Hi, welcome to another issue of my newsletter.
It has been a busy week for me. And the next few weeks looks more of the same. These coming weeks would have shorter notes as I won't have the luxury to write extensively as I use to.
This is the beginning of short notes. I'd write short notes on topics I find interesting enough. Mostly unrefined - I hope you bear with me.🤗🤗
Arbitrage is the price difference when a good sell at different prices in the market.
It is an indication that there is a missing piece(usually information) yet to be reflected in the price of the good.
It could because of an artificial pricing mechanism such as subsidy or price-fixing.
A case of price-fixing is the rate at which a dollar is sold in Nigeria. The “official” rates are around 400ish to a dollar, while the market rate is north of 450 to a dollar.
The difference is because the “official” rate is pegged and not determined by the market forces (supply and demand).
Interestingly the same happens with fuel. The government pays for fuel subsidy, making the price fixed and cheaper than the global prices.
Somehow, the fuel the government paid for finds its way to neighbouring countries and sold for handsome profits.
That wraps it up for the week. See you next week.
Succinct 👌