Strengthening Constituencies for Effective Competition Regimes in Select West African Countries

1. Strengthening Constituencies for Effective Competition Regimes in Select West African Countries (CUTS 7Up4 Project) PROJECT LAUNCH MEETING 19-20 June, La Palm Royal Beach Hotel, Accra, Ghana Draft Preliminary Country Paper (PCP) COMPETITION REGIME SCENARIO IN NIGERIA Presented by ADEDEJI, Babatunde Abiodun CStat. Coordinator-General / Founder Consumers Empowerment Organisation of Nigeria – CEON (Formerly, Consumer Affairs Movement of Nigeria – CAMON)

2. Outline of the Presentation • General Background • Nigeria Profile • Social and Economic Policies affecting competition in Nigeria: • Development Policy • Agriculture Development Policy • Industrial Policy • Privatisation and Regulatory Reforms • Investment Policy • Government Procurement Policy • Consumer Protection Policy • Sectoral Policies • Power • Water • Telecom • Transport • Financial Services • Health Services • Anticompetitive Practices • Conclusions

3. I. General Background • Geographical Location: Nigeria is situated in the West African region and lies between longitudes 3 degrees and 14 degrees and latitudes 4 degrees and 140 degrees. It has a land mass of 923,768 sq.km.. It is bordered to the north by the Republics of Niger and Chad. It shares borders to the west with the Republic of Benin, while the Republic of Cameroun shares the eastern borders right down to the shores of the Atlantic Ocean which forms the southern limits of Nigerian Territory. The about 800km of coastline confers on the country the potentials of a maritime power. Land is in abundance in Nigeria for agricultural, industrial and commercial activities. • Government: Three-tier structure - A Federal Government, 36 State Governments, 774 Local Government Administrations • Population: 144.7million (year 2006 census) • Official Language: English • Main Indigenous Languages: Hausa, Igbo, Yoruba • Over 200 ethnic nationalities • Main Religions: Christianity, Islam, Traditional • Main Commercial/Industrial Cities: Lagos, Onitsha, Kano, Ibadan, Port Harcourt, Aba, Maiduguri, Jos, Kaduna, Warri, Benin,Nnewi • One of the largest producers of crude oil in the world and Second Largest market in sub-Sahara Africa • It also has enormous natural gas reserves, vast agricultural lands, natural resources and a dynamic private sector • Very big telecoms market – GSM subscribers` base rising from 40,000 in 2001 to 46.2 million in 2007 • Economy fast growing and promising • Democratic Government • Peaceful and healthy environment for Investors.

4. Profile

5. II. Social and Economic Policies affecting Competition in Nigeria • Development Policy (NEEDS) The National Economic Empowerment and Development Strategy (NEEDS) 2004 – 2007 is Nigeria’s reform based medium-term plan for economic recovery, growth and development. NEEDS was conceptualized in 2003 and launched in 2004, as a response to the numerous challenges facing the nation. Some of the challenges include the following:- • Near collapse of social and economic infrastructure; • Per capita GDP remained stagnant prior 1990; Grew at 2.2% 1999 – 2003 • Total GDP 2001 $45 billion; • Per capital income was $300 a year; • External and domestic debt – 70% of GDP (difficult to service debt, domestic debt rose by 200% between 1999 and 2002 – about $9.0billion); • Real sector dominated by primary production sectors: agriculture 41%, crude oil 13%, manufacturing 5 – 7 % of GDP; • High macroeconomic volatility (exchange rate, inflation rate, budget deficit, GDP growth rate, GDP per capita - among the worst in the world); • Finances at all levels of government in poor shape (pension crisis, arrears of salaries, huge debt misallocation and mismanagement); • Nigerian urbanization rate – 5.3% (one of the fastest in the world); • High level of poverty (about 70%); • Dysfunctional education system (low standard, institutions decay, youth militancy etc); • Unfriendly business environment (public sector dominance, rent seeking, weak institutions, corruption, high cost of doing business); • High unemployment rate (urban 12.4%, rural 23.2%); • General insecurity of life and property.

