Competition law in Nigeria
SCOPE OF THESIS
The area of Competition law in Nigeria remains an area of law that has not been fully tapped. Currently, there is no competition law operating in Nigeria and although there has been a bill, it is yet to be passed to law. The ongoing lack of a competition law regime has quite predictably led to price-fixing, excessive pricing of products , market concentration as well as domination being the order of the day, all to the detriment of the consumer.
The primary objective of this thesis therefore, is to discover the value of introducing Competition law in Nigeria and indeed a sector specific Competition Law to the Nigerian Communications Industry. The theses will begin by examining the global significance of Nigeria and the position of Nigeria as a developing economy. This research further seeks to examine the state of the Nigerian telecommunications industry and the steps that have been taken by the Nigerian Government towards the opening up of the telecommunications industry in Nigeria.
The thesis will also look at both the arguments for and against the introduction of a competition law in Nigeria and a specific competition law in the telecommunications industry which forms the main focus of this research.
The present situation in Nigeria can be likened to a market where all the telecommunications providers provide their services at the same price, a price that always seems to be a little higher week after week, In such a case, what might have happened is that the telecommunications providers have formed cartels so that they can force up prices and make large profits. If such is the case, it is the welfare of the customers that suffers because of the lack of competition.
Competition issues in various sectors of the economy are handled by other regulatory regimes such as The Special Trade and Malpractices Investigation panel, standards organisation of Nigeria, Nigerian Civil Aviation authority, Securities and Exchange commission, Central Bank of Nigeria, and of particular importance to this thesis, The Nigerian Communication Commission (NCC) which is the national regulatory authority for the telecommunications industry in Nigeria. The question that arises however is whether the regulations set out by the NCC are sufficient to promote and preserve competition. This thesis will analyse the position of the NCC as a regulator of the Nigerian telecommunications industry.
RATIONALE AND RESEARCH METHODOLOGY
In carrying out this research, the author will rely on a collection of theories, comparative study of the Law in different jurisdictions and Interviews with various individuals who have experience in this field. Primary and secondary sources of information will be used to collect and analyze data to come to a viable conclusion.
The primary sources which the author will utilize include authoritative materials of the law such as the Constitution of the Federal Republic of Nigeria, statutes and legislations in force, official publications and judicial decisions relating to competition law, telecommunications law and Privatization in Nigeria. Books, journals, articles, dictionaries, periodicals, newspapers, The Federal Competition Bill and internet documents will constitute secondary sources of information. These are materials which pertain to law but are not themselves authoritative records of legal rules. A comparative study of competition law systems in other jurisdictions will also form a part of the study.
In order to make this thesis logical, the author will sketch headings and arrange materials to accommodate research findings. Headings and cross headings will not only assist to readily identify where a particular point has been dealt with, it will also make the theses flow in a logical way and keep the readers interested.
Because the area of law to being researched in this thesis is relatively young in Nigeria, it is necessary to perform foundation research and as such, secondary sources of research will be highly relied upon in this thesis.
Challenges of Research Methodology:
It is widely accepted that competition authorities in developed and developing countries alike encounter challenges and obstacles in their effort to promote competition and enforce their various competition laws. While the challenges faced are similar in nature their degrees vary across countries. It has been observed that Developing countries such as Nigeria do not generally place the implementation and administration of competition law on their priority lists. They are generally of the mind that it is like giving a silk tie to a hungry child.
However, with the changing global landscape, trade barriers being removed and markets becoming more integrated, developing countries find themselves in the situation in which they now have no choice but to institute the relevant legislation. The implementation of institutional reform that the developed countries took several decades to accomplish is now being thrust upon developing countries which do not have the luxury of time, the requisite skill or the resources.
In the same vein, in carrying out research on competition law in the Nigerian telecommunications industry, the author came across various research challenges. The main challenge has been the inability to get research materials. This is due to the fact that the area of research is still in its infant stage in Nigeria as a result there is not enough written material on it.
Further, it is a very contentious and political issue as a result; companies, institutions and individuals who have access to necessary material or information are not willing to release information.
The Bureaucratic nature of Nigerian Institutions also posed as a major challenge to this research. This is because there are many levels of management, much paperwork and impersonal officials working to a fixed routine who seem to find it difficult to provide necessary information or give necessary interviews which would be advantageous to this research paper. The unstable state of the Nigerian Telecommunications Limited (NITEL) which operated monopoly status in the Nigerian Telecommunications industry for a long time also proved to be a challenge in getting research information. This is because as management of NITEL changed, the operations change and this makes it difficult to get information on previous happenings in the company.
Other challenges faced by the author in the research process came in the telephone interview process. This is because some people do not have telephones or do not have their telephone numbers listed. People also often dislike intrusion of a call to their homes and never have time for a telephone interview at work. Also telephone interviews need to be relatively short or people get impatient or feel imposed on.
The use of the internet as a form of research also came with its own challenges some of which include accuracy and reliability of information obtained from online sources and difficulties in verifying a writers credentials.
