Government as Referee: Defining the Role.
Referees in any sport ensure the game’s rules are followed during play. They also maintain the integrity of the game for the benefit of the players and the audience. Unsurprisingly, the referee’s performance can make or mar the game. This analogy also applies to the government’s role in the private sector. Private businesses are formed to generate a profit by providing the necessary goods and services that consumers are willing to purchase. However, as the market grows in size and complexity, it becomes essential for rules and regulations to protect the consumers, business competitors and the general market. It is this vacuum that the government must fill. Through its regulatory agencies, in the case of Nigeria, such as the Corporate Affairs Commission (CAC), the Federal Competition and Consumer Protection Commission (FCCPC), and the Securities and Exchange Commission (SEC), the government ensures that private firms and organisations engaged in business follow the procedures and rules as essential guardrails to ensure fairness, transparency and accountability.
Ideally, as an impartial adjudicator, the government must protect consumers from predatory and unethical business practices. If left unchecked, such practices lead to the erosion of trust in the private sector. Additionally, the government must maintain a stable environment for businesses to grow and thrive. Stability can only occur when businesses have certainty about the rules of engagement. Companies must be aware of prohibited practices and the resulting sanctions, and these sanctions must be seen to be delivered fairly through trusted dispute resolution mechanisms.
Proponents of the free market economic theory often contend that government regulation stifles innovation, encourages corruption, and reduces efficiency, advocating for a self-regulating market. These proponents claim that market dynamics will ensure that innovation is encouraged through unfettered competition. The government’s role is not to be “big brother”, overreaching and stifling innovation. Like a referee, in most sports, the government should not insert itself as a player, hogging the ball and attempting to score. Instead, it observes keenly, ensuring that the players are held to the required standard and, if necessary, handing out sanctions to ensure that the audience is entertained correctly within the bounds of the law. The audience in this analogy is the consumers, who can be caught unaware as victims of unfair business practices.
For governments globally to effectively discharge their role as effective referees, there must be a synchronised lens through which it must view business and innovation. Government cannot seek to regulate what they do not understand, and conversely, overregulation stifles business growth, creates tension with the private sector and discourages new business. It is the focus of this piece to provide an essential guideline for governments to ensure effective and robust governance of private firms, most especially how governments should encourage and regulate new businesses, including local investors and Foreign direct investment.
Policy Checklist for Emerging Sectors:
a. Governments must understand the business they seek to regulate:
There is a temptation, especially in growing economies, to restrict new frontiers in business innovation due to inadequate research funding in the public sector. Essentially, governments tend to ban or restrict what they do not understand. These emerging areas include Blockchain and Cryptocurrency, the E-Sports industry, etc An example of this has been the stance of central banks globally on their slow adoption and recognition of blockchain technology, specifically cryptocurrency. Central Banks have, in many cases, worked to ban the trading of crypto assets, and in some cases have issued limited endorsement advocating for stricter regulations. However, the advent of the Investments and Securities Act (ISA) 2025 has reorganised the ownership and trading of crypto assets, a bold move which seeks to ensure formality, regulation and eventually generate potential government revenue from taxation.
b. Ease barriers to entry:
Regulations work as filters. Business growth is incentivised by minimum, but essential barriers and reduced bureaucracy. The World Bank Ease of Doing Business Reports explore different factors (including access to capital, dispute resolution mechanisms and the court system), which enable local businesses to experience growth while encouraging foreign direct investment. While nations are ranked on a progressive scale, there are some common themes; a large bureaucracy and bottlenecks around starting businesses and policy inconsistencies frustrate startups.
c. Incentivise growth & ensure fair market competition laws:
Governments “block” mergers which would create monopolies or hurt consumer welfare. An example of this was the proposed AT&T and T-Mobile merger in 2011, prevented by joint action from the US Department of Justice and the Federal Communciation Commission, valued at almost $40 billion. In the case of Nigeria, The FCCPC is tasked with playing watchman on these issues for the Nigerian Private sector, while providing guidance on mergers, acquisitions and takeovers.
