Growing business space through strengthened regulatory institution

It was Douglas North, a development economics scholar, who defined institutions as the humanly devised constraints that structure human interaction. “They are made up of formal constraints (such as rules, laws, constitutions), informal constraints (such as norms of behaviour, conventions, self-imposed codes of conduct), and their enforcement characteristics,” writes North in a 1994 book.

North goes further to define organisations as groups of individuals bound together by some common purpose to achieve certain objectives. “Organisations include political bodies (political parties, regulatory agencies), economic bodies (firms, trade unions), social bodies (churches, clubs), and educational bodies (schools, universities),” he adds.

Institutions, no doubt, play a pivotal role in the development of any economy. Where state institutions are weak, development is either retarded or completely stalled. The difference in standards of development in the West and Africa is largely a question of the difference in how well-heeled state institutions are in the countries. 

If that appears distant and academic, an interrogation of how Dora Akunyili warmed her way into our hearts will reveal the importance of strong institutions to a geographical entity’s march to nationhood. Upon her appointment as the director general of the National Agency for Food and Drug Administration and Control (NAFDAC) in April 2001, Akunyili, mindful of the role the agency could play as a regulatory institution, made the eradication of counterfeit drugs and unsafe food a top priority. Before her assumption of office in NAFDAC, fake and substandard foods and drugs were sold in Nigeria with reckless abandon and without any form of regulation. Many Nigerians were fighting killer diseases like malaria and tuberculosis with little more than sugar syrup and chalk tablets cynically packaged to look like the real things. Undaunted, she worked tirelessly and where necessary fearlessly fought the cabal that controlled the fake drugs and foods cartel, oftentimes at murderous risks to her life.

Today, NAFDAC as an institution has restored some element of sanity to drugs and food regulation in the country and, by extension, a measure of confidence on goods that are put out for sale in this market. If no other advantage, it has paid off well on our public health as well as our economy. 

However, we must acknowledge that even the best or surefooted institutions will not work well in the absence of a supportive political culture. Alternatively, seemingly less optimal formal institutions can often be made to work given the right leadership, judgment, and political will, which was what Akunyili demonstrated at NAFDAC. 

The import of the above narrative is that where the regulator is absent, weak or biased, achieving an even playing field becomes a mirage and certain players with the wherewithal behave in unethical and unscrupulous ways. Only efficient institutions promote growth. They encourage corporations to engage in productive activities by providing appropriate incentives and establishing a stable structure of both corporate and human interactions, which reduce uncertainty. 

Researched essays have argued that affluence in developed countries is a cumulative result of efficient institutions while poverty in poor countries is a result of inefficient institutions. It is given then that successful institutions are both contract-enforcing and coercion-constraining; that is, they reward production and exchange rather than expropriation, redistribution, coercion, unethical business practices and de-marketing activities from competing brands.

However, the institutional frameworks in developing countries, Nigeria inclusive, seem to favour activities that promote redistributive rather than productive activity, that create monopolies rather than competitive conditions, and that restrict opportunities rather than expand them. A situation where company ABC induces any party in the manufacturing and distribution chain not to trade in the products of company XYZ only happens in a developing economy where regulatory institution is either absent, weak or biased. This certainly hampers healthy competition and promotes monopoly in the sector.

The story has continued to be discussed in hush-hush tones among marketing practitioners where companies with the necessary wherewithal have embraced de-marketing practices in their fiercest forms. The strategy of these companies has always been to deploy both ethical and unethical means to win market share.

Besides the fact that the act is an unholy business practice, it short-changes the consumer and takes away the consumer’s right to preference. Simply put, out of 10 consumers whose preferred drink is continuously not available in their neighbourhood bar, a good number will sooner or later switch to what is available. As they say, when you cannot get what you want, you want what you get, or at least ‘manage’ what you get.

This is where the Consumer Protection Council (CPC) comes in. On the CPC website, under the ‘About Us’ template, a portion reads:  “Ensuring that consumers’ interest receive due consideration at appropriate fora and providing redress to obnoxious practices or the unscrupulous exploitation of consumers by companies, firms, trade associations or individuals.” Why then are these de-marketing practices allowed to go on unchecked? Is the regulatory body, whose functions include “surveillance and enforcement activities in the market place”, unaware of these unscrupulous practices in the market?

Clearly, this is not a healthy competition. Such unwholesome business behaviour encourages a monopolistic economy. It is on this premise that the CPC needs to rededicate itself to the contents of the Consumer Protection Council Act No. 66 of 1992 and check this unwholesome act of depriving consumers of their free choice.

Joel Ibirogba