COMPETITION ISSUES IN THE AGRICULTURAL SECTOR:

THE CASE OF NIGERIA

By

Professor Aderibigbe S. OlomolaDirector, Agriculture and Rural Development Department

Nigerian Institute of Social and Economic Research (NISER), Ibadan

OUTLINE OF PRESENTATION

INTRODUCTIONPOLICIES AFFECTING

COMPETITIONCOMPETITION IN PRODUCT

MARKETSANTI-COMPETITIVE

PRACTICESCONCLUSIONS

INTRODUCTION

Federal Competition Commission: (OBJECTIVES)

promote efficiency, adaptability and development of the Nigerian economy,

provide consumers with competitive prices and product choices,

promote employment and advance the social and economic welfare of Nigerians,

ensure that small and medium enterprises (SMEs) have an unrestricted opportunity to participate in the economy and (vi) protect Nigerian industries from unfair trade practices.

FUNCTIONS OF THE FEDERAL COMPETITION COMMISSION

(i) formulation of measures to increase market transparency including weights and measures administration,

(ii) initiation of policy review periodically to ascertain anti-competitive and restrictive practices which may adversely affect the economic interests of consumers,

(iii) investigation of persons or firms in relation to their conduct of business in Nigeria to determine whether such businesses have engaged in reported cases of sharp practices in contravention of the law and initiate appropriate sanctions where necessary,

(iv) elimination of anti-competitive, misleading, unfair, defective or questionable agreements, trading and business practices at the request of the Minister or President and

(v) resolution of disputes or complaints and issuance of clear directives where necessary

POLICIES AFECTING COMPETITION IN THE AGRICULTURAL SECTOR

Prior to the inception of SAP in 1986, several policiesaimed at providing support for the agricultural sector turned out to be regarded as anti-competitive. The policies were introduced in the past due to market failures in the allocation of resources and the need to achieve sustained growth and equitable development in the country. They included: price control(administered output prices for export

commodities) guaranteed minimum price for grains input subsidy centralized marketing export monopoly

Table 1: Average Farmgate and Guaranteed Minimum Prices of Selected Food crops in Nigeria (N/tonne)

Crops Average Farmgate Price 1981-1985 (1)

Average (GMP) 1981-85

(2)

% Difference Between (1) & (2)

Beans 1,046 408 -61.0

Maize 616 257 -58.3

Millet 489 274 -44.0

Rice (Paddy) n.a 433 -

Rice (Milled) 833 594 -28.7

Guinea Corn 428 267 -37.6n.a = Not availableSource: Complied from CBN Annual Reports and Statement of Accounts (various Issues).

COMPETITION IN THE PRODUCT MARKETS

SAP (JULY 1986) POLICY ELEMENTS(i) adoption of a realistic exchange rate, (ii) deregulation and greater reliance on market

forces, (iii) trade liberalization, (iv) removal of subsidies on public sector goods and services, (v) privatization and rationalization of public enterprises and a general reduction of the government

sector (vi) strong demand management policies (particularly tight monetary and credit policies).

SAP POLICIES IN THE AGRICULTURAL SECTOR

product price decontrol since the inception of SAP

desubsidization (withdrawal of subsidy on agricultural inputs and services)

abolition of commodity boards

privatization and commercialization of agricultural and agro-industrial enterprises

ANTI-COMPETITIVE PRACTICES

GENERAL-HORIZONTAL INTEGRATION-VERTICAL INTEGRATION-PRICE FIXING-MARKET SHARING-COLLUSION OVER TERMS AND

PRICES OFFERED TO FARMERS-MERGER AND ACQUISITION

ANTI-COMPETITIVE PRACTICES IN NIGERIAN AGRICULTURE

DOMESTIC DIMENSIONS-Vertical Integration-Contract Farming-Fertilizer Procurement and

Distribution Network-Hoarding of Products-Poor Infrastructure-Asymmetric Information System

ANTI-COMPETITIVE PRACTICES IN NIGERIAN AGRICULTURE

INTERNATIONAL DIMENSIONS-AGRICULTURAL SUBSIDIES BY

DEVELOPED COUNTRIES

-EXPORT DUMPING

(BOTH REDUCE COMPETITIVENESS OF NIGERIAN AGRICULTURE)

Table 2: Trend in US Agricultural Export Dumping Levels, 1990-2003

Commodity Export Dumping Levels

1990-1996 (% per year)

1997-2003 (% per year)

Wheat 27 37

Soybean 2 11.8

Corn 6.8 19.2

Cotton 29.4 48.4

Rice 13.5 19.2

Source: Adapted from The NewFarm, March 2005.

CONCLUSIONS The new competitive environment

while constituting considerable incentive to farmers, has failed to stabilize prices and, therefore, farm incomes.

The international agricultural commodity prices have been quite unstable, thus creating unsteady and inadequate earnings from agricultural exports against expectations. Besides, there have been complaints of sub-grade quality of produce as a result of lack of adequate supervision in the new trade regime.

CONCLUSIONS CONT’D

The sector has to come to grips with the challenges of imperfect global agricultural market with rising globalization and its non-inclusive tendencies. There is need for a shift from raw materials export to value-added products. Internal and external terms of trade must improve and consideration attention must be given to standard and quality control.

Many agribusiness firms and farmers are unable to ascertain beforehand where to buy or sell commodities in order to maximize profits and reduce the risks associated with marketing. This has created a class of market agents who have capitalized on this non-transparent market situation and lack of information to rip off both farmers and agribusiness firms in Nigeria.

To improve competitiveness, there must be improved access to market information not only for the traditional export crops but also for other crops of industrial importance such as rice, sorghum, cassava, maize, and horticultural crops.

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