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COMPETITION ISSUES IN THE AGRICULTURAL SECTOR: THE CASE OF NIGERIA

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

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COMPETITION ISSUES IN THE AGRICULTURAL SECTOR: THE CASE OF NIGERIA

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  1. 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

  2. OUTLINE OF PRESENTATION • INTRODUCTION • POLICIES AFFECTING COMPETITION • COMPETITION IN PRODUCT MARKETS • ANTI-COMPETITIVE PRACTICES • CONCLUSIONS

  3. 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.

  4. FUNCTIONS OF THE FEDERAL COMPETITION COMMISSION • formulation of measures to increase market transparency including weights and measures administration, • initiation of policy review periodically to ascertain anti-competitive and restrictive practices which may adversely affect the economic interests of consumers, • 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, • elimination of anti-competitive, misleading, unfair, defective or questionable agreements, trading and business practices at the request of the Minister or President and • resolution of disputes or complaints and issuance of clear directives where necessary

  5. 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

  6. Table 1: Average Farmgate and Guaranteed Minimum Prices of Selected Food crops in Nigeria (N/tonne) n.a = Not available Source: Complied from CBN Annual Reports and Statement of Accounts (various Issues).

  7. 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).

  8. 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

  9. ANTI-COMPETITIVE PRACTICES GENERAL -HORIZONTAL INTEGRATION -VERTICAL INTEGRATION -PRICE FIXING -MARKET SHARING -COLLUSION OVER TERMS AND PRICES OFFERED TO FARMERS -MERGER AND ACQUISITION

  10. 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

  11. ANTI-COMPETITIVE PRACTICES IN NIGERIAN AGRICULTURE INTERNATIONAL DIMENSIONS -AGRICULTURAL SUBSIDIES BY DEVELOPED COUNTRIES -EXPORT DUMPING (BOTH REDUCE COMPETITIVENESS OF NIGERIAN AGRICULTURE)

  12. Table 2: Trend in US Agricultural Export Dumping Levels, 1990-2003 Source: Adapted from The NewFarm, March 2005.

  13. 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.

  14. 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.

  15. MANY THANKS FOR YOUR KIND ATTENTION

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