By YUSUFU ABDULLAHI

In this column two Mondays ago, we wrote on the need for a competition or anti-trust law in Nigeria. There were several reactions. But this was particularly interesting and I decided to let our readers have the benefit of knowing what is happening in some sectors of the Nigerian economy.

The latest circular letter was a challenge to the Presidential order given to the Ministry of Transport in 2008 which it was forced to reverse.

This Circular letter of 2009 was also released because the Nigeria Customs Service letter to the Managing Director, Nigeria Export Processing Zones Authority on the same issue had failed to address the requirements of the private operator in stopping other free zones from getting into oil and gas industry and could not give them the expected sought monopoly as discussed below.

The forced reversion of the Ministry of Transport’s circular by the Presidency shifted the battle ground to the Nigeria Customs Service which obliged the private operator and the Ministry of Transport with a broad Circular No. 041/2008 Reference NCS/T&T/I&E/092/S. 3/Vol. 111, issued on 20th November, 2008 addressed to the Managing Director, Nigeria Export Processing Zones Authority (NEPZA) and widely published in the newspapers and other media, three months after the directive of Mr. President to the Ministry of Transport to withdraw its offensive circular letter. In the Customs’ circular, the arrow head of its circular were obviously – LADOL, OLOKOLA and SIIFZ.

However, realising the implication of its circular and how it would have affected the smooth running and operation of the free zones especially that they should have exit and entry points approved by the President and also not being under the supervision of the latter Ministry of Transport, the Customs Department, at paragraph seven of its circular, explained its intention in that “no Customs port in Nigeria has been approved to operate as a free port.

Free zone goods should be imported through a Customs port where such goods will be processed in accordance with the provisions of NEPZA Act No. 63 of 1992…” Paragraph 8 of the circular addressed the particular free zones intended to be shackled because of their involvements in oil and gas activities in the country, and where AGBAMI PROJECT was situated, LADOL and SIIFZ axis. Nigeria Customs Service Circular was specifically addressed to the Managing Director, Nigeria Export Processing Zones Authority to drum in its point.

Nigeria Oil and Gas Industry Content Development Act of 22nd April, 2010 and PIB Bill when enacted, would be difficult to execute as long as coercive monopoly is indirectly condoned, applied and granted to facilitate the operation and monopoly of one of the players against many in the industry by different Ministries, Departments and Agencies of government.

These are the challenges free zone enterprises are going through especially as it affects area of high cost of services charge made by some of the free zones managers (the effect of monopoly) and these were brought up during the audit visit of the Free Zones Reform Committee and also during the Oil and Gas/Trade and Investment Forum at Onne 2012 by the free zones enterprises in attendance at the forum.

“No one has been able to establish a coercive monopoly by means of competition on a free market. There is only one way to forbid entry into a given field of productions or services – by law.

Every coercive monopoly that exists or has ever existed anywhere else in the world was created and made possible only by an act of government: by special franchises, licenses, subsidies by legislative action which granted special privileges (not obtainable on a free market) to an institution, or a group of private sectors, and forbade all others to enter that particular field,” observed Nathaniel Branden in his works on Common Fallacies about Capitalism. Free zones operating around the Nigerian seaports are denied the privileges of competition by the Ministry of Transport using the Presidential Circulars of 22nd May, 2002 in ‘providing special privileges’ turning the circulars into ‘special licenses’.

In fact, government administration should not be as static as the Ministry of Transport is trying to make us believe that after the 2002 circulars, 10 years and going on, the Ministry of Transport could not find solution to the problems of mid-stream loading and offloading and private jetties, that the Minister of Transport himself, announced at the Oil and Gas/Trade and Investment Forum at Onne 2012 that ‘the two circulars’ were “still in effect”.

Nevertheless, this being the case, the President, aware of the two circulars of 2002 on Stoppage of Mid-stream Discharge of Cargo and Closure of Private Jetties nationwide, had copied his approvals on declaration of the free zones in 2005 to the same Ministry of Transport to enable it adjust and take proper administrative action to smooth the operations and running of the free zones.

