By Merit Ibe
The Centre for the Promotion of Private Enterprise (CPPE) has appealed to the Federal Competition and Consumer Protection Commission [FCCPC] to refrain from intimidating operators in the retail sector of the economy most of whom are micro and small businesses, with many in the informal sector.
The Executive Vice Chairman of the FCCPC, Tunji Bello recently threatened to penalise businesses involved in price fixing and gouging, issuing a one-month moratorium for them to reduce prices.
Reacting,the Director, CPPE, Dr Muda Yusuf, noted that it appears that the FCCPC was unwittingly transforming into a price control agency rather than a consumer protection commission.
To the CPPE boss, the disproportionate focus of the commission on the retail segment of the economy and pricing issues underscores his assertion.
He believes that the move is an emerging risk of market suppression and private enterprise repression by the FCCPC, if the current trajectory continues.
“This marks an elevation of regulatory risk in the Nigerian economy which is detrimental to investors’ confidence.
It should be appreciated that these traders are also victims of the current economic headwinds, especially the inflationary pressures. High prices negatively impact their sales and profit margins. Many of them had in fact shut down their businesses because of the current economic shocks.
Reminding the commission of its core mandate creating a robust competition framework across sectors and protection of consumer rights and interests, Yusuf noted that consumer protection is not about directly seeking to control price at the retail end of the supply chain.
“This is why the CPPE is concerned about the approach, methodology, targeting and the recent threats by the FCCPC to market leaders, traders and supermarket owners.”
Yusuf argued that the commission seems to be fighting the symptoms rather than dealing with the causes of the current inflationary pressure in the economy.
“Even then, the core mandate of the commission is not to fight inflation. The fiscal and monetary authorities are statutorily 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 with the telecoms sector amply validates this position.”
Decrying the proposal by the FCCPC to traverse markets across the country with objective of ensuring price regulation, Yusuf said the move is unlikely to yield concrete outcomes, noting that it is not a sustainable strategy.
“ What we need to fix are the fundamentals driving production, operating and distribution costs which resulted in spiraling inflation in the first place.
“The dynamics of pricing and prices in an economy are much more complex and fundamental and do not seem aligned with the comprehension of the FCCPC on the issue. The variables are numerous, multidimensional and dynamic. It is difficult to make pronouncements on issues profiteering in such circumstances without a rigorous analysis based on data.”
Pointing to the example of the comparative price of a particular brand of fruit blender in the USA and Nigeria cited by the commission, Yusuf noted that the comparison was too simplistic and superficial to be relied upon as a basis for the commission’s generalization about consumer exploitation by supermarkets in the country.
“The commission needs to be more diligent and thorough in its analysis before alleging consumer exploitation by the trading community. Sample size needs to be significant and data integrity needs to be assured to make the commission’s verdicts credible.”
He viewed that 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 emphasised 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 the products.
The reality is that the risk of profiteering increases with monopoly powers,” adding that the commission needs a proper comprehension of the dynamics of pricing and the key drivers of inflation. “These factors include the naira exchange rate depreciation, high energy cost, high cost of logistics, seasonality of food production, high cost of funds, extortions on the highways, high post-harvest losses, high cargo clearing cost, impact of the insecurity on food production, climate change and global factors disrupting supply chains.
Yusuf further noted the emerging dimension of the increasing export of Nigerian products to neighbouring countries in the West African sub region and beyond as a consequence of the weak domestic currency.
“The incentive to export Nigerian products to neighbouring countries has never been as intense as it is currently.”
He advised that the commission should work in collaboration with other agencies of government to tackle the fundamental causes of inflation in the economy, noting that the focus should be on causative factors driving prices, not the symptoms.
“This is a more sustainable approach than resorting to intimidation of traders, supermarket owners and market men and women.
“It is also important to draw attention of the commission to areas where there are frequent consumers rights violations like the aviation, health, energy markets, electricity market, financial services, telecoms and cable Tv sectors. These areas that demand the attention of the commission even more than the markets.”