Deregulate, devalue and trust who?

The Vice President, Yemi Osinbajo, at the project commissioning event held in Lagos on 23rd May, remarked that competition and market forces of demand and supply will regulate or force down the price of petrol from the upper limit of N145, which was recently announced by the federal government.

While the principle of competition holds sway, especially when we reference the Nigerian telecommunication industry, the VP, who is a seasoned constitutional lawyer, should also be introduced to Game Theory; Prisoners’ Dilemma and cooperation – an oligopoly situation where market operators decide to cooperate rather than compete, with the knowledge that only the consumers benefit from price based competition.

While I bear no grudge on the pricing system adjustment (not deregulation, please) which is 12 months long overdue (this is argument for another time), the government however, seems to be over-relying on the sensibility, patriotism and business ethics compliance of oil importers (both major and minor). Unfortunately none of these qualities have been tested and proven in the past. It is a misnomer that depot price of AGO (diesel) has increased by 50% since the idea of PMS price adjustment was broached earlier in May. The skyrocketing price of diesel is aimed at justifying the new pricing regime for PMS, this is according to some school of thought.

By hoping that competition will solve the pricing problem, the government is leaving the masses to the whims and caprices of capitalists whose individual and collective objective is not to deepen social welfare, but to increase shareholders’ wealth. The federal government must have missed the fact that businesses have learnt the danger of engaging in price war. Price war leads more to value destruction than anything else. The United States Aviation industry learnt this lesson the hard way, in 1992, when the combined losses declared by airline operators exceeded the total profit ever declared since the inception of the industry according to the book makers.

Capitalists cannot be trusted to behave ethically without the right legal, regulatory and enforcement framework in place. This fact cannot be left unaddressed. Despite the heavy presence of anti-trust law in the “almighty” United States of America, Steve Jobs led Apple Corporation was accused of trust violation in iTunes deal with Amazon on eBook, which was discovered after his demise. Also apt is the recent Google alleged anti-trust practices in Europe, which was made public in April 2016.

As a nation, the subject of public trust in private business operations is one that we have left unaddressed for far too long. Most private sector operators do not know that there are some fiduciary duties they owe to the general populace. That is the reason the word “CABAL” has a different meaning in the Nigerian parlance. This cuts across all spheres of our economy, especially now that the government is embarking on full deregulation of key sectors and activities – Petroleum marketing, Electricity, FOREX sourcing and sales, and we can guess that many others will follow.

I am not oblivious of the benefits of deregulation but I am aware that artificial monopoly may be worse than government inefficiency. Cooperation amongst market operators to fix price or control output under weak/non-existent regulatory framework is very easy. In a country where regulatory agents are not as technically qualified, poorly paid, hardly trained and badly motivated when compared with the staff of the market operators, which they are supposed to regulate. Not many people would fare well in that kind of terrain.

A fresh perspective is required to approach the issue of CABALS in various sectors as we have witnessed in the past. Capitalists are necessary evil that must be tamed by law. Nigeria needs huge private sector investment in order to move the country forward and in the right direction.

It is regrettable that Nigeria National Assembly are more active in overseeing the ministries/parastatals, inviting executive for questioning on sensational issues and setting up parallel probe panels when they are not busy attending the sitting of the Code of Conduct Tribunal. The function of actual law making, reviewing of the same and repealing outdated laws have taken back seat. When they choose to sponsor bills, they rather focus on those that provide them immunity and protection for speedy passage. If any law requires speedy consideration, urgent attention and passage, it should be Antitrust Law.

What Is Antitrust Law? According to Markham law firm, broadly speaking, antitrust laws seek to promote fair competition on the merits and to protect consumers and wronged competitor businesses from anti-competitive business practices — practices undertaken in effort to undermine competitive commercial behavior in a given market or line of commerce.  They also govern proposed mergers and acquisitions that are sufficiently large to constitute a threat to competition.

Now that we are seeing aggressive investment to support in-country refining of crude oil which may commence in 2018 (we expect Dangote group to deliver on this promise), we may be faced with another round of price fixing or we can see the large ones setting low prices just to edge out the modular refiners in order to gain some monopolistic advantage.

As Nigeria journey towards capitalism in order to right the wrongs of government inefficiencies in managing corporations, we need the right legal framework and enforcement strategy to protect the citizenry from the claws of the capitalist. David Korten, a former Harvard Professor once said: Capitalism has defeated communism. It is now well on its way to defeating democracy.

Olatunde Akintola