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The Nigerian Consumer: Between Regulation and Competition, By Uddin Ifeanyi

by Premium Times
August 27, 2018
Reading Time: 4 mins read
0

I would wager that the main lesson, especially when we erect regulatory functions in opposition to free enterprise, is the danger that our regulators may begin to substitute their own consciousness for the consumers’.


In Nigeria, the ideas cycle runs through a ten-year loop. To describe this process differently, every decade our echo chambers regurgitate an idea, and ruminate over it with an intensity that nearly always belies its lack of freshness. Anyone who has followed the discussion around the Consumer Protection Council’s (CPC) recent interventions in the market would understand this process, while being forgiven the error of conflating the sharp edges of most contributions to the debate with insight into the question of the purpose of the regulatory function in a market economy.

Yet, the conversation around the proper function of regulation in a market economy kicked off three cycles back. One of the biggest concerns on the “left” when the Ibrahim Babangida administration launched its deregulation and privatisation programme in the mid-1980s was that unfettered competition in the private sector would lead to a gouging of consumers and the denudation of workplaces. (Back to these themes later). What passes for the “right” in our space did not quite make the point, then, that properly designed, a regulatory framework could mitigate these downsides. But that far back, it was already obvious that the deregulation of an economy did not mean the absence of regulation.

Professor Stephen Littlechild, writing in a 2005 IEA/LBS Beesley Lectures on Regulation series XV, had described the approach to regulating privatised monopolies under Margret Thatcher as “competition where possible, regulation where not”. Not surprisingly, given how extensive the Thatcher government’s privatisation programme was, regulation was its biggest challenge. Again, the tension was between, on one hand, preventing public sector monopolies from turning into private sector monopolies, and continuing to foist on the customer sub-par performance, at cutting edge prices; and, on the other, from putting in place, according to Professor Littlechild, a regulatory environment that (1) protects utilities instead of consumers, (2) is “costly and intrusive”, (3) reduces “the incentives to efficiency”, while “providing the opportunity to ‘gold-plate’”, (4) distorts “outputs away from what customers themselves wanted towards what regulators wanted”, and (5) was “as likely to discourage or delay change and innovation”.

…the main aim of competition in an economy was recognised as “responding to the wishes of customers themselves, as encouraging efficient production and investment, as stimulating product differentiation and innovation, and as passing on these benefits to customers”.


Looking back at the U.K., today, and the plight of the “just about managing”, it is tempting to conclude that the regulatory environment that the Thatcher government put in place then is the source of today’s many social worries. But that would be to ignore the many years of rapid growth and industrial/economic stability that those reforms were key drivers of. Consumers were spoilt for choice. And their pockets have been better off for it. But at some cost. The increase in the return to capital employed at the expense of wages is feeding resentment in society’s rust belts. And the gig economy threatens to make rust belts of every other sector of society.

Still, this detracts from the thrust of this conversation. Of greater import was that so many years ago, the main aim of competition in an economy was recognised as “responding to the wishes of customers themselves, as encouraging efficient production and investment, as stimulating product differentiation and innovation, and as passing on these benefits to customers”. At least, this was how Stephen Littlechild put it in his paper.

No less important was The Economist’s argument, several years back, in defence of the decision by our governments to transition the economy to a private sector-led growth model. The newspaper recognised that this process was always going to succeed on the back of the regulatory infrastructure put in place to support it. But then concluded that the economy lacked the domestic competence to man or implement the right levels of regulatory interventions. It proceeded to recommend the concession of the regulatory function for the different privatised industries to foreign consultancy services based in the country ― at least until the local skills set caught up.

…if “competition” in all sectors of an economy is the greatest protection that the consumer can be offered, and “regulation” (in the sense of active market place interventions) makes sense only where competition fails, what are the lessons from this recent experience?


As background to much of the conversation around the CPC’s recent interventions, the latter two concepts matter most. First, the worry over domestic regulatory competence is once again highlighted. While the CPC may justly claim that it was responding to consumer wishes, none of its actions could be construed as supporting a more efficient production or investment outcome, boosting product differentiation and innovation, etc. These shortcomings notwithstanding, there is also this difference to the new debate: this time the far bigger concern is over the framework within which regulators should function. Do you hobble a business even as investigation is afoot of possible infractions? More crucially, if “competition” in all sectors of an economy is the greatest protection that the consumer can be offered, and “regulation” (in the sense of active market place interventions) makes sense only where competition fails, what are the lessons from this recent experience?

I would wager that the main lesson, especially when we erect regulatory functions in opposition to free enterprise, is the danger that our regulators may begin to substitute their own consciousness for the consumers’.

Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.

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