Cartels in Nigeria: How They Divide and Run the Markets

On a Saturday morning, I was on a visit to a neighbour’s house, on arrival, I took advantage of the crude gym implements at his place to flex my muscles, just 10 minutes into the session, and my practice was interrupting by some marauders who introduced themselves as the local union of commercial gym operators.

Whose job it was to ensure the smooth operation and regulation of their line of business within the geographical space that made up our neighbourhood.

That isolated incidence and the argument that ensued almost led to violence and this has informed my decision to write this piece about Nigeria’s business environment; its unofficial regulators and regulations.

They operate with much impunity. This has led to the kidnap of Nigeria’s markets by the cartels that dot the entire business landscape of Nigeria.

The Nigerian economy is one of the few in the world that encourages cartels to hold the consumers and even the regulators hostage.

When issues related to the nefarious activities of such cartels are tabled for deliberations on a national level, there is often the temptation to ascribe the immense powers of these cartels to an evil cabal responsible for sustaining the powers of such cartels.

Essentially, such conspiracy theory may be founded considering the moral bankruptcy of Nigeria’s political economy, these has aided them to maintain their stranglehold on Nigeria’s markets.

However, an often ignored reality is that the tendency for "cartelism" is a syndrome that is hard coded in the DNA of the average Nigerian (in business or social interactions), the mindset here is to form cliques that would run things as an elite group thereby insidiously oppressing others.

This mentality cuts across all strata of the social echelon in Nigeria and is very much prevalent at the BoP.

One of the major obstacles faced by a prospective investor in the Nigerian economy is the existence of unnecessary and outlandish artificial barriers created either by rent seekers within the national/regional regulatory authorities or individuals/groups who constitute themselves as authorities within their sphere of illegal influence.

Somehow, they manage to gain legitimacy and hence impose their reign of caprice on all and sundry.

The scope of operation of most cartels in Nigeria follows a basic path: control the market, maintain an executive that imposes levies on their members and controls market entry, upward regulation of price (prices are hardly influenced by market forces of supply and demand), creating artificial barriers for market entry (for prospective investors who desire to enter the market), and anti competitive tactics (such as predatory pricing) etc.

A major consequence of these antics is that consumers are often held to ransom and made to pay arbitrary prices for goods and services.

The experience at my friend’s personal gym gives a tip of the whole mass of what the cartels do to run down market efficiency and competitiveness in Nigeria.

If the commercial gym service operators offered better quality of service, surely they wouldn’t have any need to fear my friend’s pro bono service as people are often willing to pay for quality service.

We all agree that competition is the primary catalyst for innovation, technological advancement and economic development; therefore if meaningful progress must be achieved in Nigeria’s market place and economic landscape.

The promotion of competition should remain be a major policy tool, irrespective of the current cultural or accepted behavioural patterns in our political and business space.

Nigeria’s government has in the past attempted to arrest this situation, for the records; six times the government tried and six times it failed, although they claim that they could point out the exact reasons why these efforts met a brick wall.

I believe that the problem is in two folds, first the fact that it is encoded into the character of the average Nigerian business person to tow the part of mediocrity – here, innovators are an exception and often few (and so try their best to set up protective measures against possible competition that would rout out slapdash business ethics)

And second the monumentally weak governance institution that exists in Nigeria has made the reign of feudal lords and artificial spheres of influence thrive either in business or politics.

Here we have states within a state, institutions within institutions and economic blocs within the larger economy, a very complicated and often Byzantine maze for anyone to easily navigate.

Some of such cartels that hold hostage Nigerians at the BoP include:

· National Union of Road Transport Workers (NURTW) and the Road Transport Employers Association of Nigeria (RTEAN) – responsible for the motor park touts/extortionists popularly called agberos

· Motorcycle Operators Association of Lagos State (MOALS) – the motor bikes that are often employed by people at the BoP as a form of self employment initiative to provide public transport within cities across Nigeria. MOALS is the notorious Lagos State chapter that makes life difficult for people trying to enter the trade; they maintain their own touts that go on an extortion spree targeting individual operators.

· Barbers and Hair stylists associations scattered across cities in the entire federation of Nigeria

· Vulcanizers (local name for automobile tire repairers) and automobile mechanic technicians association.

· Gym owners association

· Tailors and fashion designers association

The list is endless; any new trade that comes into existence is followed by a union or association of similar trade operators whose ultimate goal has always been market control.

