In today’s global economy, all economic indices are being regulated by the government; businesses that deal with a very competitive field are limited as to how much they can grow and how low they can make their prices. That is the norm. But many countries across the globe have taking the crucial steps to hands off or decrease state or federal government oversight of industries and business control; thus, the deregulation of key sectors of the economy. Characterized by repeal of laws that restrict trade and competition, deregulation is a major component of a capitalist model. Proponents of deregulation cite systemic economic benefits; industries may become more efficient in deregulated economies. These and many more benefits are what economists made us believe in deregulation. However, there could be other “blows” of deregulation to the Nigerian economy than the perceived benefits or theories about the benefits to be derived.
 
Although deregulation may not be seen as a new concept in the Nigerian economy, its widespread application in key sectors of the economy over the years had significantly improved the economy; Telecommunication, Banking, Media and Publicity sectors, among others, has attested to that.  It is actually true that deregulation lowers barriers to entry in a given industry; and that when more firms enter an industry, competition increases and consumers have more choices for products and services, however, what wasn’t made clear is the long run effect of deregulation. At the short run, deregulated industries provide cost savings to customers, individual businesses tend to decrease prices, company profits increase and cost savings can be passed on to customers to achieve a more competitive position in the market. How long would this strategy keep individual business in the market?
 
However, deregulation aids industry consolidation. For instance, the 2005 consolidation exercise in the banking sector allowing out-of-state holding companies and strong banks to acquire weaker-performing banks. The aftermath of this was a “reformed” and virile banking industry with recapitalised banks referred to as “Mega Banks”. Even proponents recognize certain pitfalls of deregulation. For example, the post consolidation banking crisis that began in 2009 was in part caused by deregulation of banks in the early 2000. Laws allowing banks to sell exotic instruments, such as mortgage-backed securities, complicated the crisis when valuing those securities became excessively difficult. These conSOLUDOted banks had adopted accounting procedures of declaring paper profits and bubbling up their share price, unethical and non-performing loans, and a near absence of corporate governance. One is left in an immediate awe as to the gain of deregulation and consolidation of key sectors of the economy which serves as a deciding factor in growth and development.
 
The many hymns to deregulation usually describe the success stories that occur immediately after deregulation. This is always a period of price-slashing and better service as companies compete to attract more customers. But there is always more to the story, which often takes years to play out. The latter stages of deregulation feature generally look like this: there is a perpetual elimination of the weakest companies, even when only strong ones are left; during the heated competition phase, the name of the game is not prosperity, but survival; companies become desperate to cut costs wherever possible to maximize profits; consumer and worker safeguards are reduced or eliminated; environmental safeguards are reduced or eliminated; convenience and comfort are reduced or eliminated; wages are reduced; workers are laid off by the thousands; production and workloads are pushed to the limit, often at the risk of life and limb; entire markets – for example, rural areas – are dropped if they are deemed low-profit; in the final stages, a monopoly or oligopoly emerges, after which prices are raised, services dropped, quality reduced, and corruption and abuses of power become commonplace; workers from failed companies continue working in their fields by either joining the few surviving giants (usually at lower wages) or working alone (always at lower wages). In other words, a monopoly or oligopoly will dominate the market, but hundreds of nickel-and-dime operations may work around the edges.
 
The deregulation of the airline industry in the late 1970s in Europe clearly shows a worrisome state of business activities. After a brief period in which new airlines formed to compete for customers, there was a shake-out. To cut costs, airlines began paring back their maintenance and safety crews, which outraged the flying public. Since 1978, a dozen airlines have merged or gone out of business. Some 50,000 employees lost their jobs. Now that a few majors exist, air service is being dropped to 130 smaller communities, many others are served by only one airline, and air fares are climbing faster than the planes themselves. A near scenario is what is being experienced in the Nigerian air industry, with air safety at a near comatose, and fares at a geometric increase against service rendered. A consolidation of the airline industry accompanied by an Airline Deregulation Act could save operators and customers; this could allow the airline industry and its companies to gain more control over where they wanted to fly and how much they wanted to charge. This would foster creativity among the industry’s competitors as they looked for bigger and better ways to outdo each other to increase their market shares. Consumers would of course benefit from this, as they now had a choice of more routes and destinations as well as lower fares – a win-win from their standpoint.
 
Of course, competition, corporate restructuring and eliminating inefficiency are all necessary to keep an economy healthy. A moderated meritocracy allows competition to thrive right up until the point where it becomes destructive, and then it steps in to prevent trouble. The advantage of such a system is that competition becomes sustainable. It is a supreme irony of unrestricted meritocracies that what starts out as a wide open field of competition sooner or later winds up as no competition at all.

