Beyond oil: competition is the new fuel for Nigeria’s economy
By Henry Freeman
Nigeria’s dynamism and wealth of resources attracts a range of investors, particularly in oil. Petroleum remains at the heart of Nigeria’s economy, contributing to a colossal 80% of total export revenue, but a weakened currency and low oil price has started to impact revenue. It is evident that Nigeria can’t keep running its economy on oil – federal revenues are down by about 30% because of the global oil slump. Africa’s largest economy is now being forced to diversify.
Compared with other economies in Sub-Saharan Africa, Nigeria is keen on foreign equity ownership. Foreign investors are taking full advantage of booming telecoms, agriculture and manufacturing sectors. The Chinese alone swelled the Nigerian market with imports worth 336.5bn naira. This year, Nestlé, Unilever and Procter & Gamble have all have set production expansion targets for Nigeria.
But beyond diversification, there is a critical challenge: opening up the Nigerian market to the Nigerian people. There are fundamental problems: Nigeria is more expensive than its neighbours and large, well-connected companies monopolise a number of sectors. This makes it difficult to offer quality and competitively priced goods to European Union, United States and Economic Community of West African States (ECOWAS) markets.
The country desperately needs better private sector regulation, to increase healthy competition, reduce monopolies, identify illegal cartels, lessen the risk of corruption, generate innovation and drive down prices for less wealthy consumers.
A Competition Law to improve regulation has been written, but progress on its enactment has stalled since 2002. Nigeria’s Bureau of Public Enterprises is still struggling to get this important piece of legislation approved.
But now President Muhammadu Buhari has brought fresh blood to Nigeria’s political landscape. With a rejuvenated focus on anti-corruption, there are promising signs the Law will be signed in the next 12 months. It would provide the regulation needed for competition to flourish; smaller businesses to expand and new businesses to enter the market. Although a law alone is insufficient. Strong institutions are needed to oversee the regulation of Nigeria’s economy, including an independent and accountable Competition & Consumer Protection Commission. Only then can Nigeria learn lessons from the past and move beyond oil to become the economic giant it promises the world.
The UK’s Department for International Development (DfID) has been working closely with Nigeria’s Federal Ministry of Trade & Investment to support enactment of the Competition Law. Supported by Adam Smith International, the Ministry has secured support from the private sector, introduced a competition impact assessment tool to ensure policy coherence between the competition law and other public policies and re-drafted a Competition & Consumer Protection Policy to protect the rights of consumers and smaller businesses.