Transcript competition issues in the agricultural sector

COMPETITION ISSUES IN THE
AGRICULTURAL SECTOR:
THE CASE OF NIGERIA
By
Professor Aderibigbe S. Olomola
Director, Agriculture and Rural Development Department
Nigerian Institute of Social and Economic Research
(NISER), Ibadan
OUTLINE OF PRESENTATION
 INTRODUCTION
 POLICIES
AFFECTING
COMPETITION
 COMPETITION IN PRODUCT
MARKETS
 ANTI-COMPETITIVE
PRACTICES
 CONCLUSIONS
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
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
(i)
POLICIES AFECTING COMPETITION
IN THE AGRICULTURAL SECTOR
Prior to the inception of SAP in 1986, several policies
aimed 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
Average
Farmgate Price 1981-85
1981-1985
(1)
(2)
(GMP) % 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
-37.6
n.a = Not available
Source: 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 subgrade 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.
MANY THANKS FOR
YOUR KIND
ATTENTION