COUNTRY PROFILE AND GLOBAL SIGNIFICANCE OF NIGERIA
The Federal Republic of Nigeria consists of 36 states and 774 local governments administrations. The Capital city is Abuja, located in the Federal Capital Territory and it is geographically situated in the middle of the Country.
Nigeria has a population of over 148 million making it the largest market in sub-Saharan Africa with reasonably skilled and potential manpower for efficient and effective management of investment projects within the country. Nigeria is a regional power and it is listed among the “Next eleven” economies
Nigeria is a nation blessed with an abundance of natural and mineral resources as well as renewable energy sources. Its oil reserves make Nigeria in the league of the top ten petroleum rich nations, and by far the most affluent in Africa. Nigeria is a member of the organisation of petroleum exporting nations which makes it significant to the world at large. The petroleum industry in Nigeria has brought unprecedented changes in the Nigerian economy, particularly in the past five decades when it replaced agriculture as the cornerstone of the Nigerian economy and contributes the lion share of in the nation’s gross domestic product, accounting for the bulk of federal government revenue and foreign exchange earnings.
The Nigerian economy can be described as most promising. Nigeria has however been long hobbled by political instability, corruption, inadequate infrastructure, and poor macroeconomic management. Nigeria’s former military rulers failed to diversify the economy away from its overdependence on the capital-intensive oil sector, which provides 95% of foreign exchange earnings and about 80% of budgetary revenues. Following the signing of an IMF stand-by agreement in August 2000, Nigeria received a debt-restructuring deal from the Paris Club and a $1 billion credit from the IMF, both contingent on economic reforms.
Nigeria has a mixed economy which accommodates all; individuals, corporate organisations and government agencies to invest in almost all economic activities. Over the last decade, the Nigerian government has introduced some economic measures such as liberalisation and privatisation of sectors that had been monopolies, with the purpose of introducing competition, wealth creation and encouraging foreign investors.
In 2003, the Nigerian government instituted the National Economic Empowerment and Development Strategy (NEEDS), a domestically designed and run program modelled on the IMF’s Poverty Reduction and Growth Facility for fiscal and monetary management. NEEDS focused on four key strategies; poverty reduction, wealth creation, employment generation and value re-orientation. The initiative has recorded remarkable achievements, meeting most of its targets, and in some instances surpassing them. In November 2005, Nigeria won Paris Club approval for a debt-relief deal that eliminated $18 billion of debt in exchange for $12 billion in payments – a total package worth $30 billion of Nigeria’s total $37 billion external debt. The deal requires Nigeria to be subject to stringent IMF reviews.
OVERVIEW OF THE TELECOMMUNICATIONS INDUSTRY
The telecommunications industry forms a major infrastructural requirement for any meaningful economic development to take place in a country. The importance of a robust telecommunications infrastructure cannot be over emphasized as it is pertinent to economic growth, and constitutes a significant portion of the world’s economy. This chapter discusses the historical and present state of the global telecommunications industry with particular focus on Nigeria. The Chapter will consider the policy approach to deregulation of the Nigerian telecommunications industry, as well as provide an overview of the evolution of the Nigerian telecommunications industry from the colonial times to full liberalisation as is the position now
Over the last one hundred and thirty (130) years, the global telecommunications industry has experienced an unprecedented growth from an almost unnoticed analogue telephony to a modern digital mobile communication with billions of subscribers worldwide. This is evident in the Europe and Latin American telecommunications market worth â‚¬424bn in 2007, with mobile services accounting for 51%.
The Evolution of the Global Telecommunications Industry
The African telecommunications market being the fastest growing telecoms market in the world plays host to the next wave of global competition. In 2006 alone, mobile companies signed up about 60 million new subscribers across the continent, as many people as the entire population of the United Kingdom.
Africa’s unique infrastructure challenges have made telecommunications (particularly mobile phones) an indispensable business and social tool. Despite impressive recent growth in telecommunications, penetration rates in Africa remain relatively low, thereby suggesting a large underlying potential market in this populous continent. It is expected that 260 million new subscribers will be added across Africa by 2014, nearly equal to the present population of the entire United States of America.
THE NIGERIAN TELECOMMUNICATIONS INDUSTRY
In consonance with the global trend in the telecommunications industry, Nigeria shares a similar success story over the past 130 years of navigating its telecommunications operations. The figure below shows incremental successes achieved within the Nigeria telecoms industry.
The Evolution of the Nigerian Telecommunications Industry
HISTORY OF TELECOMMUNICATIONS IN NIGERIA
Telecommunications facilities came into being in 1886 by the colonial administration. The initial purpose was merely to carry out administrative duties as opposed to the provision of socio economic development for the country. Thus, the introduction of public telegraph services connecting Lagos by submarine cable along the west coast of Africa to Ghana, Sierra-Leone, Gambia and on to England was more important than an efficient telecommunications network.
