Nigeria lacks credible regimes for competition and consumer protection
Last week, I wrote about the much- talked- about Companies and Allied Matters Act, CAMA 2020. This week, I want to turn to the lesstalked- about Federal Competition and Consumer Protection Act, FCCPA, which President Buhari signed into law in 2018. Both statutes, if soundly conceived and properly implemented, could lay the legal and institutional foundations for a robust free market economy in Nigeria.
However, as I wrote last week, CAMA 2020, which focuses mainly on the incorporation and management of companies, only scratches a tip of the iceberg in terms of the problems confronting business environment and private sector development in Nigeria. Sadly, as I will argue here, the FCCPA 2018, on which, legally and institutionally, a liberal and competitive market economy could be anchored, does not cut the mustard.
For context, it’s worth noting that until President Buhari signed the FCCPA into law in 2018, Nigeria had no proper competition and consumer protection law. Indeed, in the Nigeria Industrial Revolution Plan (NIRP), published by the Jonathan administration in 2014, the government said: “Nigeria does not have an adequate set of policies, regulations and laws to control anticompetitive practices in industry.”
Furthermore, the NIRP identified key competition–related problems in Nigeria. First, it said that the manufacturing sector “has failed to undergo the critical structural transformation necessary for it to play a leading role in economic growth.” Second, it said that “some industrial sectors have evolved into oligopolies, with just a few companies controlling the majority of the market”, with some charging excessive prices for their products.
Of course, these problems arose because of the absence of a robust competition and consumer protection regime. For instance, where industries face competitive pressures, they will be forced to innovate and undergo structural transformation. But where they are shielded from competition, they will atrophy and become “zombie” industries. Equally, monopolies and oligopolies cannot emerge or survive in a country with stringent competition law and enforcement. So, can the FCCPA tackle these problems?
Well, the first point is that the act sets out laudable objectives. Its objectives include to: “promote and maintain competitive markets in the Nigerian economy”; “promote economic efficiency”; “protect and promote the interests and welfare of consumers by providing consumers with wider variety of quality products at competitive prices; and “prohibit restrictive or unfair business practices which prevent, restrict or distort competition or constitute an abuse of a dominant position of market power in Nigeria.”
As a strong believer in an open and competitive market economy, I applaud these objectives. I mean, the idea of promoting economic efficiency in Nigeria is music to my ears. It is one of the things this column stands for and one of the things I have been banging on about for the past six years, to the utter annoyance of socialists and protectionists. So, I welcome the objectives of the FCCPA 2018.
In terms of the substantive provisions, the act contains some of the usual competition and consumer protection rules. For instance, with respect to competition, it prohibits restrictive agreements, abuse of dominant position, monopoly and anti-competitive practices, such as price-collusion. On consumer protection, the act protects a wide range of consumer rights, even covering the remits of traditional principles of contract and sales of goods laws.
Furthermore, the act establishes the Federal Competition and Consumer Protection Commission (FCCPC) and invests it with wide-ranging powers to identify and tackle “anti-competitive, anti- consumer protection and restrictive practices.” What is more, the FCCPC has a remit to advise the Federal Government on “the eradication of anti-consumer protection and anticompetitive behaviour.”
So far so good! But can the act achieve its laudable objectives? Can it turn Nigeria into an open and competitive market economy? Well, based on some anti-market provisions in the act, and the adverse government policies that underpin the act, the truth is that FCCPA 2018 offers little hope of engendering economic efficiency in Nigeria. But even before we come to those counterproductive provisions and policies, there is a legitimate question about whether the FCCPC, that is, the commission, can effectively administer and enforce the good provisions of the act. Why did I say that?
Well, recently, President Buhari blamed the runaway food inflation in the country on middlemen. Speaking through Garba Shehu, his senior media assistant, Buhari said that “exploitative market behaviour by actors has significantly increased among traders”, adding: “The most worrisome are the activities of ‘corrupt’ middlemen and other food traders found to be systematically creating an artificial scarcity so that they can sell at higher process.”
If, indeed, the Presidency “found” middlemen and traders that are engaging in exploitative market behaviour or restrictive practices, what’s the FCCPC doing about it? Why has it not swung into action to identify those engaging in such practices and enforce the provisions of the act against them?
There must be genuine questions about whether the FCCPC can be effective or whether it would be a toothless bulldog. Can it act independently, without fear or favour?
I noted earlier that the Nigeria Industrial Revolution Plan states that “some industrial sectors have evolved into oligopolies, with just a few companies controlling the majority of the market.” This has resulted in the prices of some products being “among the highest globally.” But can the FCCPC act against the powerful and politically connected oligopolists?
Well, the truth is that, in the Nigerian context, the answer is no. Expect the FCCPC to bear its fangs against the “small fries” while the “big beasts” act with utter impunity.
But that aside, how can the FCCPA 2018 achieve its objectives when some of its provisions and government policies blatantly undermine those objectives? For instance, how can it “promote economic efficiency” and “protect the interests and welfare of consumers by providing consumers with a wider variety of quality products at competitive prices” when import bans and forex restrictions are the centrepiece of the government economic policy? You cannot have a wide variety of quality products at competitive prices with protectionism!
The truth is that any competition regime that denies market access for imports and forecloses markets to foreign competitors cannot promote economic efficiency or promote the welfare of consumers. Open and competitive markets drive down prices and provide incentives for domestic firms to innovate and to become more efficient and competitive internationally. As the saying goes: “industries thrive locally when they can compete globally.” So, shielding domestic industries from international competition is counterproductive.
Yet, the FCCPA is set within the economic philosophy of import-substitution. In that regard, it is utterly misleading to say the act would “promote economic efficiency” or “promote and maintain competitive markets in the Nigerian economy.” No, it cannot achieve those objectives. You cannot have a competitive but illiberal market. It is both liberalisation and contestability of markets that promote economic efficiency.
Which brings us to price controls? Recently, the Centre for Social and Economic Rights (CSER) placed an advertorial in this newspaper, rightly condemning the incessant practice of price-fixing by regulatory agencies. The CSER described Nigeria as a “free market economy”, operating “a liberal economic system.” No, Nigeria is a protectionist and dirigiste economy.
Think of it, no free market economy will legitimise price-fixing. Yet, Part XI of FCCPA 2018 gives the president wideranging powers to control the prices of goods and services. Any person who violates the president’s price regulation orders can be fined up to N50m and if it’s a company up to 10 percent of its previous year’s turnover!
Nigeria’s first-ever competition and consumer protection legislation puts price-fixing on a statutory footing. Furthermore, it exists under the shadow of aggressive protectionist and interventionist policies. It is utterly ill-suited to promoting economic efficiency.
So, FCCPA 2018 is a misnomer: it’s neither pro-competition nor proconsumers. On both, it doesn’t cut the mustard. What a wasted opportunity!
There must be genuine questions about whether the FCCPC can be effective or whether it would be a toothless bulldog. Can it act independently, without fear or favour?