Price Control In Nigeria: Insights Into The Price Control Act, 1977 And It’s Implications For Businesses And Consumers.

By Oyetola Muyiwa Atoyebi, SAN FCIArb. (U.K)

Introduction

Given the rising inflation and decreasing consumers’ purchasing power, governments often adopt several measures to cushion the impact of these macroeconomic changes on citizens. Direct regulation of prices of selected commodities, otherwise referred to as price control, is one such measure.[1] As prices of food and commodities continue to soar amidst the economic hardship in the country, there is a pressing need to examine the reasons for price distortions, which occur when prices and production deviate from the levels that would typically exist in a competitive market.[2]

The Price Control Act of 1977 represents a crucial piece of legislation aimed at regulating and stabilising prices across various sectors of the economy. Enacted to ensure fair pricing practices and protect consumers from exploitation, this act holds significant implications for businesses, consumers, and government authorities alike.

Without a doubt, the intent behind the implementation of such control stems from the desire to maintain the affordability of goods and mitigate the impact of inflation on consumers of various products and services, or to ensure a minimum income for providers of certain goods or a minimum wage.[3]

In this article, we delve into the intricacies of the Price Control Act, examining its key provisions, enforcement mechanisms, and impact on economic activities in Nigeria.

Overview of the Price Control Act

The Price Control Act 1977, enacted during the military regime of Gen. Obasanjo, serves as a fundamental tool for governmental price regulation, particularly during periods of economic turmoil such as wartime or high inflation. This legislation empowers the government to establish both maximum and minimum price limits for designated goods and services. Minimum prices, known as price floors, ensure fair compensation for labour, while maximum prices, or price ceilings, prevent the exploitation of consumers by capping prices.

Despite the shifting economic landscape and the trend towards liberalisation, the Price Control Act remains relevant, especially in the realm of wage and salary regulation. Notably, the government continues to enforce minimum wage standards through the establishment of price floors for labour.

In 2004, during the tenure of the Obasanjo administration, the Price Control Act was reaffirmed, leading to the creation of the Price Control Board.[4] The Act mandates the creation of Price Control Committees in each state to enforce price controls locally [5] while also providing supplementary provisions regarding the functioning of the Board and Committees.[6]

The Act empowers the Board to impose prices according to the Act [7] and outlines procedures for fixing controlled prices and defining basic prices and permitted variation.[8] It also prohibits the sale of goods above controlled prices, with corresponding penalties for violations[9] while addressing hoarding practices and penalties.[10]

Sections 8 to 17 of the Price Control Act delineate various enforcement measures, penalties, and legal procedures. These provisions cover aspects such as resale price maintenance, the role of enforcement staff, duties to furnish information to the Board, seizure of goods, requisition and sealing of premises, court orders for habitual offenders, offences by corporate bodies, trial procedures, personal liability exemptions, and regulatory authority.

Through these provisions, the Price Control Act aims to maintain economic stability, protect consumer interests, and ensure fairness in pricing practices. However, whilst arguably price control is a veritable economic tool for the protection of consumers, increasing access to essential goods and controlling inflation through prevention of excessive price increase, its relevance in present-day Nigeria calls for a total overhaul to confront the present challenges in the Nigerian Market today.

Enforcement Mechanisms of the Price Control Act, vis-à-vis Federal Competition and Consumer Protection Act

While the Price Control Act (PCA) remains in force, it is the Federal Competition and Consumer Protection Act (FCCPA) that currently serves as the primary legislation governing competition and consumer protection in Nigeria. This comprehensive law addresses all facets related to the regulation of consumer goods and prices within the country.[11]

In accordance with the legal principle of precedence, in cases of conflicting provisions between different statutes, the provisions of the latest statute generally take precedence. In the present context, Section 88(1) of the FCCPA confers upon the President the authority to declare a list of goods and services subject to price control in Nigeria through an order published in the Federal Gazette. Therefore, if there exists a direct conflict between the provisions of the PCA and the FCCPA, the latter would prevail, given its enactment in 2019, while the PCA dates back to 1977. Consequently, should the President exercise their authority under Section 88(1) of the FCCPA, the provisions of the PCA pertaining to the same subject matter would be rendered obsolete.[12]