Subsequently, as at 1960 when Nigeria gained her independence, there were only 18,724 telephone lines available for a population estimated at 40 million people. This translated to a tele-density of about 0.5 telephone lines per 1,000 people. The telephone network consisted of 121 exchanges out of which 116 were of the manual (magneto) type and only 5 were automatic. Since independence, there have been a number of development plans for the expansion and modernisation of the telecommunications networks and services. Most of these plans were not fully implemented.
After the Nigerian Independence in 1965 and up until 1985, the telecommunications industry was divided into: The department of Posts and Telecommunications (P & T) and The Nigerian External Telecommunications (NET) Limited, P & T took charge of the internal network while NET overlooked the external telecommunications services and provided the gateway to the outside world.
By the end of 1985, the installed switching capacity was about 200,000 lines as against the planned target of about 460,000. All the exchanges were analogue, and telephone penetration remained poor equal to 1 telephone line to 440 inhabitants, well below the target of 1 telephone line to 100 inhabitants recommended by the International Telecommunications Union (ITU) for developing countries. The quality of service was largely unsatisfactory, the telephone was unreliable, congested, expensive and customer unfriendly.
These unsatisfactory services led to the split of P & T in January 1985, it was divided into Postal Division and Telecommunications Divisions. The telecommunications division was merged with NET to form Nigerian Telecommunications Limited (NITEL),a limited liability Company, while the Postal Division was reconstituted into another organisation called the Nigerian Postal Service (NIPOST).
On establishment, NITEL became the national operator for telecommunications services in Nigeria. Although efforts are being made to privatise NITEL, and indeed there was a recent privatisation attempt where by 51% equity stake of NITEL was sold to core investors, this privatisation attempt was reversed and NITEL remains wholly owned by the Government of Nigeria.
NITEL was set up to reverse the defects which characterised telecommunications development from independence up until 1984. Its main objective was to harmonise the co ordination of the external and internal telecommunications services, rationalise investments in telecommunications development and provide easy access, efficient and affordable services.
The historical key businesses of NITEL include fixed telephony services including international, internet, payphone and interconnection; Long distance carrier including fixed international calls and satellite services; cellular, including all cellular activity carried out within M-Tel.
After the inception of NITEL,little progress was made in the development of the telecommunications industry and it was still characterised with poor management, lack of accountability and transparency and inefficiency.
At this time, NITEL occupied a monopoly status and being owned by the Government, this resulted in its having a weak infrastructure base, high unmet demand, Lines concentrated in selected urban areas, slow growth of subscriber base and limited investment into the telecommunications sector.
In order to tackle these short comings, and in line with what obtains in several developed nations, The Government of Nigeria identified that Liberalisation of the Telecommunications market was essential for rapid network growth. Private sector participation was essential for attracting financial resources, innovation and new technology. The industry was thus deregulated through the establishment of the Nigerian Communications Commission (NCC) by Decree No. 75 of 1992.
The NCC has since approved almost 200 operating licenses for private providers of various telecommunications services, including internet services providers, which of course has in turn generated a high demand for telecommunications equipment, accessories, consultancy and technical partnerships. In addition, NITEL has approved various private firms to be connected to its switching systems so as to provide more lines (with greater efficiency and service) and thus act as a buffer for the grossly inadequate NITEL services.
Despite all these efforts, it was quite clear that there was a dire need for the Nigerian Government to be more pro-active about improving telecommunications.
As such, in 2000, the NCC awarded licenses for Global System of Mobile Communications (GSM) to NITEL by auction to two preferred bidders – Econet Wireless Nigeria Limited and MTN Nigeria Limited. The licenses were ‘bought’ at almost US$240million dollars, the highest amounts ever paid for such licenses in the world. The GSM technology has completely overshadowed NITEL’s land lines, as the demand is high for them due to efficiency, despite the astronomical tariffs its consumers are subjected to.
These cumulative events eventually spurred the NCC, through the Bureau of Public Enterprises (its secretariat) to seek to privatise NITEL by requesting for Core investors to acquire controlling interest in the entity and manage its day to day activities.
The privatization of NITEL has always been shrouded in controversies and politics. Many people are of the view that the Federal Government has not shown enough seriousness or sincerity in the many attempts to sell the telecommunications company. The first attempt in 2002 to privatise NITEL could not materialise due to the failure of Investment International Limited (ILL) of Britain to pay the $1.317 billion it offered for the 31 per cent shares of the company. ILL paid up the mandatory 10 per cent deposit, but was unable to make up the balance by the end of several deadline Periods, thereby derailing the process.
Another attempt was made in 2003 with the engagement of a Dutch company, called Pentascope to manage NITEL and put it on sound footing preparatory to its sale. This one also collapsed. In the third attempt, Orascomm of Egypt offered $256.43 million for 51 per cent shares of NITEL. This offer was considered “ridiculously low”, and, so the government cancelled the deal.
