Commodity market prices in Nigeria are being stimulated by a reflex action dictated by fluctuating oil prices and crumbling exchange rates that put more pressure on the Naira, a report by Financial Derivatives Company (FDC) has shown.
The current FDC report indicates that Brent Crude price is down by $0.07 per cent to $76.41pb as against $76.48 previously recorded. The survey also shows that Nigeria’s external reserves slipped by 0.78 per cent to $47.43 billion, as against $47.50 billion recorded earlier.
Other indicators show that the local currency (Naira) remained flat at N306 (official rate) to $1, while the parallel market still trades at N365 in spite of the slip in external reserves and fuel prices, sustaining a lax momentum in the face of overwhelming pressure posed by external forces.
Meanwhile, the commodity market has been reacting to the imbalances, owing to the fact that market forces naturally generate ripple effect across the value chain. Domestic commodity prices captured in the FDC report show that more than 100 per cent increase in prices of consumer goods like palm oil, soya beans, yams, tomatoes, gari, flour, sugar, rice and beans, among others, has been recorded between 2017 and 2018.
The report, which based its survey in Lagos, show that 25 litres of palm oil, which was sold N10,000 in 2016 and early part of 2017, is now sold at N25,000, just one year after; as recorded in May.
Also, 50kgs of tomatoes was sold at N8000 in the last two years, later increased to N15,000, and now sold at N28,000; 50kgs of rice was sold at N13,000 in the last two years, later increased to N16,500, and now sold N22,000.
The report captured soya beans as a commodity in focus, considering its enormous nutritious and market value with the commodity’s prices increasing from $377 (N137,605) to $384 (N140,160) per 1 metric tonne.
Total global production (2016/2017) of soya beans, according to the report, was 347.1m tones, with an estimated value of $130.8bn, a 10.8 per cent increase over 2015/2016 record.
The report also showed that diesel price in other parts of the country increased by 4.91per cent to N205.67 per litre in May, 2018; even though it is sold at N220 per litre in Lagos and surrounding environs. Before now, prices of the commodity varied according to distance and availability, ranging from N180 to N200 or more, as the case may be.
Clearly, the commodity market has been under the grips of happenings in the international market; what plays out at the macro level of the economy, sends signals to the micro level up to the last consumer.
In a bid to offer some solace, the CBN has been intervening in the exchange rate crises by injecting certain amounts of the foreign currencies to cushion the effects of their scarcity in key sectors of the economy.
The FDC report indicates that the CBN has intervened with $541.41mn this month (June) so far, but warned that “Increase in Fed funds rate will put additional pressure on the naira.” Understandably, over flooding the market with dollars and other foreign currencies would rather increase or sustain the current inflation rate.