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Part I (published on May 12) addressed a topical issue in Nigeria’s ride hailing market. The price war between Uber and Taxify highlighted some competitive and possibly, anti-competitive behaviour. In an attempt to prize away a portion of Uber’s market dominance, Taxify reduced the price charged to customers for an equivalent Uber trip. In addition, they charge a lower commission for connecting drivers with customers compared to Uber giving the drivers more profit. In response, Uber decided to crash their prices by 40% thereby leading to even lower prices for the customers but also, lower profits for the drivers. Whilst the price war is beneficial for the consumer short term, it is likely to be unfavourable long term for three reasons. First, the market player with the deepest financial reserves will outlast the others potentially creating a monopoly which is an undesirable outcome for consumers. Second, foreign players such as Uber and Taxify are more likely to export their profit out of Nigeria in the future reducing the social surplus for the Nigeria consumer. Third, the price war harms indigenous competitors such as Oga Taxi because their operational competitiveness cannot be sustained in light of the fierce price war between the foreign giants. Part I concludes that the manifestations in the ride hailing market would have been investigated within the limits of an enforceable competition policy if we had one.
A competition policy for the digital technology sector can provide a framework that enables the government to set the rules of engagement between competing market players without interfering with the market itself. It will ensure that the market remains competitive by protecting the competitors whilst including special provisions that promote the participation of indigenous players in the local technology sector. Although, there are some regulations in Nigeria that guide competition in specific network industries such as Telecommunications and Electricity, there is largely no clear legal backing for these fragmented policies that could address competition in the digital technology sector such as the ride hailing platforms. This was attributed to two main reasons in Part I. First, the government prefers to focus on other visually appealing issues such as poverty and insecurity and second, there is alack of understanding of the importance of competition policy. A third compelling reason is the influence of cronyism which diminishes the will for the political elite to tackle anticompetitive behaviour. The goal here is to discuss current policy efforts which establish the need for a well-functioning digital market as a means of tackling unemployment due to wealth created from new market opportunities and through the protection of existing market players. A further far reaching effect is to reduce insecurity, which is itself a manifestation of unemployment.
Nigeria boasts both high rates youth unemployment and poverty. The National Bureau of Statistics data shows that greater than 112million Nigerians out of approximately 180million live in poverty where poverty is referred to as living on less than $2 per day. Further, insecurity in the North-East and the Niger Delta regions have plagued the nation however, these have subsided due to amnesty and financial appeasing efforts which are arguably unsustainable. The economic recession in the third quarter of 2016 prompted the government to launch an Economic Recovery and Growth Plan (ERPG) in 2017 which had three broad objectives; tackling corruption, improving security and re-building the economy. In terms of re-building the economy, ERPG highlights that “the role of government in the 21st century must evolve from that of being an omnibus provider of citizens’ needs into a force for eliminating the bottlenecks that impede innovation and market-based solutions”. More specifically, EPRG contextualizes the importance of economic re-building through diversification by reducing dependence on oil for revenue and moving towards agriculture and solid minerals. Also, it highlights the importance of well-functioning markets- a process that requires the building of local capabilities, protectingindigenous players and correcting market failures such as monopoly, information asymmetry between agents and anticompetitive behaviour. Crucially, the EPRG was established “to recognize the power of markets to drive optimal behaviour among market participants, prioritise the use of the market as a means of resource allocation, where appropriate and strengthen regulatory oversight to minimise market abuse”.
Philosophically, the EPRG is well intentioned but, it superficially addresses the need for investing in the youth population, restoring growth and building a competitive economy that promotes digital-led growth. A further perusal of the EPRG’s section on digital markets which was derived from “the Smart Nigeria Digital Economy Project (SNDEP) to increase the contribution from ICT and ICT-enabled activity to GDP” highlights two important issues. First, it superficially addresses the importance of technology-based digital led sectors for wealth creation (poverty reduction) and reducing the risk of insecurity through fewer idle hands. Second, it shows a clear lack of dynamism and depth needed to address today’s technology sector issues. The SNDEP policy focuses on expanding broadband coverage, increasing e-government, and establishing ICT clusters but, it provides very little clarity on the strategies that will smoothen the existence of the technology industries/markets that are consequently developed. This arguably accounts for the diminished impact of digital-led growth in the country.
It is possible to easily attribute the lack of understanding of technology sector competition policy by policymakers as the reason behind the lack of clear strategies for managing local technology markets. Alternatively, the lack of political will also, provides a perfect alibi. Such blame will not be assigned here. However, the clear frustrations of unemployment especially among youths and the knowledge of the promise shown by the technology sector in reducing unemployment and creating wealth has driven indigenous youths’ interest in this sector. This is highlighted by numerous incubators and accelerators such as Co-Creation Hub, Spark and Weenovation which are developing and implementing brilliant ideas thatwill change the landscape of Nigeria’s digital sector. New apps such as Tuteria, RecyclePoints, Kangpe and Kudi typify the rising tide of digital technologies in Nigeria which should be nurtured. Moreover, a study by McKinsey Global Institute suggests that up to 3 million jobs and $88 billion can be added to the Nigerian economy over 10 years by supporting the local technology sector in areas such as digital accounts, payments, mobile money, health and educational services.
In conclusion, the economic benefits of supporting the local technology sector are clear and critical to tackling unemployment and insecurity. However, the lack of clear and detailed strategies to achieve such goals highlights the need for policymakers to evolve with this fast growing sector that enables indigenous players to thrive in spite of competition from external players. This article has consistently argued for the protection of the local digital technology players through a competition policy but, the author believes that the presence of competition from foreign players will also incentivise local players to innovate more in order to reach global standards. Therefore, competition should be encouraged within prescribed guidelines and models outlined in a comprehensive competition policy thereby allowing the effects of the Smart Nigeria Digital Economy Project to be noticed. Some models have been adopted in other emerging economies to promote and protect local players in the presence of global technology sharks. This will be discussed in Part III.
TomiwaErinosho, PhD
Dr TomiwaErinosho is currently studying a Master’s in Technology Policy at the Judge Business School, University of Cambridge.