This has been the story of the efforts to privatize this big and potentially rich government-owned telecommunications firm. One deal that stood out was the Pentascope agreement. While Pentascope was expected to revitalize NITEL, Pentascope ended up not only ruining the company but it mounting up huge debts for the company as well. In particular, when Pentascope took over NITEL in March 2003, NITEL had about N17.7 billion in its coffers. However about a year later when its agreement with NITEL was terminated, it had left NITEL with a debt burden of N38 billion and a reduction in the number of functional land lines from 455,000 to 288,000.
It therefore seems correct to state that the singular error of picking Pentascope as the management consultant to NITEL in 2003 is largely responsible for the pitiable condition the company finds itself in today.
In 2006, 51 per cent equity in NITEL was sold to another company, Transnational Corporation, (TRANSCORP), for US $ 500 million. However, this process also failed to turn around the operator as TRANSCORP has been unable to raise the money to overcome the many problems of NITEL.
The Nigerian government holds 49% of NITEL. The government however, wants Transcorp to sell 27% of Nitel to a new investor, which would then purchase a further 24% from the government to take control. This new core investor was scheduled to take over in February 2009; however this has not yet happened.
In the meantime, the NCC has awarded a second national carrier license to Globacom Nigeria Limited, the only company out of three who expressed an Interest that was able to come up with the US$20 million 10% deposit of the Auction price requested by the NCC. Government was of the belief that a second National carrier would offer much needed competition to NITEL. Globacom has since commenced operations and as of today, it has the third highest subscriber network in the Country.
POLICY APPROACH TO DEREGULATION AND PRIVATIZATION
Liberalisation and privatisation
It was only a matter of time before it became clear to Nigerian policy-makers that a shift in its policies was required. The over-regulation of the economy had become unhelpful, the economy was anaemic, and the Government had trouble keeping up with subventions to State owned enterprises, many of whom, at any rate, were inefficiently and unprofitably run.
For SOEs in the telecommunication sector such as NITEL, the implications of its inefficiency for the entire economy were very far-reaching as it contributed to the retardation of the country’s overall industrial development.
The merits of a deregulated economy were thus too overpowering for the Nigerian Government to ignore: much-needed foreign direct investment was to be attracted, bringing in tow the required technology, management and technical skills that would not only boost the economy but would transform the SOEs. To achieve this, however, it was obvious that radical legal reforms would have to be undertaken.
Following the collapse of communism and apartheid, more countries joined the race for foreign investors. Investment climates therefore needed to be competitive. Before then, through the indigenisation policy pursued since the early 1970s, foreign investors in Nigeria had to contend with ceding a portion of their business to local investors. The real challenge, however, lay in removing regulation and monopoly so that foreign investors could have a level playing field. What followed was a rash of laws designed to facilitate foreign direct investment in Nigeria.
Significant among these reforms was the repeal of the Nigerian Enterprises Promotions Decree 1989 (under which the indigenisation policy was sustained), and in its place came the Nigerian Investment Promotion Decree No.16, 1995 which made it possible for an enterprise to be 100 per cent owned by foreign investors. Also, the Exchange Control Act 1990 under which foreign investors required the approval of the Minister of Finance in order to transfer profits abroad was repealed in favour of the Foreign Exchange Decree No.15, 1995 that guaranteed free transfer of capital. The Companies Act 1968 was also repealed in favour of the Companies and Allied Matters Act, 1990, a more comprehensive and forward-looking company code. Against these reforms, Nigeria began its gradual journey towards deregulation, privatisation and a free market economy.
However, as the free market was a model that had never previously been applied in Nigeria, its handlers had trouble grappling with it, and this led to the initial efforts being short-lived.This was followed by another privatisation law, the Bureau of Public Enterprises Decree, 1993.
In every great monarchy in Europe, the sale of crown lands will produce a very large sum of money, which if applied to the payment of public debts, would deliver from mortgage a much greater revenue than any which those lands have ever afforded to the crown…When the crown lands become private property, they will in the course of a few years become well improved and well cultivated” ADAM SMITH, WEALTH OF NATIONS (1776).
The term privatization is used to describe a range of different policy initiatives designed to alter the balance between the public and private sectors. It commonly refers to the transfer of ownership and control of enterprise from the state to the private sector.This may occur in various ways, such as, the sale of all or part of the privatized company’s equity to the public, or the sale of the company as a complete entity. It may also take the form of joint ventures, where the private sector will invest in a public enterprise
Privatization as a tool for economic management came about in the early 1970s when Chile became the first country to turn public businesses to private operators. Since then, over 140 countries have embraced privatization as a route to economic growth and prosperity.
In the process of privatization, more investible capital has been injected into the various economies through local and foreign investors to the benefit of the country at large. In the process, funds that would have been committed to the maintenance of otherwise inefficient enterprises have been freed into more productive sectors of the economy.