Having passed through various types of reforms in all sectors of the economy in the past, there is the dire need for Nigeria to consolidate the surviving economy through the establishment of strategic frameworks that would complement the deregulated economy; a vivid surf of the Nigerian telecommunication sector attest to rapid growth in Information and Communication Technology (ICT), with connectivity and accessibility in almost every part of the country could be a good idea. The deregulation of this sector showed a positive hymn for both producers and consumers. While telecom operators seek to capture a wide stake in the market, completion led to price slashing and a wider coverage witnessing a continuous downward movement of services tariffs and charges, in addition to increase in value added services. Although proponents still argue on the expected benefits to be derived from the telecom sector, its ability to meet the trends of today’s global challenge in ICT had put it in a better position than the banking sector whose post consolidation audit exercise exposed a deep rot that could lead to a collapse of the Nigerian economy.
 
Strategic frameworks that could assist in consolidating the economy are enormous; price capping has been a dominant feature of regulation in recent years – although this is now being phased out as most utility markets become more competitive. In reality, setting a price cap, the industry regulator usually has in mind a “satisfactory rate of return on capital employed” for each business. Price-cap regulation is a form of intervention in the price mechanism which has been applied at various points in time to all of
the privatised utility businesses in the UK. Nigeria had once introduced an equivalent policy – Price Control System – which was believed to have worked well for government and Nigerians. Though it came about with a Decree, rather than an Act, the Price Control System is an alternative to rate-of-return regulation, in which utility businesses are allowed to achieve a given rate of return (or rate of profit) on capital. In the UK, price capping has been known as "RPI-X". This takes the rate of inflation, measured by the Consumer Price Index and subtracts expected efficiency savings X. A modified Price Capping in Nigeria’s current economic trail could set a benchmark for a realistic economic transformation.
 
Consolidating an economy to achieve a sustainable economic growth does not come risk-free. Although our material progress can be measured in part by the growth of national output, income and spending, if the economy grows too quickly, it can bring about short and long-term problems. Economists and experts has stressed on the danger of demand-pull and cost-push inflation if demand grows faster than long run productive potential. High and rising inflation can be destabilizing for an economy because it puts pressure on interest rates to rise and can cause a loss of competitiveness for domestic businesses in international markets. More so, environmental impact could arise. Fast growth of production and consumption can create negative externalities such as increased noise and air pollution and road congestion. Environmental damage can have a negative effect on our quality of life and limits our sustainable rate of growth.
 
As a consequence to consolidating the economy towards growth, income and wealth may not be evenly distributed. We may witness a rise in real GDP, as promised by the CBN towards the end of the fiscal year, but also growing income and wealth inequality in society which is reflected in an increase in relative poverty may occur. Economists have the Gini coefficient to measure the inequalities in the distribution of income and wealth in different countries. The higher the value for the Gini co-efficient (the maximum value is 1), then greater the inequality.  Countries such as Japan, Denmark and Sweden typically have very low values for the Gini coefficients; whereas African and South American countries have an enormous gulf between the incomes of the richest and the poorest elements of the population.
 
When deregulation works, there are numerous advantages – most of them to the consumer in the form of lower prices, more providers and better products. A company that was not doing so well and maintained only a small market share before deregulation would also be likely to benefit from this act. When the company faces fewer restrictions, it might be able to explore avenues that the government had previously not allowed or severely restricted. With less red tape, this company could theoretically emerge from deregulation much more successful than it was before. Conversely, a company that was doing quite well on its own despite government regulations would definitely see deregulation as a downside, as it will make the rules lax for its competitors. In essence, a successful company might view deregulation as a way of handicapping the competition, or allowing the competition to play by fewer rules in order to give it a fairer shot.
 
Deregulation is a hot-button issue for many governments and big businesses. This is because it is one of those issues where it seems that you cannot please everyone. Like anything else in life, when the rules are bent, it brings advantages to some who had a hard time being successful with the initial rules, while it may place a handicap on others who found a way to be successful despite these initial rules. Having gone through various stages of reforms and counter-reforms, a closer assessment of the economy however shows that deregulation only promotes competition in the early stages. In the latter stages it actually eliminates competition as rivals are driven out of business. Owners feel the need to cut every corner possible – and both workers and consumers pay the price. And what is the result of all this perpetual elimination of business rivals? A monopoly of course! Even though the nation had promised to ensure the application of impetus on its reform programmes that would transform the state of a deregulated economy into a global giant, the question that would still lingers in the minds of the many Nigerians living below the poverty line is: to what extent would the impact of such reforms play on the creation of more jobs, equal distribution of national income and wealth, as well as Medicare service?

Salim Salihu Muhammed
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