In a period of abnormal economic activity, if supernormal profit is gained through monopolized activities of privileged few, it means incomes will be transferred from ordinary and very poor consumers to the privileged few behind the created monopolies.
Also, there is something unique about reforms – especially economic reforms. When the existing order is to be significantly tweaked or jettisoned and a new order to be enthroned by throwing up new products, it is inevitable that the new order will throw up high decibel noise, confusion, misunderstanding, and misperception. In the midst of this social bedlam, and while it lasts, supernormal profiteering will reign in the marketplace. While the social bedlam persists, poor government actions can lead to the creation of monopolies through issuance of licenses, patents or franchise so that the products in question is sold in a local market exclusively. Likewise, some circumstances can create monopolies. These include costs of market entry, the amount required as sinking fund, economy of production scale, location advantages, domineering position in major inputs’ ownership and/or government restrictions.
Apple enjoys great goodwill in the market place. In 2015, the company was the world’s most profitable owing to its very strong brand loyalty and products selling well despite unusually high prices. The company could boast of profit margin of about $53.4 billion and cash reserves worth $216bn that year. In 2011, Tesco made supernormal profits at the time when it was difficult for new firms to compete in the supermarket industry because the company enjoyed significant economies of scale and strong brand loyalty. The period of abnormality was only checkmated by new European supermarkets (Lidl and Netto) that entered the market to make the UK supermarkets more competitive and less profitable. Similarly during the COVID-19 pandemic period, companies that were making vaccines, masks and gloves enjoyed unusual profit margins for as long as the pandemic raged and ravished people’s health and lives. The companies experienced sudden and huge increase in demands while supplies were limited, with buyers naming their prices.
Since June/July 2023 that President Bola Tinubu’s economic reform was introduced, series of interventions have been unveiled. But, quoting a broadcaster and a team member of a radio talk show, ChaCha Charity of SplashFM Ibadan, ‘the interventions are not intervening’. From NNPCL’s illogical activities in the supply of petrol to the introduction of CNG as alternative product and to the nonsensical dole out of foodstuffs as palliatives, what Nigerians have in abundance is noise and great level of muddle. In the last fifteen months of FX floatation, Nigerian banks are enjoying abnormal profiteering. The 2023 Naira FX floatation has led to Nigerian banks enjoying sudden supernormal jump in profits (realised and unrealised) in an economy where the real sector is in comatose and poverty rate is higher than 60 per cent of the total population. In the same vein, the players in the downstream subsector of the oil and gas industry are giving nothing but noise and increase in price per litre as response to the yearnings of the masses who are calling for reduced pump price.
In the midst of these babelous situation, some privileged early-risers among the reformed industry players are enjoying supernormal profiteering. Government’s intervention in the CNG conversion and supports for commercial vehicles so far are giving some operators in the transport business ‘a kill’ because there is no control yet. Those commercial transport service providers that are already using CNG are charging their fares same as petrol users. Though this cannot be ruled out for as long as others are struggling to make their own conversion, the fact remains that for as long as the government is unable to exercise control, the rip-off of consumers will continue. For the rip-off and supernormal profiteering period to be shortened, the federal and state governments need to be more strategic about number of Conversion Centres and number of active CNG filling stations within a timeframe. If one may ask, how many vehicles are targeted to be converted in a week and how far and when exactly is the various governments targeting to enforce reduction in transport fares charged by the commercials?
Without good competition and ensuring that supplies outweighs demands, privileged few will continue to rip-off the poor through monopolized business activities. This is the spirit and letter of capitalism. In pure capitalism, the market players revel and rejoice in unhindered transferring of ordinary consumers’ incomes to themselves. This being the reality, it behooves on the government to exercise great sense of responsibilities to nip this supernormal profiteering in record time. It is the duty of the government through the competition and markets’ authority to prevent uncompetitive outcomes in the market.
Ola Emmanuel is a business planning consultant