Privatization in Nigeria
Privatization in Nigeria was formally introduced by the Privatization and Commercialization Act of 1988, This Act set up the Technical Committee on Privatization and Commercialization (TCPC) with a mandate to privatize 111 public enterprises and commercialize 34 others. In 1993, having privatized 88 out of the 111 enterprises listed in the decree, the TCPC concluded its assignment and submitted a final report. Based on the recommendation of the TCPC, the Federal Military Government promulgated the Bureau for Public Enterprises Act of 1993, which repealed the 1988 Act and set up the Bureau for Public Enterprises (BPE) to implement the privatization program in Nigeria.
As at May 1999 the Federal Government investment in these public enterprises was in the region of US$100 billion. In spite of these massive investments, however, public enterprises have failed to perform the functions and attain the objectives for which they were set up. The gross failure of these enterprises to live up to expectations is partly responsible for the current move towards economic liberalization, competition and privatization. The philosophy behind privatization in Nigeria therefore is to restructure and rationalize the public sector not only to lessen the dominance of unproductive investments in the sector but also to initiate the process of gradual cession to the private sector of public enterprises which are believed to be better operated by the private sector.
It is also expected that the privatization programme will provide the channel for reintegrating Nigeria back into the global economy as a platform to attract foreign direct investment in an open, fair and transparent manner.
THE ENABLING PRIVATISATION LAWS
Public Enterprises (Privatisation and Commercialisation) Act 1999 provides the enabling legislation for the implementation of the privatization and commercialization programme. This Act created the National Council on Privatization (NCP) whose functions include:
- making policies on privatization and commercialization;
- determining the modalities for privatization and advising the government accordingly;
- determining the timing of privatization for particular enterprises;
- approving the prices for shares and the appointment of privatization advisers;
- ensuring that commercialized public enterprises are managed in accordance with sound commercial principles and prudent financial practices; and
- Interfacing between the public enterprises and the supervising ministries in order to ensure effective monitoring and safeguarding of the managerial autonomy of the public enterprises.
The 1999 Act also established the Bureau of Public Enterprises (BPE) as the secretariat of the National Council on Privatization. The functions of the bureau include among others to do the following:
- implement the council’s policies on privatization and commercialization;
- prepare public enterprises approved by the council for privatization and commercialization;
- advise the council on capital restructuring needs of enterprises to be privatized;
- ensure financial discipline and accountability of commercialized enterprises;
- make recommendations to the council in the appointment of consultants, advisers, investment bankers, issuing houses, stockbrokers, solicitors, trustees, accountants, and other professionals required for the purpose of either privatization or commercialization; and
- Ensure the success of privatization and commercialization implementation through monitoring and evaluation.
The Constitution of the Federal Republic of Nigeria 1999
Nigerian laws dealing with the issues of privatization do not exist in a vacuum. It is part of the body of laws governing the transfer and acquisition of property in Nigeria. The most fundamental legal document in Nigeria is the Constitution of the Federal Republic of Nigeria 1999. Under sections 43 and 44 of the Constitution, the right of the individual to own movable and immovable property is guaranteed by the Constitution. As a corollary to this guarantee, these properties cannot be acquired by the Government without the payment of compensation.
The issue that has been discussed very frequently is whether the guarantees protect the sale of shares. This depends on whether the shares are movable property under the Constitution. It has been argued that since shares are choses in action they are not strictly so called movable property. They are special specie; consequently they are not protected under the Constitution. If this argument prevails it means that if a NEW Government which does not share the philosophy of the recent Governments ascends to power, it can reacquire the shares which it had disposed off through privatisation without any obligation to pay compensation for the share.
At present the position of the Constitution should not create any serious alarm because, Under the Nigeria Investment Promotion Commission Act, Decree No. 16 1995 (the law enacted to encourage inflow of investments in Nigeria) the Government of Nigeria guarantees expressly that no compulsory acquisition of enterprises and interests shall take place in Nigeria. This clearly includes chooses in action.
Foreign Exchange (Monitoring and Miscellaneous Provisions) Decree 1995
A major factor which provided a catalyst for the privatization process was the need to attract foreign investment. The commanding height of the economy theory had failed to attract investments. The oil boom had disappeared and it was necessary to augment national revenue through foreign investment.
The laws governing the allocation of foreign exchange had to be adapted in such a manner as to make it very attractive to the foreign investor. Consistent with this spirit of liberalization and privatization of the economy the rules governing the importation and repatriation of the foreign exchange were further relaxed in 1995 by the promulgation of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Decree No 17 of 1995.
The Decree repealed the Exchange Control (Anti-Sabotage) Decree 1984, The Foreign Currency (Domiciliary Account) Decree 1985 and the Second Tier Foreign Exchange Market Decree 1986. It created the Autonomous Foreign Exchange Market (AFEM). One of the interesting features of this law was that the responsibility of accepting foreign exchange into Nigeria and repatriating it out of Nigeria is now conferred on the authorized dealer (who is not necessarily a bank) who can receive foreign currency being remitted into Nigeria as an investment or for any other legitimate transaction. If a foreign investor wants to invest in Nigeria all he has to do is to transfer the money into Nigeria through an authorized dealer who has the duty of issuing a certificate of capital within 24 hours to the importer.
