Quick one on price rises
Got this packet of 20 N95 masks a week ago at ₦12,000, for my family and team members. That comes to ₦600 per mask.
Prices have now gone up to as much as ₦4,500 per mask since Nigeria got its index case of the coronavirus.
Exploitation or capitalism?
Last Monday was my first day at work after three weeks off sick, and coincidentally, my team published a report that I’m rather proud of on the same day, about the effects of COVID19 on Nigeria’s economy.
Looking at the raw data they compiled, I went shopping. The stories thatI’m hearing about a sharp rise in the price of masks bear the data out, but what I find interesting is people, from an OPEC country, shouting about price increases. Some of these same people, a month ago, were wishing war in the Middle East so oil prices would rise.
Wake up people it’s called capitalism, and in Nigeria, we run the naked unfiltered kind. As the late Anthony Bourdain said about this country, “Nigeria is capitalism in its pure form, completely unregulated.”
Why then should the price increases surprise anyone?
The moment our index case was announced, there was panic, and people made a run for the available masks. Sellers saw an opportunity, some hoarded, created artificial scarcity, which raised the premium on masks, and people became more willing, if not happy, to cough out the dosh. This is something that happens in this country all the time.
Think about how prices of rams shoot up each time a Muslim Eid comes around.
Think about how prices generally shoot up during the Christmas break.
Is it people being wicked? No, it’s people obeying incentives. We have a huge infrastructure deficit, and this makes it difficult for sellers to replenish once their stock is depleted. Added to that is that our government is not in true control of all the territory within our borders, which increases the risk associated with trying to replenish. Naturally as a result, that risk, as well as the losses due to crappy infrastructure, are passed on to the consumer.
This is true of rams.
This is true of Christmas rice.
This is true of our 12% (and rising) post border closure inflation rate.
This is true of masks.
It doesn’t matter how many economically illiterate government officials order the price of rice to remain below ₦14,000 ($39), what matters in inflation is the ability of sellers to replenish their stock.
Sadly, the ability of traders in Nigeria to replenish their stock is limited by our infrastructure deficit and an increasingly clearly stupid border closure that made our richest man move his export business to another country because 41% of his exports were lost to the border closure.
I’ll expand on these thoughts to a proper article that someone will pay for.