Checking unfair competition in Nigeria’s real sector with FCCP bill
Under a free market system, competition is inevitable and in turbulent times, it plays a considerable role in helping to calm economic nerves. In Nigeria’s case, unchecked competition, especially from imported goods remains a challenge for the manufacturing sector. Will the Federal Competition and Consumer Protection Bill provide the reprieve needed to keep firms afloat? FEMI ADEKOYA writes.
Last year, the National Assembly passed the harmonised version of the Federal Competition and Consumer Protection Bill. When it receives the President’s assent and becomes law, it will repeal the Consumer Protection Act and transfer all the staff and assets of the Consumer Protection Council to the newly created Federal Competition and Consumer Protection Commission.
The bill is expected to affect everyday businesses as restrictive agreements will be prohibited while abuses will be investigated, in a bid to avoid monopolies and abuse of dominant market positions.
Overview of the FCCP bill
The Bill prohibits agreements made to restrain competition such as agreements for price fixing, price rigging, collusive tendering and also empowers the President to regulate the prices of certain goods and services on the recommendation of the Competition Commission.
Real sector operators weigh in on the bill
For the real sector, competition from imported goods remains a major threat to local producers, considering the low level of penetration into the Nigerian market as well as low consumer purchasing power that has increased preference for cheaper items.
According to the Manufacturers Association of Nigeria (MAN), while access to foreign exchange is improving, there is a gap in inventory of unsold stocks lying in the warehouses of manufacturers.
“If they produce and cannot sell, there is nothing that can be done. The disposable income of the average Nigerian has been eroded. We are trusting that government will continue to work on reducing inflation and making forex available while the policies to ease business dealings in Nigeria are effectively implemented”, MAN added.
Beyond inflation, issues of unchecked competition from imported items remain a challenge for the real sector.
Latest data from the various surveys conducted by MAN equally indicated that at the end of 2017, an estimated 1,649,612 cumulative jobs were created in the manufacturing sector, while 10,291 jobs were lost.
With increased competition from sub-standard goods, there are worries that the jobs created may become threatened.
MAN President, Dr. Frank Jacobs expressed optimism that the implementation of the FCCP bill when passed into law will help to check unfair competition from imported goods, espcially as Nigeria continues to improve its business environment.
Indeed, the Director-General of the Standards Organisation of Nigeria (SON), Osita Aboloma noted that checking unfair competition in the real sector, especially from imported items made it expedient for the agency to engage in independent intelligence gathering, monitoring, assessment and intervention from time to time to further promote transparency and accountability in standards enforcement activities.
“We have also set up the Surveillance Investigation and Monitoring (SIM) Unit to protect and safeguard genuine manufacturers and importers of goods and services from unfair competition by substandard goods influx into Nigeria while also striving to improve the lives of Nigerians through standards and quality assurance”, he said.
On his part, the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, said a major weakness of the Nigerian manufacturing sector is the high dependence on imports.
Other challenges according to him include, smuggling, dumping and counterfeiting, and poor local patronage of domestically produced goods.
“This is the consequence of the import substitution industrialization strategy adopted in the 70s & 80s. It was a strategy that was driven and sustained by a strong currency which made it easy for raw materials and other inputs to be imported. This is a contrast to the industrialization strategy of the colonial times and the period immediately after independence, which was a resource-based approach.
“The manufacturing sector has profound competitiveness issues. The sustainability of any business is driven by its competitiveness. The environment for manufacturing has created a competitiveness problem for the sector. The first critical constraint is energy cost. It is difficult to drive industrialization without energy that is affordable and available”, he added.
He however stated that the FCCP bill would help address some lingering issues in the real sector.
“The FCCP bill is consistent with the ease of doing business (EODB) agenda of the federal government. One of the cardinal objectives of such a law is to ensure that there is equal opportunity and that there is a level playing field. There are many instances where people get unfair advantage over their competitors.
“It could be through the policies, regulation, waivers, illegal activities like smuggling, tax and duty evasion, as well as under-invoicing. All those things affect the fairness of trade. The whole idea is to have a level playing field. Issues of unfair advantage over competitors will be checked.
“It will help not just the real sector but all players of the economy. There are issues between the real sector and importers. There are also issues among real sectors operators themselves. It is expected that this law will check those issues””, he explained further.
Considering the fragmentation of the Nigerian market, the Organisation for Economic Co-operation and Development (OECD) noted that strong competition ensures that inefficient firms leave the market and that production is rationalised without requiring government-sponsored mergers; restrains exploitative pricing by foreign firms that possess market power and facilitates entry into sectors dominated by a few foreign firms; as well as ensures that companies are more efficient.