At the top echelon of the society, the cartels in operation are the more noticeable Major Oil Marketers Association of Nigeria (MOMAN) the rice and cement cartels, the diesel cartels, cartels controlling the sales and imports of salt, sugar and other major staples, the nefarious hard drugs cartels etc.

The solution to the cartel dilemma is a systematic and simultaneous elimination of parallel institutions that run alongside the established and recognised governance institutions, followed by a strengthening of the existing governance institutions.

These parallel institutions continue to thrive by ensuring that regulatory agencies and other governmental institutions of the state remain inefficient and weak.

Considering the strategic importance of having free and fair competitive economy, competition policy has a significant role to play in promoting competitiveness and growth.

This has led to the increasing concern that besides seemingly weak sector-specific laws on competition in Nigeria, efforts to have a competition law for Nigeria has failed.

Previous efforts are chronicled below. None has been given a serious attention.

Draft Bill 1:

Federal Competition Bill 2002 - A bill for an Act to set-up federal competition. To provide the necessary conditions for market competition and to stimulate creative business activities, protect consumers, and promote the balanced development of the national economy by prohibiting restrictive contracts and business practices that substantially lessen competition and regulating the abuse of dominant positions of market power and anticompetitive business combines, and to establish the Federal Competition Commission for the effective implementation and enforcement of this bill and for matters connected therewith. This is in an Executive Bill sponsored by the Federal Government through the Bureau of Public Enterprises (BPE). This draft bill was presented as an executive bill to the Senate in 2002.

Draft Bill 2:

National Anti-trust (Prohibitions, enforcement, etc) Bill 2004: An act to regulate and prohibit unfair competition and unreasonable combinations in restraint of commerce, industry and trade, including monopolies, trusts and interlocking directorates, for the purposes of maintaining and strengthening the free enterprise system, ensuring unrestrained competition, and establishing a level playing field, in business in the federation, and to make provision for other matters relating thereto. This bill was sponsored by Hon. Halims Agoda and others and presented to the House of Representatives in 2004.

Draft Bill 3:

Competition (Anti-trust) Bill 2007-sponosred by Hon. C. I. D Maduabum. Presented to the House of Representatives in 2007. First reading was on September 5, 2007. No second reading till date.

Draft Bill 4:

Nigerian Trade and Competition Commission Bill 2008 - The bill was sponsored by Senator Joel Ikenya. First read on November 6, 2008. Referred to Joint Committee on establishment and Public Service matters, Judiciary, Human Rights and Legal matters, and Commerce.

Draft Bill 5:

Nigerian Anti-trust (enforcement, miscellaneous provisions, etc), 2008 - A bill for an Act to prohibit monopolies to trade, commerce or industry, to regulate the business activities of companies and trust with regard to restraints in trade or commerce, to establish the anti-trust division for the purposes of enforcing the provisions thereof and to foster the sustenance and development of a free market system, and secure the practice of a fair and open market system, etc.

The bill was sponsored by senators Heineken Lokpobiri and F. K. Bajomo and was first read on April 23, 2008. It was never read a second time.

Draft Bill 6:

Competition and Consumer Protection Bill 2009. On April 22, 2009, late President Umaru Musa Yar'Adua presented before the Federal Executive Council (FEC) a bill that seeks to promote the welfare and interests of consumers and provide them with competitive prices and choices.

It also seeks to regulate monopolies, merger and acquisitions and all forms of business combinations and prohibit restrictive business practices, which prevent, restrict or distort competition or constitute the abuse of a dominant player in the market.

Approval of the bill was differed till another date to enable council members sort-out grey areas in the bill and for proper harmonization with the existing sector-specific regulatory laws.

At a national training workshop on competition policy in Abuja penultimate week, the general Coordinator of Consumers Empowerment Organisation of Nigerian (CEON), Mr. Adedeji Babatunde identified political economy constraints in implementing competition regimes.

Some of these, he listed as lack f consensus amongst the relevant government ministries, departments and agencies on the competition commission; low awareness of benefit of competition law for the country in the political circle; possible hostility from large business (state monopolies that were privatized, at the beginning of the privatization process, which are weary that the competition law is designed to weaken their position in the sectoral markets.


One way of achieving this is to ensure that the people employed to run such regulatory agencies and competition authorities would be people committed and passionate about making positive impact and transforming Nigeria’s market place to becoming more open, free and driven by fair playing practices, not government lip service as they have done in the past years.