Some nights ago, I went to buy a drink to clear my head. I really needed to. I think I was on a project for so long my head ached.
At the mini-mart which is a combo of a pharmacy and an upcoming super-market, this man in his thirties kept insisting,
“Oga, the last time I buy this thing, na N1,000. If e go increase, e suppose increase to N1,200 last.”
“Abeg, where you buy this drug?”
“Here. For this your shop.”
“How much you say you buy am again?”
“No be here you buy am. I never sell this me’cin for N1,000. Na N1,200. Now e don rise to N1,500 because of exchange rate.”
“Oga! How? How e go rise like so? If something wan put price, e suppose be N100 increase.”
This last statement was so funny but I was careful not to receive a punch. Nonetheless, I snickered. Really! I had my drink and left. On my way home, I realized that either the man arguing this isn’t a business person, doesn’t care about the cost of production (why should he? lol) or he’s set to pull a funny prank.
You don’t calculate cost of production on assumption(s); you never do.
It’s as simple as this: If it costs $5 to manufacture an item at an exchange rate of N200 per $1, that’s N1,000. You add your transportation/logistics cost, phone bill, miscellaneous and perhaps, your production cost is upped to N1,200.
You decide to make 25% profit. You checkmate at N1,500.
Then, Nigeria’s exchange rate decides to go up, up, up [and possibly away] to N250 per dollar.
You go back to your calculator or drawing board and do $5 x N250 = N1,250. Then, you add your transportation/logistics cost, phone bill and miscellaneous and you’re up to N1,450.
Oga! How? How e go rise like so? If something wan put price, e suppose be N100 increase. Click To Tweet
You decide to make 25% profit. You checkmate at N1812.50. Because we don’t use kobo here in Nigeria, except in our textbooks, you dash N0.50 to CBN and you set your price at N1813 or N1812.
I don’t see how that translates to N100 increase ceiling. I see no how even if you set your profit percentage at 20%. If you see, please epp me. Epp my eyesight. I’m too shortsighted to hold this in my proximal vision.
Whoever brought this “N100 increase ceiling,” hmmm, what business class did you attend?