Federal High Court Decision on Price Control in Nigeria

The Federal High Court (FHC) in  Lagos in February 2024, its ruling ordered, in a suit marked FHC/L/CS/869/2023 brought Mr Feml Falana (SAN), against the Price Control Board and the Attorney-General of the Federation (AGF) per Justice Ambrose Lewis-Allagoa of the FHC, the Federal Government to fix the prices of foodstuffs, and petroleum products within seven days from the date of the decision (the “Court Order”). Specifically, the Court Order concerns the fixing of the price of milk, flour, salt, sugar, bicycles and their spare parts, matches, motorcycles and their spare parts, motor vehicles and their spare parts as well as petroleum products (including diesel, petrol motor spirit (PMS) and kerosene).[13]

Traditionally, courts refrain from intervening in executive powers, especially when discretion is involved. The issuance of a writ of mandamus, typically used to compel the performance of a public duty, is primarily employed to prevent the abuse of discretionary power or when decisions are influenced by irrelevant considerations. Courts generally hesitate to dictate how discretionary powers should be exercised.[14]

The courts explained the use of the order of mandamus in the case of Dododo v. E.F.C.C. (2013) 1 NWLR (Part 1336) 468, thus: “Mandamus is a high prerogative writ which lies to secure the performance of a public duty, in the performance of which the applicant has a sufficient legal interest. It commands that a duty or function of a public nature, which normally, though not necessarily, is imposed by statute but is neglected or refused to be done after due demand, should be done. If there is discretion in the performance of the duty, the court has the power to examine whether the discretion to refuse to act has been properly exercised. In the exercise of that power, the court will not lightly overrule discretion just because it considers it desirable that the duty be performed. Even if it is found that the discretion was not properly exercised or that there was in fact no discretion at all in the matter, the court may still exercise its discretion not to order mandamus on the general ground that the court would make no order in vain which could no longer be carried out; or on the other ground of expediency that it would serve no useful purpose even if the order were implemented. In those instances, the exercise of the court’s discretion will also need to pass the usual test.”[15]

Implications of Price Control for Businesses and Consumers in Nigeria

On the 19th of February, an important meeting was held, gathering key stakeholders including the Minister of Works, the Minister of Industry, Trade and Investment, top executives from Nigeria’s leading cement manufacturers (BUA Cement, Dangote Cement, and Lafarge Cement), and representatives from the Cement Manufacturers Association of Nigeria. The primary agenda of this gathering was to deliberate on the worrying trend of rising cement prices within the Nigerian market.[16]

After thorough discussions and deliberations, the attendees collectively arrived at a resolution to implement specific price limits for cement products. This decision was seen as a proactive measure aimed at curbing the escalating prices of cement, which had been a growing concern for various sectors of the economy, including construction, infrastructure development, and housing.[17]

However, while the initiative to impose price controls may address immediate concerns related to affordability and market stability, it also raises several noteworthy considerations and potential drawbacks. One significant concern is the potential stifling effect of price controls on market dynamics and competition. Imposing rigid price limits could discourage innovation and investment within the cement industry, as manufacturers may face constraints in adjusting prices to reflect changing market conditions and production costs.[18]

While they may be introduced with the best intentions to improve social outcomes, price controls often undermine growth and development, impose fiscal burdens and can weaken the effectiveness of monetary policy. At least in part, this is because price controls cause a shift in consumption towards subsidised goods, and away from other non-subsidized goods.[19]

Additionally, the imposition of price controls may create administrative challenges and regulatory burdens for both government agencies and industry stakeholders.[20] Monitoring compliance with price limits, addressing grievances or disputes, and enforcing penalties for violations require significant resources and oversight.[21] Moreover, the effectiveness of price controls in achieving long-term economic objectives remains subject to debate, as they may only offer temporary relief without addressing underlying structural issues within the market.[22]

Whilst the decision to establish price limits reflects a proactive effort by the government to address immediate concerns, a cursory look into the causes of inflation [23] in the Nigerian economy is essential to carefully weigh the potential benefits against the inherent drawbacks and unintended consequences of price control measures for achieving lasting economic prosperity.

Conclusion

The Price Control Act, enacted in 1977, stands as a testament to the government’s efforts to regulate prices and ensure economic stability in the face of inflationary pressures. However, the evolving economic landscape and the emergence of new legislation, such as the Federal Competition and Consumer Protection Act (FCCPA), necessitate a reevaluation of the role and effectiveness of price controls in today’s market environment.

In addition, the recent ruling by the Federal High Court, mandating the government establish price limits for essential commodities, highlights the delicate balance between judicial intervention and executive discretion in economic policy.

Moving forward, it will be essential to have a nuanced understanding of the economic implications, coupled with evidence-based policymaking, to chart a path towards sustainable economic prosperity in Nigeria. Ultimately, achieving a delicate balance between market stability, consumer protection, and economic growth will be paramount in navigating the complexities of price control in Nigeria’s evolving economy.

