Economist compares purchasing power of Naira to Ghanaian Cedi’ - NIGERIAN TRIBUNE
A university lecturer, Dr John Gatsi of the University of Cape Coast, Ghana has explained that the cost of living which is based on cost of food items and other basic needs, is lower in Nigeria compared to Ghana because most of these items are now being produced in Nigeria which makes their prices cheaper domestically.
He further said the currency does not define the value or strength of the economy, adding that though cost of living is lower in Nigeria and higher in Ghana, the Ghanaian Cedi remains stronger because Ghana is yet to limit importation of such items.
Economists describe cost of living as the amount of money needed to maintain a certain level of living, with basic expenses such as housing, food, taxes and healthcare.
It is often used to compare how expensive it is to live in one city versus another locale. A high cost of living means that a smaller salary can buy so much in a city where it doesn’t cost a lot to live, while a large salary can seem insufficient in an expensive city.
Speaking to Nigerian Tribune in Ghana on Thursday at a Training workshop facilitated by FBN Holdings in conjunction with FirstBank, the Ghanaian scholar attributed the situation to different economic fundamentals between the two countries.
Specifically, Gatsi said, for example, while the Nigerian government has taken firm stand against importation of certain products ranging from pharmaceutical products to rice which is helping prices of such items, Ghana is still importing most food items which have kept prices high.
His words: “It is possible to get these items cheaper in Nigeria and higher in Ghana despite exchange rate differences. Certain pharmaceutical products are not imported; rice for example is homegrown now in Nigeria. All those variables influence the pricing regime and living conditions in Nigeria.”
Explaining further that it is not out of place for Nigeria to have such huge economy, higher inflation with better standard of living whereas its currency remains weaker than the Ghanaian Cedi, Gatsi noted that there are still a number of economic factors that caused this scenario.
Nigerian Tribune checks revealed that the annual consumer price inflation fell to 11.2 per cent in October, from 12.2 per cent in September, while for the eighth consecutive time since January this year, Nigeria’s inflation rate dropped to 15.98 per cent in September, from 16.01 per cent recorded in August, according to the National Bureau of Statistics. The October inflation rate is being expected.
According to the university don, fuel prices for instance have gone up in Ghana a number of times, but in Nigeria, it has remained stable especially since the first quarter of 2017.
“This has serious implication for transport fares which affect almost everything. We have also seen some adjustments in other sensitive areas. So it depends on the level of economic activities going on in Nigeria relative to Ghana,” he stated.
Gatsi emphasized that it is possible for the Ghanaian Cedi to be stronger than the Nigerian Naira, while the Nigerian economy remains stronger than the Ghanaian economy, stressing also that it is possible for the inflation rate to be higher in Nigeria, compared to Ghana, yet cost of living is better in Nigeria than Ghana.
He said this is because “what constitutes cost of living on the average level is the cost of food items and most of these items are produced in Nigeria which makes their prices cheaper domestically. Therefore, the average cost of living in Nigeria is bound to be lower than in Ghana. That is the basic difference,” he stressed.
A number of Nigerians spoken to expressed concern on what they described as the purchasing power paradox. Checks reveal that purchasing power or the amount of goods and services that one unit of money can buy is lower in Ghana (which ought to reflect high inflation) and higher in Nigeria (lower inflation regime), yet the Ghanaian currency is stronger at Eighty Naira to one Cedi (N80 =GHN Cedi 1) officially, as there are no parallel exchange rate markets in Ghana.
A Nigerian lady, who prefers to be called Adeola Yusuf, said from her experience, each time she wants Naira, it is better to convert Cedis to Dollars, and then from Dollars to Naira, than to convert Naira directly to Cedis because the Naira will be priced lower against the Cedi.
Also, Mrs Chinenye Anuforo who travelled to Ghana this week, said she bought a plate of cooked Indomie for an equivalent of N400 (about five GHN Cedis), the same delicacy she usually buys at the cost of N200 in Nigeria, yet the Cedi is literally stronger than the Naira.