Federal Competition and Consumer Protection Bill
Excerpted from sections of the 8th Senate 3-Year Report: Reviving The Economy, Creating Opportunities For Nigerians
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The shift from public sector provision of infrastructure and other services to the private sector has increased the need to ensure that there is no abuse of dominant positions in the market.
The Federal Competition and Consumer Protection Bill repeals the Consumer Protection Act to create the Federal Competition and Consumer Protection Commission, and the Competition and Consumer Protection Tribunal.
The first of its kind in Nigeria, the bill will for the first time supervise and promote competition by prohibiting activities which lessen competition and create private monopolies, control mergers, acquisitions and protect consumers.
Competition between businesses has been shown to increase efficiency, expand choice for consumers and drive down prices.
Consider the following:
In the United States, in a contemporaneous review of the deregulation of natural gas, long-distance telecommunications, airlines, trucking and rail, it was reported that real prices dropped by at least 25 percent and sometimes close to 50 percent within ten years of deregulation in those industries. At the same time, there were improvements in the quality of service.
Pro-competition policy developments in New Zealand and the United Kingdom are estimated to have added around 2.5 percentage points to their employment rate over the period 1978-1998. Reforms promoting private governance (i.e. privatization) and competition tend to boost productivity.
In India, economic reforms comprising liberalization, privatization and pro-competition policies have been introduced since the early 1990s. As these reforms took effect, economic growth surged and consumer sovereignty asserted itself. There are reasons to believe that developing economies tend to be more vulnerable to anti-competitive practices than developed countries. Thus, it may be particularly important to protect consumers in developing countries against cartels, monopoly abuses, and the creation of new monopolies.
We have already seen how the work of the Consumer Protection Council has helped to curb some dubious business practices. We can expect to see more of this when the competition (anti-trust) law comes into operation.
Competition between businesses has been shown to increase efficiency, expand choice for consumers and drive down prices. A World Trade Organization (WTO) Report observes that:
“There are reasons to believe that developing economies tend to be more vulnerable to anti- competitive practices than developed countries. The reasons include high “natural” entry barriers due to inadequate business infrastructure, including distribution channels, and (sometimes) intrusive regulatory regimes; asymmetries of information in both product and credit markets; and a greater proportion of local (non-tradable) markets. Thus, it may be particularly important to protect consumers in developing countries against cartels, monopoly abuses, and the creation of new monopolies...”
Competition law is based on clear insights from economic history that public interest is best served by free competition in trade and industry. Competition amongst producers and suppliers improves quality, increases efficiency and results in lower (“more competitive”) prices.
Competition laws attempt to prevent anti-competitive practices and unreasonable concentrations of economic power that stifle, restrain or weaken competition. Global research suggests that real prices drop by between 25-50% because of competition and deregulation in previously uncompetitive industries and quality of service also improves. Research also suggests an approximately 2.5% increase in employment as well as significant economic growth (India, for instance, grew by an average post reform differential growth of 5%).
Federal Competition and Consumer Protection Bill
The Bill … seeks to promote competition in Nigerian markets at all levels by eliminating monopolies, prohibiting abuse of a dominant market positions and penalizing other restrictive trade and business practices. In promoting competition, not only will monopolies and undue profits be prevented, it will also enhance efficiency in goods and service delivery.
The Bill may impact to the Nigerian economy in the following ways.
- A 10% reduction in prices in uncompetitive sectors and a 1% economy-wide price reduction, both of which manifest as income effects, especially for poor households;
- The creation of an additional estimated 320,000 jobs over a 5-Year period, with average job creation of around 64,000 a year; the total income effect is estimated at an average of ₦148bn yearly, and ₦742bn over the full 5-Year period; and
- A resultant reduction in poverty through greater employment and lower prices may precipitate about 12% reduction in relative poverty in Nigeria over a 5-Year period.
The passage and assent of the Federal Competition & Consumer Protection Act will create a competitive market, protect the welfare of consumers by providing consumers with competitive prices and product choices, and prohibit restrictive business practices that distort or constitute an abuse of a dominant position of market power in Nigeria. This will therefore, promoting economic efficiency and will lead to better pricing, faster employment generation, better productivity, increased consumer savings, faster economic growth and increased investment.
Based on global research evidence, it is conservatively assumed that the proposed enactment of a competition law in Nigeria may result in a 10% reduction in prices in uncompetitive sectors and a 1% economy-wide price reduction, both of which manifests as an income effect, especially for poor households. It is also estimated that it will spur 318,021 additional employments over 5 years, with average yearly job creation of 63,604 and total income effect estimated at an average of N148.30billion yearly and N741.52 billion over a 5-year period. The resultant reduction in poverty, greater employment, and lower prices may precipitate an 11.8% reduction in relative poverty over a 5-year period.