Snippet: The Price Control Act 1977, enacted during the military regime of Gen. Obasanjo, serves as a fundamental tool for governmental price regulation, particularly during periods of economic turmoil such as wartime or high inflation.

Keyword: price control, price control act 1977, PCA and FCCPA

AUTHOR: Oyetola Muyiwa Atoyebi, SAN FCIArb. (U.K)

Mr. Oyetola Muyiwa Atoyebi, SAN, is the Managing Partner of O. M. Atoyebi, S.A.N & Partners (OMAPLEX Law Firm).

Mr. Atoyebi has expertise in and vast knowledge of Commercial Law and Practice, and this has seen him advise and represent his vast clientele in a myriad of high-level transactions.  He holds the honour of being the youngest lawyer in Nigeria’s history to be conferred with the rank of Senior Advocate of Nigeria.

He can be reached at atoyebi@omaplex.com.ng

CONTRIBUTOR: Chikezie Iwu Esq.

Chikezie is a member of the Dispute Resolution Department at OMAPLEX Law Firm. He also holds commendable legal expertise in Commercial Law and Practice.

He can be reached at chikezie.iwu@omaplex.com.ng

[1] Seye Ayinla: Price Control and Competition in Nigeria. Available at https://www.doa-law.com/wp-content/uploads/2024/02/Price-Control-and-Competition-in-Nigeria.pdf accessed on 19 April 2024

[2] Justin-Damien Guénette: Price Controls Good Intentions, Bad Outcomes. Available at https://documents1.worldbank.org/curated/en/735161586781898890/pdf/Price-Controls-Good-Intentions-Bad-Outcomes.pdf accessed on 19 April 2024

[3] Isaac Asabor: Consumers See Price Control Mechanism As Panacea To Rising Prices Of Goods. Available at https://independent.ng/consumers-see-price-control-mechanism-as-panacea-to-rising-prices-of-goods/ accessed on 19 April 2024

[4] Section 1 of the Price Control Act 1977

[5] Section 2 PCA 1977

[6] Section 3 PCA 1977

[7] Section 4 PCA 1977

[8] Section 5 PCA 1977

[9] Section 6 PCA 1977

; [10] Section 7 PCA 1977

[11] Stanley Alieke: Price Control on Consumer Goods in Nigeria. Available at https://www.tekedia.com/price-control-on-consumer-goods-in-nigeria/ accessed on 19 April 2024

[12] Op cit fn. 1

[13] Editorial: Nigeria’s economic crossroads: The controversy of price control revival, Business Day (February 15, 2024). Available at https://businessday.ng/columnist/article/nigerias-economic-crossroads-the-controversy-of-price-control-revival/ accessed on 19 April 2024

[14] Fummilayo Odude: Issues in using Price Control in Nigeria. Available at https://www.financialnigeria.com/issues-in-using-price-control-in-nigeria-blog-862.html#:~:text=Price%20control%20in%20Nigeria%20was,it%20has% 20not%20been%20repealed. Accessed on 19 April 2024

[15] Ibid

[16] Emmanuel Addeh: Dangote, Bua, and Lafarge Agree to Reduce Cement Prices to N7,000 After Meeting with FG. THISDAYLIVE (February 20, 2024) available at https://www.thisdaylive.com/index.php/2024/02/20/dangote-bua-lafarge-agree-to-reduce-cement-prices-to-n7000-after-meeting-with-fg accessed on April 19, 2024

[17] ibid

[18] FaterCapital: Implications Of Government Intervention On The Free Market. Available at https://fastercapital.com/topics/implications-of-government-intervention-on-the-free-market.html accessed on 19 April 19, 2024

[19] Worldbank: Price Controls: Good Intentions, Bad Outcomes(GLOBAL ECONOMIC PROSPECTS | JANUARY 2020). Available at https://documents1.worldbank.org/curated/en/735161586781898890/pdf/Price-Controls-Good-Intentions-Bad-Outcomes.pdf, accessed on April 19, 2024

[20] Op cit fn. 12

[21] Op cit. fn. 18

[22] ibid

[23] Oyeremi Abdulrasaq Omobolaji: High rate of inflation in Nigeria and its negative effects. Vanguard (February 23, 2023) is available at https://www.vanguardngr.com/2023/02/high-rate-of-inflation-in-nigeria-and-its-negative-effects/ accessed on April 19, 2024