In addition, the Federal Executive Council in 2002 concluded and approved of ONLY one Free Zones Authority in the country because the dualism of the Free Zones Authorities are also being used as a coercive monopoly in the sector of the economy – Oil and Gas sector because one of the operators is claiming that the Oil and Gas Free Trade Zone Act had given it sole responsibility on oil and gas activities in the country.

The government has therefore directed the merger of the two authorities in order to remove the perceived view of government supporting one player in the field of oil and gas free zones against others and also open the field of free zones to private sector participation in its development, which started in 2005.

This is one of the challenges the industry is battling with, with these two circulars and the dualism of the free zones authorities acts, existing in one industry.

Federal Ministry of Trade and Investment was expected to finalize the merger as directed and approved by the Federal Executive Council Conclusions and Presidential approvals on the dualism of the Free Zones Authority in the country since 2007 without success.

If these decisions are implemented by the Ministry of Trade and Investment, sanity would return to the free trade zones industry and the expected economic progress would be achieved in the area of local content development.

Alan Greenspan observes in his article “Antitrust” that “if entry into a given field of production and service is not impeded by government regulations, franchises, or subsidies, the ultimate regulator of competition in a free economy is the capital market. So long as capital is free to flow, it will tend to seek those areas which offer the maximum rate of return. Investors are constantly seeking the most profitable uses of their capital.

If, therefore, some field of production and service is seen to be highly profitable (particularly when the profitability is due to high prices rather than to low costs), businessmen and investors necessarily will be attracted to that field; and, as the supply of the product and service in question is increased relative to the demand for it, prices fall accordingly.

The capital market,” writes Mr. Greenspan “acts as a regulator of prices, not necessary of profits. It leaves an individual producer and service provider free to earn as much as he can by lowering his costs and by increasing his efficiency relative to others. Thus it constitutes the mechanism that generates greater incentives to increase productivity and leads, as a consequence, to a rising standard of living.”

Now, if a company were able to gain and hold a non coercive monopoly, if it were able to win all the customers in a given field, not by special government granted privileges, but by sheer productive efficiency – by its ability to keep its costs low and /or to offer a better product or service than any competitor could – there would be no grounds on which to condemn such a monopoly. On the contrary, the company that achieved it would deserve the highest praise and esteem.

No one can morally claim the right to compete in a given field if he cannot match the productive efficiency of those with whom he hopes to compete. It is not free trade on a free market that creates coercive monopolies, but government legislation, government action, government controls.

Federal Ministry of Trade and Investment should therefore enact a Competition Law just like the Canadian Competition Act or the United States Antitrust Law or Sherman Act of 1890 in the USA, to guide corporate competition to boost the Nigeria economy. Canadian Competition Act is a Federal law intended to prevent monopolies that regulate Canadian business practices.

It is enforced by the Canadian Competition Bureau and Competition Tribunal, which oversees mergers, trade, and commerce practices that concern industry competition.

It ensures consumers have competitive products and prices. Without the Competition Law in Nigeria, the goals of ‘Nigeria Content’ in oil and gas sector would be difficult as explained under the Terms of Reference of the Committee for Free Zones Reform and also as emphasized by the 2006 Presidential Committee on Free Zones in that “NNPC through ‘Nigeria Content’ Division, develop synergy with Free Zones in order to ensure that their activities promote the achievement of significant local content in oil and gas related activities which will ultimately act as a driver for other sectors of the economy.”

Strategic Restructuring policy of the Reform Committee of Free Trade Zones and Export Processing Zones is tailored just around this philosophy to achieve above stated objective with Nigeria Content initiative.

Competition amongst companies is therefore healthy to any economy because it breeds efficiency, brings cost of production down, reduce prices and increase general standard of livings. Competition is therefore healthy to the Nigeria economy. Coercive Monopoly is very unhealthy, dangerous to the economy, increase cost of production, charges higher prices, depressed the economy, breeds corruption and ultimately lead to high unemployment.