Government Institutions’ Unhealthy Fixation With Price Fixing

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The Centre for Social and Economic Rights (CSER), a civil society organisation, is becoming increasingly worried about attempts by institutions of state in Nigeria to fix prices of goods and services in a free enterprise system. These have come in the shape of government organs/agencies issuing directives to private businesses on what prices they should charge for their goods/services.

Ordinarily, these would have been dismissed, but for the fact that they are being championed by the Federal House of Representatives and very shockingly, the National Broadcasting Commission (NBC).

On 1 September 2020, Daily Independent quoted acting NBC Director-General (D-G), Professor Armstrong Idachaba, as ordering the Management of MultiChoice Nigeria to revert to old prices and stating that the company cannot downsize despite the severity of the economic climate. Idachaba spoke to the newspaper after a meeting with the MultiChoice Management to discuss the recent price adjustments announced by the pay television company. MultiChoice had explained that it adjusted prices on some of its DStv and GOtv packages after considering the impact on the consumer, rate of inflation at 12.82%, the highest in 27 months, content costs and efficiencies within the company.

“They said they are committed to keeping their business in Nigeria but are affected by currency devaluation and inflation rate. They said their fears are that they may lay off Nigerians in their employment if they have to remain in business bearing in mind the present unfavorable circumstances of doing business. They gave examples of other companies that are closing shop because of economic challenges,” he told Daily Independent.

A similar directive was issued a few weeks earlier, when he directed the company to suspend the said tariff adjustment and asked to know why MultiChoice did not inform the NBC before announcing the price adjustments. He also promised to invite StarTimes, MultiChoice’s rivals, to give reasons for the 30% price adjustments made on its packages.

Interestingly, Idachaba admitted that the NBC lack the  power to fix prices, saying: “With regards to broadcasting, there is nowhere in the Act of the commission, which gives us the power to fix prices.”

CSER applauds Idachaba’s honesty, but is concerned by NBC’s latent desire to legislate on prices and private businesses’ response to harsh economic/operational conditions.

“I am told, but I have not confirmed that the Telecommunications Act gives the NCC the power to determine prices… We have no provision to regulate the prices that those who offer broadcast services fix, but if, in the course of fixing prices, we find out that it is very exploitative and injurious to the consumers, we have the power to call them to order, which we have done severally,” Idachaba said.

On 18 August 2020, the House of Representatives directed StarTimes, to revert to its old tariffs. Hon. Uyime Idem, Chairman of the House Ad-hoc Committee investigating the non-adoption of Pay-As-You-Go billing system by Pay TV firms, said the increment is ill-timed in view of the harsh economic realities occasioned by COVID-19.

“We are in a limbo at the matrix used to arrive at the current price regime. The timing for the increment was wrong, unfortunate and insensitive considering the harsh economic realities occasioned by the COVID-19 pandemic. We will like StarTimes to as a matter of urgency revert to the old subscription tariff in the interest of Nigerians,” Idem said.

Star Times, according to reports, attributed the adjustments to the new VAT regime, exchange rate volatility and high cost of providing alternative source of power.

We recall that the 8th session of the House and Senate illegally attempted to foist a billing model on MultiChoice Nigeria, an indication that this interference is not new.

CSER is disappointed that the House is playing to the gallery just to be seen as concerned about the people when facts decline to support such. We are equally worried that the NBC, a practice regulator, is trying to assume price-regulatory powers. Idachaba admitted that the Commission had previously directed pay TV operators to suspend price increase.

We wonder where the Commission derived the powers to order private businesses on how to respond to threatening economic situations. We know how life-disrupting job losses are, but they are unavoidable in the basket case Nigeria has become.

These institutions appear to ignore the fact that Nigeria operates a liberal economic system, which thrives on the balance of the interests of businesses and the consumers. It is not out of place for government to intercede-not interfere-but such intercession should not hurt private businesses and, importantly, the consumer it seeks to protect.

Issuing stop orders to private enterprises through the media could serve to incite consumers against businesses. It is self-serving and injurious to national economy.

NBC and the House of Representatives need to realise that they are in grave error on this score. First, NBC has no power over prices. Same for the House, which needs to understand that its resolution is no law. Nigeria operates a free enterprise system, not the discredited command economy.

The interference of the House and NBC in a matter between a private business organisation and its clients is needless. We can understand intercession when such involves abridgement of rights, but that is not the case in this instance.

The House cannot act Moses the Lawgiver in pricing, which is the result of interplay between supply and demand and not drunken populist posturing.

NBC and the House are not unaware that prices of goods and services have been affected by the increase in the rate of VAT, which is collected on behalf of government and remitted to same.

Since the outbreak of the COVID-19 pandemic, from which the House and NBC are keen to reap emotional dividends, providers of other goods and services, including government agencies and departments, have raised prices to reflect the current economic situation.

The National Electricity Regulatory Commission has approved increase in energy tariffs, effective 1 September, 2020. Petrol pump price has been raised to N151.56.

The Federal Airports Authority of Nigeria (FAAN) hiked the pre-paid toll payable at Lagos’ Murtala Muhammed International Airport (MMIA) toll gate users from N10,000 to N40,000. FAAN, within the same period, raised its Passenger Service Charge (PSC) from N1,000 to N2, 000. The Nigerian Railway Corporation (NRC) has adjusted train fares on the Abuja-Kaduna route by 100%. The new fares are N6,000 for First Class, N5,000 for Business Class and N3,000 for Economy. VAT rate has risen from 5% to 7.5%.

A major contributor to the soaring costs is the volatility of the Naira, which trades officially at N387 to $1 and N480 to $1 on the parallel market.

With the highest rate of inflation in 27 months, prices of goods and services have risen steeply. Without commensurate price adjustments, providers of goods and services, including government agencies, will not offer the same quality or go out of business.

Price regulation, understandably, is hugely appealing. Its appeal has been strong from the earliest times because it promises protection to groups that are most hard-pressed to meet price increases. The Old Testament prohibited interest on loans to fellow Israelites, while medieval governments fixed the maximum price of bread.

But Nigeria, it has to be stated again, operates a free enterprise system that ensures that resources are allocated based on supply and demand. It promotes consumer liberty to choose, encourages market competitiveness, ensures consumer voices are heard and determines what products or services are in demand.

Supply and demand create competition, which helps ensure that the best goods or services are provided and makes the market attractive to investors. Nigeria needs investors, especially from abroad.  But NBC and the House fail to realise that behaving like Soviet-era price control agency discourages investments.

Without investments, jobs are harder to find, tax revenue shrinks, consumer choices in goods/services are fewer and the society is worse.

The “sympathetic” House members should be capable of better conduct than cheap showboating. In other climes, the government is focused on initiatives designed to help citizens afford essential commodities, not luxury goods/services. NBC, we believe, urgently needs to focus on its regulatory duties, which do not include price regulation and impotent directives.

Nelson Ekujumi

Executive Director