From a regulatory standpoint, the Companies and Allied Matters Act (CAMA) 2020, the Investments and Securities Act 2025 and the FCCPC Merger Review Guidelines also serve to ensure fair market competition for both startups and stalwarts in the private market.
d. Efficient Taxation:
Public management theories prescribe efficient government taxation after optimal government investment in the economy, and policy consistency. The tax laws must be extensive, clear and inclusive. Tax breaks and holidays should be used strategically for new companies in certain sectors, as well as companies that have shown commendable compliance over time. Taxation should also take other novel adaptations, such as carbon credits, to address ESG concerns, especially for companies dealing with hydrocarbons.
What happens when there is minimal government intervention?
The essence of regulation is balance, which is tough but practical. Political systems that run solely on ideology fail to adapt to real-time circumstances and are stuck in inertia. Balance is key, as too much regulation makes businesses scared of taking ethical risks because of fear of the big brother interference. On the other hand, minimal regulation also undermines state capacity, creating a business environment promoting unethical business practices, unfair competition, and weak anti-trust enforcement. It becomes a “survival of the fittest” and MSME’s which are the backbone of most post-colonial economies like Nigeria are left to bear the brunt.
Case Study: 2008 Bailouts and Regulatory Intervention
However, what happens when government ideology clashes with real-world realities and application? During the financial crisis of 2008, the Bush and Obama administrations faced a similar issue in facilitating a bailout of the banking and auto industries. Top companies, including JP Morgan, Fannie Mae, Chrysler, and General Motors, were in deep liquidity trouble, holding a large portfolio of mortgage-backed securities and guarantees on subprime loans in the case of the banks and also a massive drop in car sales in the case of the automakers.
To a sizeable number of critics, the bailouts were seen as a betrayal of the ideals of true capitalism. The aggregated views show that in line with capitalist ideologies, these companies ought to have been left to their own devices and either found a way out of the troubles or be simply allowed to go bankrupt and liquidate. In hindsight, such course of action would have been both economic and political suicide, removing stalwarts in global business, creating mass unemployment and prolonging the long walk to freedom.
The masterstroke by both administrations was the initiation of the Troubled Assets Relief Program (TARP) and the placement of Fannie Mae and Freddie Mac under the Federal Housing Finance Agency’s federal conservatorship. The Obama administration also facilitated the merger of Chrysler Motors by Italian Auto giants, FIAT as a condition of the auto-industry rescue.
Corporate Capture: When Referees are Inflenced and Pressured
In many post-colonial economies, the earliest forms of corporate-styled businesses were built on the extraction of resources and exportation of these resources to respective colonial powers. Some of the oldest companies in existence in these economies had notable foundations and affiliations with the colonial merchant/chartered companies, like the Royal Niger Company and the Dutch East India Company. This foundation is important to understanding the business climate for most post-colonial societies.
Where state capacity is undermined and weak, where government institutions lack core policy grounding and direction, deferring to patronage instead of merit becomes the norm. Consequently, corporate capture becomes a real and palpable fear.
Corporate Capture is where a private firm or a group of private firms work to heavily influence regulatory bodies to adopt policies that will be most suited to their businesses, while wielding undue influence, evidenced by the firm’s lukewarm obedience to government regulation. The key here is pressure without formal control. In economies where the major employers of labour fall on a handful of profitable companies, as well as an economy with a concentrated and under-diversified tax base, corporate capture is not a far-fetched reality. Conversely, corporate capture, while still feasible in advanced economies, strong public institutions with stronger institutional memory guard against monopoly in the private sector and capture of regulatory institutions.
Conclusion: Responsible Governments and the Building of the Modern Referee State.
With new advancements in technology and the varied adoption of Artificial Intelligence to solve ever-evolving global business challenges, responsible governments cannot escape investment in rigorous research and development (R&D), AI deployment, and big data for policy implementation. The referee must be aware of the modern adaptations of the required sport and instill confidence in the overall sanctity of the competition by showing a moral fortitude necessary for equality and fair play.
It is recommended that governments evolve, and the machinery for regulation evolve with them. Nations need harmony in systems and responsible governments work to provide predictability and ensure that corporations remain accountable at all times. Absolute free markets have inadequate capacity to self-correct and small firms risk being overrun without adequate protection. Governments are necessary for maintaining a healthy equilibrum, effecting stoppage, spotting foul play and awarding penalties where there has been breach of the rules. This is the duty of any competent umpire. Responsible governments must be referees, not players—enforcing fair play while allowing the market to thrive.