This situation has made the importation of capital into Nigeria for any legitimate purpose very convenient and has aided the privatization process and indeed promoted competition in the economy considerably
CRITICISMS OF PRIVATISATION
The privatisation exercise brought with it controversies that are still raging on. Western countries, and in particular International Monetary Fund IMF and the World Bank, have been blamed for forcing the privatization of public services and natural resources in Africa as a condition for development assistance. They are accused of telling poor countries to turn their public services over to private owners and to sell off their oil, gas, mining, electric, telecommunication, transport, and water companies, which are also said to be conditions for debt relief. As in some of the other African countries, resentment is intensified because a good number of the larger enterprises being privatized are bought over by foreign interests. The largely and more ignorant public also see privatization as lacking credibility and as an attempt by government officials to purchase the said enterprises for themselves.
The Opponents of the privatization process fear that the private sector will exploit consumers where there is monopoly or oligopoly power such as by raising the prices of goods. It has also been argued by those opposed to privatization that the process will create poverty. At the heart of the criticism of privatization is the perception that it has not been fair – hurting the poor and the vulnerable work force, while benefiting the rich, the powerful, and the privileged – thereby perpetrating poverty. Unions are also of the view that privatization will break unions. Workers dismissed as a result of privatization have great difficulty finding other work; the large number of people out of jobs is forced to accept jobs with lower pay, less security, and fewer benefits. They, therefore, believe that the aims of privatization are to reduce labour costs and numbers, and to break union power.
There is also the argument that even if privatization contributes to improved efficiency and financial performance, it has a negative effect on the distribution of wealth perhaps arising from corruption. Corruption is the single most destructive factor responsible for the pitiable state of affairs in many developing countries. It distorts the economy through waste and misallocation of resources and creates need for external assistance. Transparency International has for a long time decried the evil consequences of corruption and has identified acute corruption in many developing countries. Further, There is this strong belief that privatization is not necessary. Public enterprises need not run at a loss; all they require is good managers, less political interference, competent boards of directors, and especially more rational pricing policies. Critics of privatization further view it as an injustice because there is an assertion that it is the politicians and bureaucrats that caused the public enterprises to perform poorly but only labour is asked to carry the burden of reform.
Privatization is seen as an imposition by foreign capitalists and agencies like the IMF and the World Bank; therefore, privatization must be meant to exploit the developing countries. Some critics have argued that privatization is neo-colonialism since the policy is being pushed by International Monetary Fund, World Bank, and their agencies. It is not an indigenous idea; therefore, it will not work.
Right from the onset, the most publicly persistent and organized opposition of privatization in Nigeria has come from the labour movement. There always have been strikes against any decision to privatize a government agency. Sometimes workers have succeeded in blocking or slowing down the privatization of specific enterprises. In other cases the government simply has brushed aside the labour opposition leaving a legacy of anger and political tension. What is obvious is that workers are reacting against threatened jobs or the possibility that benefits might be jeopardized under new management.
OBJECTIVES OF PRIVATIZATION
Privatization aims to reduce the drain on state treasury by state enterprises. It is note worthy that an improvement in efficiency performance of a Privatized company will only occur if privatization is associated with competitive market conditions.
An important motive for privatization is the anticipated promotion of wider share ownership by both employees and the public, ostensibly to increase competitiveness, enhance technical innovation, and break down barriers between employees and management. Ownership of shares breaks down barriers between owners and earners, and contracting out introduces more specialised expertise, more flexible work practices, and deployment of manpower.
Privatization also prevents the Government from meddling with the affairs of business enterprises. Bureaucratic controls will be reduced and the likelihood of arbitrary interference in operating decisions will be lessened, thereby increasing productive efficiency of the privatized company.
Other benefits of privatization are that it will Reduce corruption , Modernise technology, Strengthen domestic capital markets, Dismantle monopolies and open markets, Promote efficiency and better management , Reduce debt burden and fiscal deficits, Resolve massive pension funding problems, Broaden base of ownership and Promote corporate governance,.
DEREGULATION OF THE NIGERIAN TELECOMMUNICATIONS INDUSTRY
Another mode of privatization involves Deregulation or Liberalisation of entry into activities previously restricted to the public sector enterprises. The removal of restrictions on market entry is intended to increase the role of competition, and to the extent that the private sector is successful in entering the hitherto protected markets, a variant of privatization will have occurred, even though no transfer of ownership of assets has been involved
Deregulation and liberalisation of the Nigerian Telecommunications industry began with the establishment of the Nigerian Communications Commission (NCC) by Decree 75 of 1992; The NCC is the independent National Regulatory Authority for the telecommunications industry in Nigeria. The Commission is responsible for creating an enabling environment for competition among operators in the industry as well as ensuring the provision of qualitative and efficient telecommunications services throughout the country.
