FCCPC’s marching order: Businesses claim victims of govt policies, fault tackling inflation by fiat

CPPE warns of market suppression, private enterprise repression by FCCPC
• Draconian policies will only lead to shutdown of more businesses, ASBON warns
• We’re not attempting price control, we only want to prevent arbitrary price hiking, FCCPC insists

Entrepreneurs business owners and industry stakeholders have kicked against the directive from the Federal Competition and Consumer Protection Commission (FCCPC) to traders, who last week, gave traders nationwide, a 30-day ultimatum to reduce the prices of goods or face sanctions.

After much uproar however, the agency said it was only telling businesses to cease price gouging and fixing, placing barriers to market entry and other exploitative and anti-competitive practices, saying the directive was not an attempt at price control or a mandate to crash prices arbitrarily.

The executive vice chairperson of the Commission, Tunji Bello, said he understands the complexities of the current macroeconomic environment and that the FCCPC is actively working with stakeholders to address the broader economic challenges business owners have raised.

However, querying the decision in its totality, the executive secretary, Nigerian Association of Small and Medium Enterprises (NASME), Eke Ubiji, said the Commission has not done its homework on why the prices of goods keep going up. “How can you tell a trader who went to market to buy goods to sell in these terrible times to reduce the prices in a month? Do they think traders just wake up one morning and decide to raise prices?”

He pointed out that the rise in prices is a combination of several factors and the current economic situation is not helping matters. “The traders are not selling in isolation. Look at the economic situation in the country and tell me if this is their fault. The government that is giving a one-month directive should look at what they are doing economically about FX, procurement of goods, importation, fuel prices, operating environment, energy prices and so on and come back and tell me if they can slash prices.”

He said the government was prioritising the wrong things and instead of fixing the problems causing the rise in prices, is looking instead to punish those selling. “It is clear the FCCPC does not understand basic economics, but they better rethink this approach else, they will have more problems on their hand than they can manage,” he said.

Chief Executive Officer (CEO), Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said the FCCPC appears to be unwittingly transforming into a price control agency rather than a consumer protection commission.

He said the agency’s core mandate is the creation of a robust competition framework across sectors and the protection of consumer rights and interests and not about seeking to control prices at the retail end of the supply chain. He further expressed deep concern about the approach, methodology, targeting and the recent threats by the FCCPC to market leaders, traders and supermarket owners.

He added that the FCCPC seems to be fighting the symptoms rather than dealing with the causes of the current inflationary pressure in the economy.

“The fiscal and monetary authorities are responsible for macroeconomic policy issues and are better placed to deal with the challenge of high prices. It has been proven, theoretically and empirically, that the best way to protect consumers from exploitation is to diligently promote competition across sectors. Our experience in the telecoms sector validates this position. The emphasis should not be on pricing but on deepening the culture and practice of competition and a level playing field for all investors. Intense competition makes profiteering difficult and diminishes the chances of exploitation of consumers.  When consumers have choices, it is difficult to exploit them,” he explained.

Adding that the retail sector of the economy currently has an estimated eight million retailers with thousands of supermarkets, departmental stores and markets across the country, he said the higher the number of players in a sector, the more competitive the operating environment becomes and the more difficult it becomes for profiteering to take place.

“The truth is that the retail segment of the economy is the least vulnerable to price gouging or consumer exploitation on a sustainable basis, contrary to the thinking of the commission. They do not have the monopoly powers to influence prices or perpetuate profiteering sustainably. Besides, many of them are dealing in perishable items which makes supply manipulation difficult because of the inherent pressure for speedy disposal of said products. This why FCCPC’s attention should be focused on creating a good competition framework to deepen competition across sectors.”

He said the commission needs a proper comprehension of the dynamics of pricing and key inflation drivers such as the Naira exchange rate depreciation, high energy costs, high cost of logistics, seasonality of food production, high cost of funds, extortions on the highways, high post-harvest losses, impact of the insecurity on food production, climate change and global factors disrupting supply chains.

“There is also the very important dimension of export of Nigerian products to neighbouring countries. The incentive to export Nigerian products to neighbouring countries has never been as intense as it is currently because of the significant appreciation of the CFA relative to the Naira.  It has become more profitable to export many Nigerian products (including petrol) to neighbouring countries than to sell domestically because of the strength of the CFA, exerting enormous pressure on domestic prices.”

He said traversing markets to enforce price regulations is unlikely to yield concrete outcomes and is not sustainable either. What needs to be fixed he said, are the fundamentals driving production, operating and distribution costs which resulted in spiraling inflation in the first place.

“The example of the comparative price of a particular brand of fruit blender in the USA and Nigeria cited by the commission is too simplistic and superficial to be relied upon as a basis for their generalisation about consumer exploitation by supermarkets. The commission needs to be more diligent and thorough in its analysis before alleging consumer exploitation by traders. Sample size needs to be significant and data integrity needs to be assured to make their verdicts credible,” he said.

He appealed to the FCCPC to refrain from further intimidation of operators in the retail sector, most of whom are micro and small businesses, with many in the informal sector and create millions of jobs across different levels and geographical jurisdictions.

He raised concern that there is an emerging risk of market suppression and private enterprise repression by the FCCPC if the current trajectory continues; marking an elevation of regulatory risk in the economy which is detrimental to investors’ confidence.

Adding that the traders are also victims of the current economic headwinds, especially inflation, he said high prices negatively impact their sales and profit margins. Many of them had shut down their businesses because of the current economic shocks.

He advised the commission to collaborate with the other agencies of government to tackle the fundamental causes of inflation, saying the focus should be on causative factors, not symptoms. This is a more sustainable approach than resorting to intimidation of traders, supermarket owners and market people, he said.

“It is also important to draw the FCCPC’s attention to areas where there are frequent consumer rights violations like the aviation, health, energy markets, electricity market, financial services, telecoms and cable TV sectors, which urgently demand their attention even more than the markets,” he said.

On his part, president of the Association of Small Business Owners in Nigeria (ASBON), Femi Egbesola, regretted that the government has never come up with policies that will help, revive and sustain small businesses in the country, rather it seemed to be working hard to hasten up their demise. Pointing out that millions of businesses have shut down with millions of jobs lost in the last year, he said rather than looking for a solution towards reviving these businesses, stopping capital flight and ramping up employment, the government seems to enjoy adding more problems to already existing ones.

“Our challenges are nothing new, we have been crying out for some time now, warning that our numbers are depleting daily because of the many macroeconomic challenges we are facing. But instead of helping us to solve these problems, those in authority are only seeking to multiply them. No business owner does not wish to sell his/her goods quickly because we know in trading, turnover is more important than exorbitant profits. Most of us are already selling with little to no profit, where is the room for price gouging when most Nigerians cannot even afford to buy in the first place? I am worried the government does not understand basic economics and how a free market works,” he said.

Urging the government to address the challenges of FX and exorbitant customs duty charged on imported materials and goods which he said are the root causes of the inflation, he said if those are tackled, they wouldn’t even need to see any directive as the cost of goods will crash overnight. “You cannot tell a trader that bought something at N100, cleared it with N500, brought it down to his shop and so on, to sell at N500, it is not possible. These days, the cost of clearing is often equal or more than the cost of the goods itself, that should be looked into, if the government is serious about bringing down the cost of goods,” he said.

Warning that most businesses are already on the edge, he said further punitive and draconian directives would only cause more businesses to go under and urged the FCCPC and government to rethink.