6. Development Policy - Continues The conceptual issues on NEEDS/SEEDS are based on four goals: • Poverty reduction, • Wealth creation, • Employment generation, • Value re-orientation. The framework for actualizing the goals of NEEDS is anchored on three pillars; • Empowering people and improving social delivery, • Fostering private sector led growth through creating the appropriate enabling environment, and • Enhancing the efficiency and effectiveness of government, by changing the way government does its work. The SOCIAL CHARTER under NEEDS covers the following key areas • Economic empowerment and poverty Reduction; • Education; • Health; • Employment generation; • Gender equity; • Water and sanitation; Poverty Reduction and Employment Generation: Broad targets • Increase average per capita consumption by at least 2.0% a year; • Creation of about 7 million jobs by 2007; • Increase immunization coverage to 60 percent by 2007; • Increasing the percentage of the population with access to safe drinking water to at least 70 percent by 2007; • Significantly increasing school enrolment rates particularly girls; • Increasing the adult literacy rate to at least 65 percent by 2007.

7. Agriculture Development Policy Nigeria's agricultural policy aims to: • ensure food security, • promote domestic trade, • enhance foreign exchange earnings, • promote export diversification, • enhance access to agricultural raw materials, • encourage participation in preferential trade arrangements, and • promote the use of modern technology and the quality of agricultural exports. Following are some of the Federal Government of Nigeria Policies on Agriculture Development: • The Presidential initiatives on rice, cassava, vegetable oil, tree crop, livestock, fisheries, aquaculture development, and rubber. • A Programme for raising maize production from 7m metric tones to 14m metric tones, by the end of 2007, and tropical fruit production were put in place between 2004 and 2005. • Implementation of the National Special Programme for Food Security. • Donor assisted projects (Roots and Tubers expansion Project (RTP), the Community-based Agriculture Development Project, and National Fadama I and II Project. • Easier assess to Agricultural Credit Programme (Trust Fund Model TFM). • Promotion of Export Support initiatives (tariff measures and export support schemes for farmers and agric-businesses). • Value Added Tax exemption for locally produced agricultural input • deregulated fertilizer market by allowing the private sector to participate in the supply of fertilizers • The Government established a National Strategic Food Reserve Programme, to act as a buyer of last resort with the purpose of maintaining food security as well as price stabilization

8. Major Agricultural Imports, Exports and Contribution to Economic Activity • Agricultural output consists mainly of: food crops, such as cassava, yams, sorghum, millet, maize, groundnuts, palm fruit; cash crops, such as palm oil, rubber, cocoa, cotton, gum arabic, and shea butter; poultry, goats, lamb, pigs, and cows; fishery products; and forestry products. • the major agricultural imports being wheat, rice, sugar, palm oil, milk, meat, and fish. • The main agricultural exports commodities are cocoa beans, coffee, copra, cotton, palm-oil and soya bean. Agricultural contribution to economic activity The agriculture sector plays a significant role in the Nigerian economy; • In spite of the dominance of oil, the sector is the mainstay for the majority of Nigerians, employing some 70% of the country's labour force. • Most workers in the sector live below the poverty line: • agriculture accounts for some 67% of national poverty, thus the sector is crucial in national poverty reduction efforts. • Agriculture remains important for the diversification of the economy, in particular its export structure • Some estimates put the sector's contribution to GDP at 41%.

9. Industrial Policy • The Federal Ministry of Industry's policy objective is to transform the Nigerian economy from "its rural and agrarian form to a modern and competitively industrialized one". This is to be pursued by, inter alia, encouraging the private sector to play a pivotal role; providing services for the training and development of indigenous skills and manpower; and financial support. Nigeria's current industrial policy thrust is anchored on a guided deregulation of the economy and Government's disengagement from activities which are private-sector oriented, leaving Government to play the role of facilitator, concentrating on the provision of incentives policy and infrastructure that are necessary to enhance the private sector's role as the engine of growth. The industrial policy is intended to: • Generate productive employment and raise productivity; • Increase export of locally manufactured goods; • Create a wider geographical dispersal of industries; • Improve the technological skills and capability available in the country; • Increase the local content of industrial output by looking inward for the supply of basic and intermediate inputs; • Attract direct foreign investments (FDIs); • Increase private sector participation.

10. Privatisation and Regulatory Reforms Growing the Private Sector The NEEDS aims at addressing the country’s underlying lack of competitiveness, which has prevented economic growth and Development from keeping pace with other economies. The policy thrust is: • to build a private sector that can take advantage of domestic, regional and global markets. The major strategies include: • re-defining the role of government as a facilitator and promoter in the economy; • Strengthening enabling environment through improvement in security, policy related costs and investment in infrastructure, especially electricity, transport and water; • Privatisation and Liberalization and improvement in accessibility to cheap finance.