As a result of Telecommunication Liberalisation, Nigeria has become one of the fastest growing telecommunications market in the world for mobile communications. For instance, since launch in August 2001, MTN Nigeria has steadily deployed its services across Nigeria. It now provides services in 223 cities and towns, more than 10,000 villages and communities and a growing number of highways across the country, spanning the 36 states of the Nigeria and the Federal Capital Territory, Abuja. Many of these villages and communities are being connected to the world of telecommunications for the first time ever
The Policy Objectives of Deregulation of the Nigerian Telecommunications Industry:
The policy objectives of deregulation are stated in the National telecommunications policy. Accordingly, they may be divided into three categories they are; The Social Objectives, The Technical Objectives and the Legal and Economic objectives.
The social policy objectives of the deregulation of the telecommunications industry, include the provision of public telecommunications facilities to all communities in the country, and meeting the telecommunication service needs of the social, commercial and industrial sectors of the economy,
The technical objectives include the implementation of a network development project which will ensure that the country meets and exceeds the ITU recommended minimum teledensity of 1 telephone to 100 inhabitants. This means that a minimum of 2 million fixed lines and 1,200,000 mobile lines should be provided within 2 years, The promotion of widespread access to advanced communications technologies and Services, in particular the Internet and related capabilities; the development of indigenous capacity in telecommunications technology; the establishment of a National Frequency Management Council (NFMC) within the Ministry of Communications with the responsibility for the planning, coordination and bulk allocation of the radio spectrum in the interest of efficiency, transparency and accountability and to establish and meet aggressive targets for the installation of new fixed and Mobile lines.
The legal and economic objectives include the participation in international telecommunications activities in order to Promote telecommunications development in Nigeria, meet the country’s international obligations and derive maximum benefit from international cooperation in these areas; ensuring that the government divests its interest in the state-owned Telecommunications entities so as to promote competition to meet growing demand through the full liberalization of the telecommunications market; reviewing and updating telecommunications laws in order to bring all telecommunications operators under the regulatory control of NCC.
Other significant objectives of deregulation include the encouragement of domestic production of telecommunications equipment in Nigeria and the development of related software and services,
Important objectives include the protection of the integrity, defence and the security of the state and its citizens, Thereby encouraging Nigerian telecommunications operating companies to become Global leaders in the industry, encouraging the development of an information super-highway that will enable Nigerians enjoy the benefits of globalization and convergence, and To create the enabling environment, including the provision of incentives, that will attract investors and resources to achieve the objectives earlier stated.
Relevance of the telecommunications Industry in Nigeria.
The telecommunications industry is very significant to the Nigeria’s economy. The sector is a major source of Foreign Direct Investment (FDI), a key contributor to the economy and mass employer of labour. The relevance of the Telecoms industry continues to increase as operators offer products and value-added services that have brought changes to how people work and live. The financial sector has also benefited as banks and insurance companies and other financial institutions participate in the large – ticket transactions traceable to the telecoms sector.
Corporations across industries are advancing their businesses under the tenets of e-business; from online ticket reservation to internet-enabled interbank funds transfer using mobile phones as medium of exchange – the demand for telecommunications services is embedded in the day to day activities of individuals and businesses. With a progressive trend of changing customer buyer values, continued technological advancement and increased dependence of businesses on telecommunications, the relevance of the telecommunications industry going-forward is established.
CURRENT AND EMERGING PLAYERS IN THE NIGERIAN TELECOMMUNICATIONS INDUSTRY
The Nigerian wireless market has grown from an initial thirty thousand (30,000) subscribers base in 2000 to exceed fifty five million (55 million) subscribers eight years later. This phenomenal growth was spurred by the deregulation of the telecommunications industry in Nigeria and increased participation by the private sector.
In 2001 the industry monopoly of the government-owned Public Switched Telephone Network company, NITEL was broken when the Digital Mobile License (DML) was awarded to MTN Nigeria, Zain Nigeria (formerly Celtel Nigeria Limited), and Mobile Telecommunications Limited (Mtel). In 2002, a fourth Digital Mobile License was awarded to Globacom Limited and National Carrier Licenses awarded to NITEL and Globacom Limited. Other licenses in the category of Fixed Wireless Access and National Long Distance Operators brought about network carriers operating in the fixed wireless segment. These operators include, Starcomms, Multilinks, Intercellular, Reltel (now ZOOM Mobile), MTS Wireless, recently Visafone amongst others.
After expiry of the 5-year exclusivity licenses awarded to GSM operators in 2006, the Unified Access Service License regime was introduced under which converged fixed-mobile services could be offered under a Unified Access Service License. Subsequently, eight (8) Unified Access Service licenses were awarded. In 2007, 3G spectrum licenses were awarded to four (4) companies – MTN, Globacom, Celtel (now Zain) and Etisalat.
