Commodity prices not changed despite oil price drop

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Commodity prices not changed despite oil price drop

With almost a month since international oil prices dropped to below $60 the lowest in five years and triggered a significant reduction in local pump prices from Rwf1,030 to Rwf895 per litre of petrol and diesel.

However, it looks like consumers will have to wait a little longer before this can actually happen as commodity prices still remain unchanged despite reduction in the cost of transport, at least from the fuel component.

Rwanda Utilities Regulatory Agency (RURA) has promised a downward revision of transport rates to reflect the current situation.

A mini market survey conducted by this reporter in the City of Kigali however revealed that the market has not responded to such promises with some business analysts indicating that it might take long before the economy starts benefiting from a reduction in fuel prices.

“While it’s true that transport costs largely affect the way commodities are priced, we need not underestimate other factors such as demand and supply the key drivers of market prices.

This is indeed true because transport affects the supply from the point of production to the point of consumption and depending on the cost of the transport; it affects the final price that the consumer will have to pay.

Therefore, despite fuel price  going  down, commodity prices could remain high, at least  in the  short run, simply because some shops and markets are for instance  still selling old stock,” says Felicite Nyampundu, an economist at Business Professionals Network.

She added that the same goes for production and the purchasing power along the value chain where by a reduction in pump prices may not respond to production of commodities in the short run. With all these factors in play, we might have to wait longer before we can see a significant impact in commodity prices

This is indeed true because transport affects the supply from the point of production to the point of consumption and depending on the cost of the transport; it affects the final price that the consumer will have to pay.

Therefore, despite fuel price  going  down, commodity prices could remain high, at least  in the  short run, simply because some shops and markets are for instance  still selling old stock,” says Felicite Nyampundu, an economist at Business Professionals Network.

The market survey revealed that a kilogram of bananas costs Rwf200 in Nyabugogo and Nyamirambo markets; unchanged since last year.

A kilogramme of beans in Kimironko and Remera markets also remain unchanged at between Rwf500 and Rwf550.  Neither has the price of fresh peas nor that of Irish potatoes reduced despite a drop in fuel prices.

From our survey, fresh peas go for Rwf1, 500 per kg while millet and maize flour costs Rwf1, 300 and Rwf800 respectively. Rice also remains unchanged at between Rwf700 and Rwf1, 000 in most city markets depending on the quality and type; while beef goes Rwf2, 300 a kilo.

Daphne Uwitonze, a vendor in Nyarugenge market said, they are also optimistic about low fuel prices.

“Of course we expect transport fares to drop which means the cost of transporting for instance Irish potatoes from Musanze District to Kigali will automatically reduce, allowing us to reduce the prices.”

Uwitonze’s optimism follows the announcement by Patrick Nyirishema, the Director-General of Rura, who recently said that the authority had assigned a team to work on the new tariffs.

If this happens we could see prices for most commodities follow suit.

 

About the author

Olive Ndaka is the Junior Editor for RwandaEye. An investor and young entrepreneur, she is a quick learner and has contributed many articles for RwandaEye in Kinyarwanda.

More posts by | Visit the site of Ndaka

 

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