to higher prices for consumers.
The complexity and multiplicity of taxes in Nigeria can create administrative burdens for businesses, leading to additional costs associated with compliance, record-keeping, and reporting. These compliance costs can further strain businesses' resources and influence their pricing strategies.
While the appreciation of the Naira against the Dollar may offer some relief in terms of reduced import costs for businesses reliant on foreign inputs, the presence of multiple taxes can counteract these benefits by increasing the overall tax burden on businesses.
It is crucial for policymakers to evaluate the impact of taxation on businesses and consumers holistically. Simplifying the tax system, reducing compliance costs, and ensuring transparency in tax administration can help mitigate the burden of multiple taxes on businesses and potentially alleviate upward pressure on market prices.
Addressing the challenges posed by multiple taxes requires a collaborative effort between the government, businesses, and regulatory authorities. By fostering a tax environment that is conducive to business growth and competition, stakeholders can work towards promoting price stability, fostering economic development, and safeguarding consumer interests in Nigeria.
What advice would you offer to businesses and consumers in navigating the current economic landscape with high prices despite currency appreciation?
For businesses, the key is to remain agile and responsive to market dynamics. By focusing on cost optimization, value creation, and strategic pricing decisions, businesses can weather the challenges of high prices and maintain their competitiveness. It is also crucial for businesses to stay informed about economic trends, consumer behavior, and regulatory changes to anticipate and adapt to shifting market conditions effectively.
For consumers, it is essential to comparison shop, look for discounts or promotions, and makes informed purchasing decisions based on value and quality.
By being mindful of their spending habits and exploring alternatives, consumers can mitigate the impact of high prices on their budgets. Navigating high prices despite currency appreciation requires a combination of strategic planning, adaptability, and informed decision-making for both businesses and consumers.