11. Privatisation and Regulatory Reforms - continues Re-defining the Role of Government In line with NEEDS policy thrust, government divestment from direct production of goods was intensified in 2005 and 2006: • a total of 111 public enterprises have so far been reformed and privatized, covering major industrial sectors – banking, finance and insurances; oil and gas; telecommunications; transport and infrastructure; power and steel; manufacturing and hospitality. • A total of US$3.66 billion has been realized • and about US$10 billion annual transfers to public enterprises saved. • In 2006, 38 privatization transactions were concluded. • In additions, giant strides in policy, regulatory and institutional reforms have been made, thereby improving Nigeria’s investment climate.

12. Investment Policy The Nigerian Investment Promotion Commission Decree No. 16 of 1995 This decree established the Nigerian Investment Promotion Commission (NIPC) as the successor to the Industrial Development Co-ordination Committee (IDCC). The NIPC is an agency of the Federal Government of Nigeria specially established, among other things, to: • Co-ordinate, monitor, encourage and provide necessary assistance and guidance for the establishment and operation of enterprises in Nigeria; • Initiate and support measures, which shall enhance the investment climate in Nigeria for both Nigerian and non – Nigerian investors; • Promote investments in and outside Nigeria through effective promotional means; • Register and keep records of all enterprises to which the NIPC Decree legislation applies; • Identify specific projects and invite interested investors to participate in those projects; • Provide and disseminate up-to-date information on incentives available to investors; • Assist incoming and existing investors by providing support services; and • Evaluate the impact of the Commission on investment in Nigeria and recommend appropriate remedies and additional incentives;

13. Government Procurement Policy Public Sector Reforms The public sector reform agenda focuses on the following: •Restoration of professionalism in the Civil Service; • Rationalization, restructuring, and strengthening of institutions; • Privatization and liberalization in the sector; • Tackling corruption and improve transparency in government accounts, • Reduction in waste and improve efficiency of government expenditures; • and Enhance economic coordination. In line with NEEDS, between 2004 and 2006, a number of institutional And structural measures have been put in place to ensure the achievement of desired objectives. These measures include: • Open and competitive tender arrangements for government contracts; • Establishment of a due process mechanism to vet and eliminate ‘fat’ from government contracts; • Massive anti-corruption campaigns involving all public officials, including the President. • Public sector reforms to reduce, if not completely eliminate opportunities for corruption, especially through the Comprehensive monetization of benefits to public officers; • A committed focus on privatization and auctions of Government licenses (leading, for example, to the liberalization of the telecommunications sectors);

14. Consumer Protection Policy Existing Consumer Protection Laws In Nigeria today, there is no single codified document where the rights of consumers are contained. What one is likely to see are several legal enactments establishing certain institutions charged with the responsibilities of determining or regulating specific areas of consumable goods and services. Prominent among these consumer legislations are: • The Consumer Protection Council Act No.66 of 1992 • The Weights and Measures Acts 1974 • The National Agency for Foods & Drugs Administration and Control (NAFDAC) Act No. 15 of 1993 • The Food and Drugs Act 1974 • The Counterfeit and Fake Drugs and Unwholesome Processed Foods (miscellaneous Provision) Act 1999 • Nigerian Civil Aviation Authority (NCAA) Act No.49 of 1999 • Standard Organisation of Nigeria (SON) Act • Federal Environmental Protection Agency (FEPA) Act • Nigerian Electricity Regulatory Council (NERC) Act • Trade Malpractices Act 1992 Despite this statutory protection framework, the level of practical protection has remained rather low. This is because the laws are yet to take care of some vital aspects of consumer protection. Two of such areas are compensation for the victims of defective products or services and right to satisfaction of basic needs.

15. Consumer Protection Policy – State of its Implementation, Consumer Awareness and Existence of Consumer Organisations. • With the exception of the Consumer Protection Council Act, all the other existing consumer related legislations are criminal law based, which are aimed at punishing the offender and not to compensate the victim. • Level of Implementation of Consumer Protection Council Act is low. • Level of Consumers Awareness is low. • Absence of small claims court for consumers redress. • Small number of active Consumer Protection Organisations. (compared with the size of Nigeria – number of states, population size etc.).

