Business monopoly in Nigeria: The effects on the economy and more

In June 2023, it was reported that Lagos Ports transport about 90 percent of Nigeria’s foreign trade or more. That is, it’s estimated that about 90 percent of Nigeria’s total import-export trade activities were carried out through various Lagos ports and land border posts in the first quarter of 2023 alone, with the estimated handling of exports at 97.13 percent and imports at 81.5 percent. What else could best describe monopoly in Nigeria, when a single state accounts for almost all the import-export operations in the nation? And most interestingly, it’s estimated that Nigeria loses more than $1.5 billion a year over the monopoly in the logistics and supply services sector of the oil and gas industry, thanks to the unfair and government-aided dominance of INTELS oil and gas in the logistics sector. So what really is monopoly, and how has it affected Nigeria as a nation?

This article has been tailored for businesses to understand all there’s to know about monopoly in the Nigerian market, its effects on the economy,  and needed governmental policies aimed at curtailing this problem.

What is Monopoly?

A monopoly is when one business and its products control a whole sector, resulting in little to no competition and forcing customers to buy particular products or services from one business.

In terms of competition, monopoly is the reverse of perfect competition.

When there is just one supply of a good with no direct alternatives, a monopoly scenario results. A monopolist is able to choose how many of his items to put on the market as well as the price at which to sell them.

The use of monopoly as a weapon in the Nigerian economy is harmful, if not completely dangerous, given the structure of our economy and the stage of human potential development. However, there could be a good reason to justify it. A nation like Nigeria needs a certain kind of market structure that would avoid producer dominance of the market and pricing discrimination tactics.

Example of monopolies in Nigeria

Nigerian law has designated Digital Satellite Television Nigeria (DStv) as a monopolistic corporation. It is a broadcast satellite company. For many years, it has been in charge of the prices. It has extremely high subscription rates, which are regularly raised without any rationale.

The biggest cement manufacturer in Nigeria is Dangote Cement. We saw how, through government policies favourable to Dangote cement, they were able to displace other key players like elephant cement from the market, thereby becoming the dominant factor. This resulted in them having sole control of the cement market, thereby increasing the price at their Will.

Another example of monopoly can be noticed in Lagos State, as mentioned above. Lagos State controls almost all the import-export activities of the nation. This has resulted in untold hardship for Nigerians, as can be seen in the frequent Apapa gridlock, amongst others.

Time will certainly fail us to talk about the monopoly in the oil and gas sector, especially in the logistics business. INTEL Group has dominated the oil and gas logistics business for decades due to government policies that have favoured them, thereby causing a great strain in the logistics sector while Nigerians bear the brunt.

Effects of monopoly on Nigeria’s economy

In general, monopoly application has a beneficial or bad impact on the economy of any country, including that of Nigeria. The type and structure of the economy will determine which is typically the case. However, the following additional benefits and drawbacks of the monopoly application are discussed below: 

The positive effects of monopolistic behaviour on the Nigerian economy

Monopoly as a term is not always bad. There are some ways it can help the economy. Below are monopolistic applications to the economy.

  1. Sometimes, to encourage indigenous business, the Nigerian government has made laws to Favour them, in a bid to drive away other foreign actors.
  2. The Nigerian populace has enjoyed quality service of DSTV, despite its high cost. This means sometimes, monopolistic businesses tend to provide quality services.
  3. Monopoly may prevent resource duplication and waste brought on by perfect competition, especially when it comes to the provision of social services.
  4.  Monopoly uses mass production to maintain its dominance.
  5.  Monopoly conditions are better for standardization, which is the foundation for cheaper production.
  6. At the top, where management choices are made in a big room, monopoly planning and management are consolidated.  

The negative effects of monopolistic behaviour on the Nigerian economy

  1. Monopoly stiffens competition among businesses. A vivid case study is that of Dangote cement. 
  2. Monopoly reduces or hampers economic growth and innovation. A case study in Nigeria is that of Nigeria telecommunication (NITEL). Had NITEL been the only network provider in Nigeria,  it would have been so difficult for the Telecom industry to witness the growth it has witnessed today.
  3. Because there are no competitors, it always encourages the monopolist not to look for new ways to enhance his products.
  4. Since a corporation gains monopolistic power through product differentiation, resources are ultimately wasted.
  5. Due to the possibility of a small number of producers and their potential agreement on minimum prices, monopoly results in a restriction of the consumer’s freedom of choice as can be seen with Dangote cement.
  6. Monopoly generates a political influence that can be exploited by them to sway government policy against consumers. 

The causes of monopoly in Nigeria

The following are some major causes of monopolistic behaviour in the Nigerian economy:

  1. The government’s granting of a company’s patent rights to produce, utilize, or market its own invention 
  2. Possession of strategic raw material for manufacturing that is exclusive.
  3. A company’s natural monopoly is when it supplies the entire market at a reduced unit cost as a result of growing economies of scale, as in the case of the supply of electricity, gas, etc.
  4. Allowing a private company the sole right to operate under government regulation
  5. Owning and controlling monopolies like postal services, water and sewer systems owned by municipal corporations, etc.
  6. License issuance to a single enterprise and protection from foreign competitors
  7. The single maker of a product adopting a limit price policy to block the entry of other businesses.

The control and regulation of monopoly in Nigeria

To effectively regulate and control monopoly application in  Nigerian, the government and other regulatory authorities may have to employ three main techniques, which are;

  1.  The government’s passage of laws that prohibit monopolies and ban unfair trading practices.
  2. The government either actively manages natural monopolies or controls monopolies by placing price caps.
  3.  Taxation as regulation

Conclusion

From the aforementioned, it is clear that the idea of monopoly could even be compared to a coin with two sides. When you try to severely or cursorily analyze something from one side, it appears to be favourable, but when you also look at it from the other side, it appears to be unfavourable.

However, for a country such as Nigeria, the main objection to monopoly in Nigeria is that it will stiffen competition, thereby stiffening Innovation and eventually causing stagnation in the growth of the Nigerian economy.

Frequently Asked Questions

Can government officials benefit from monopolistic businesses?

Yes. Most businesses lobby the government to create or enact laws that will favour them in the market and stiffens other competitors, but this comes with an agreement to have a stake in the form of shares in the business.

Does Nigeria have a law that prohibits monopoly in business?

Yes. it’s called the Federal Competition and Consumer Protection Act 2018 (“FCCPA” or “the Act”). It is the main law that rules and covers the rights of consumers and competition in Nigeria. 

Why do we consider monopolies to be Inefficient compared to perfect competition?

A monopolistic business produces less and may charge what it wants. In a perfect and competitive market scenario, competition offers more goods and services to serve more consumers in an economy, and also encourage growth.

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Paul Umukoro

Paul Umukoro

Paul Umukoro is an astute content writer with makemoney.ng. He writes mostly on hot, contested, and valuable topics in business, finance, and technology. He majored in computer science.

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