Nigeria’s sees drop in price of key food items

Nigeria is witnessing favourable swings in the price of some key food items according to a survey by the economists at Financial Derivatives company. The drop in the price of staples will most likely lead to a marginal fall in inflation when the official count is published next week. It is perhaps the one good news about the economy in a long time.

A report by Financial Derivatives showed that the price of a basket of tomatoes fell almost 50% from between N45,000-40,000 in May to between N20,000-25,000 in June while the price of a basket of pepper dropped from N20,000 in May to N17,000 last month.

The price of a basket of maize also saw a drop, falling from N18,200 in May to N12,800 in June.

A bag of rice which sold for N15,000 in May is now selling at a reduced price of N13,000 while the price of beans remains unchanged at N16,000.

It is unclear if the price drop is supply or demand led but Financial Derivatives economists seem to believe that the latter is the case.

According to them, “Consumers increased their demand for products (in the past) out of unavailability and fear that prices will continue to skyrocket. But by April through May, aggregate demand curve had shifted inwards because of the income constraints. This coincided with the month of May’s subsidy removal (slash in purchasing power) which altered consumer behavior. The game changer, however, was the new exchange rate policy which effectively reduced disposable income by 40%.”