16. Sectoral Policy - POWER Power Sector • NEEDS focus is on the provision of adequate electricity supply to the country. A major reform in the Power Sector is: • the enactment of a law in 2005 that removed monopoly power from National Electric Power Authority (NEPA) and subsequently to the unbundling of NEPA into 18 successor Companies and • the formation of Nigerian Electricity Regulatory Commission (NERC). • With the on-going reform, coupled with the vigorous implementation of the seven National Integrated Independent Power Projects and conclusion of the privatisation of the three power plants in 2007, NEEDS target of increasing electricity generation capability from 4200MW in 2004 to 10,000 by end of FY 2007 was nearly attained. • Electricity supply remains a major challenge for private sector Development and competitiveness.

17. Sectoral Policy - WATER National Water Supply Policy The government of Nigeria has a national water supply policy whose aim is: • Provision of potable water to all inhabitants of Nigeria by the year 2020. • The present inadequate level of services should be increased to 120 liters per capita per day, and 60 liters per capita per day to urban, peri-urban and rural areas respectively by the year 2020. • Increase the capacity of local, state and the federal government to assist communities to obtain basic water supply facilities that the communities themselves can maintain with the possible support of the private sector. The policy thrust of NEEDS in respect of water is on participatory, integrated and sustainable water resource management, to meet the nation’s water needs. The target is to increase water coverage to 70%.

18. Sectoral Policy - TELECOM In 2000, the Government set out a National Policy on Telecommunications with the overriding objective of modernizing and rapidly expanding the telecommunications network and services in Nigeria. • This has been pursued by allowing more private operators in the sub-sector. The short-term objectives of the plan are to, inter alia, • implement network development projects to ensure that the country meets and exceeds the ITU recommended minimum teledensity of one telephone for 100 inhabitants; • participate effectively in international telecommunications activities in order to promote telecommunications development in Nigeria, meet the country's international obligations, and derive maximum benefit from international cooperation in these areas; • establish a National Frequency Management Council (NFMC); • ensure that the Government divests its interest in the state-owned telecommunications entities; • promote competition to meet growing demand through the full liberalization of the telecommunications market; and • review and update telecommunications laws in order to bring all telecommunications operators under the regulatory control of NCC.

19. Sectoral Policy – TRANSPORT • Policy initiatives in the Transport sub-sector seek to achieve a more effective, productive, and safe transportation system. • A National Transport Sector Policy was developed in 2003. The policy aims to, inter alia, • promote trade and transport services through an efficient and affordable integrated transport network, and transparent and streamlined administrative procedures based on modern management techniques; • improve the safety, security, quality, and speed of movement of goods and people; • increase the involvement of the private sector in the financing and operation of transport-related services; • structure the infrastructure to ensure environmental sustainability and internationally accepted standards; • build a strong financial base for the creation, maintenance, and upgrading of transport infrastructure; and • promote public transport over private car travel.

20. Sectoral Policy – FINANCIAL SERVICES The regulatory and supervisory institutions governing financial services include: • the Central Bank of Nigeria, which is the highest regulatory and supervisory authority; • the Ministry of Finance, which cooperates with the CBN on monetary matters; • the Nigeria Deposit Insurance Corporation (NDIC), which complements the functions of the CBN by providing deposit insurance to boost confidence in the banking system; • the Securities Exchange Commission (SEC), which seeks to promote an orderly and active capital market; • the National Insurance Commission (NAICOM), which regulates and supervises the insurance industry; • the National Board for Community Banks (NBCB), which seeks to support the establishment and operation of community banks; and • the Financial Services Regulation Coordination Committee, which seeks to coordinate the supervision of all financial institutions. Under the GATS, Nigeria bound, without limitation, cross-border Supply and commercial presence for banking services. Foreigners, Corporate or individuals can own up to 100% equity in any enterprise

21. Sectoral Policy – HEALTH SERVICES Health Sector Policy thrust • Strengthening of the National Health System; • Improving the availability and management of health resources • Reducing the disease burden and improving physical facilities • (HIV/AID, Malaria, Tuberculoses and STD) • Improving financial access to good quality health services.

22. Anti-competitive Practices Following are some of the prevailing anticompetitive practices in the Nigeria market: • Cartel • Price fixing • Market division • Excessive Pricing • Bid rigging • Tied selling • Price discrimination • Misleading Advertisements • False Advertising • False representation

23. Conclusions • Presently, there is no Competition Law in Place in Nigeria. • Government is committed to developing a law though there is no consensus on the institution that the competition agency should be house under. • Efforts have been made to incorporate Consumer Protection elements into the Competition Bill, and evolve a hybrid agency to implement it.

24. Thank you • Adedeji, Babatunde Abiodun CStat CEON, Nigeria