The fast subscriber growth witnessed in 2007 has prompted the three (3) major players to invest in network capacity and coverage. The threat of foreign operators and investors entering the market as well as full-blown competition from fixed wireless operators therefore loom over profit margins. :
Brief Profile of the Nigerian Telecommunications Operators
MTN Nigeria (MTNN) is a subsidiary of the MTN Group, based in South Africa. Following the Nigerian GSM auction conducted by the Nigerian Communications Commission in 2001, in which MTN obtained a GSM license, the company launched full commercial operations beginning with Lagos, Abuja and Port Harcourt. To date, MTNN has invested over US$1.8 billion building mobile telecommunications infrastructure in Nigeria.
MTNN now provides services in 223 cities and towns, more than 10,000 villages and communities and a growing number of highways across the country, spanning the 36 states of the Nigeria and the Federal Capital Territory, Abuja. Many of these villages and communities are being connected to the world of telecommunications for the first time ever.
The Company’s mission is to be a catalyst for Nigeria’s economic growth and development, helping to unleash Nigeria’s strong developmental potential not only through the provision of world class communications but also through innovative and sustainable corporate social responsibility initiatives.
Glo Mobile launched its services in August 29, 2003, and became the fastest growing GSM network in Africa, achieving a record one (1) million subscribers, covering over eighty-seven (87) towns in just nine (9) months. The Glo Mobile coverage now extends to over 40,000 cities, towns, communities and major roads, thus making the company the second largest operator in Nigeria.
While vigorously pursuing its expansion strategy, the network has earned the identity of the Nigerian innovator. This is because it boasts of a wide variety of innovative packages and tariff plans designed to fulfil the needs of a broad spectrum of market segments in Nigeria. Prominent among the innovations that Glo Mobile introduced, are the Per Second Billing, Blackberry, Multimedia Messaging Service (MMS), Magic Plus, Glo Direct, Glo Mobile Internet, M-banking and Glo Mobile Office.
While other competitors in the Nigerian telecommunications industry argued that Per Second Billing (PSB) was not possible until 2007 and that no network in the world has been able to launch PSB, Globacom introduced the billing platform at launch. This caused a stir in the industry and is regarded as the most innovative landmark in the communications industry since the introduction of GSM services in Nigeria in 2001.
Originally known as ECONET Wireless, the company was established in 2000 by a group of institutional and private investors as well as the governments of Lagos, Delta and Akwa Ibom states. ECONET Wireless went through series of name changes to V-mobile, Vodacom, Celtel and on August 1 2008 it was branded to Zain Nigeria following the global acquisition of Celtel International’s organisation – MTC Group – by Zain Group, a leading emerging markets player in the field of Telecommunications.
It made history on August 5, 2001 by becoming the first telecoms operator to launch commercial GSM services in Nigeria. Zain Nigeria currently covers over 1500 towns and 14000 communities across the six (6) geopolitical zones of the country
Emerging Markets Telecommunication Services (EMTS), trading as Etisalat, is a Nigerian company duly incorporated under the laws of Nigeria in partnership with Mubadala Development Company and Etisalat of the United Arab Emirates. Incorporated in Nigeria as a private company, it acquired the Unified Access License from the Federal Government in January 2007. The license includes a mobile license and spectrum in the GSM 1800 and 900 MHz bands at a price of $400million (Four Hundred Million U.S. Dollars). Etisalat acquired a 40% stake in EMTS and is now the operator of the Unified Access License.
The company has been the telecommunications service provider in the United Arab Emirates since 1976. In its 32 years of operations, it has built up state-of-the-art telecoms infrastructure and taken a leadership position of innovation and reliability among regional and international operators. It has footprints in sixteen (16) countries traversing the Middle East, Asia and Africa. In Africa, Etisalat’s operations span ten (10) African countries including Sudan and Zanzibar.
In Nigeria, Etisalat made the first official call on its network on the 13th of March 2008. From day-one of its operations in Nigeria, the company puts in place various skills acquisition and training programs to enable its people offer outstanding quality and services to Nigerians.
Etisalat’s mission is to extend people’s reach. It is currently actively developing advanced networks that will enable people to develop, learn and grow. It has been at the forefront of technological innovations, including a 3.75 network deployed in Egypt. In addition Etisalat owns majority shares in Thuraya, a leading provider of satellite telephony.
Nigerian Mobile Telecommunications Limited (Mtel) was established in 1996 with the objective of providing affordable and reliable mobile cellular services throughout the country. It took over the operations of 10,000 (TACs) Analogue system, which was hitherto managed by Nigerian Telecommunications Limited (NITEL). In 2001, President Obasanjo merged Nigerian Mobile Telecommunications Limited (Mtel) with Nigerian Telecommunications Limited (NITEL) for operational expediency.
Meanwhile, on the 1st April 2003, Mtel was a company re-established to exclusively continue the deployment of GSM service in Nigeria. The company’s mission is “to be the focal point of national pride by providing delightful and affordable services through a motivated workforce while ensuring adequate returns on investments and meeting corporate social responsibilities.”
Starcomms started operations in Nigeria in 1999 as a Private Telecommunications Operator (PTO) to provide fixed telephony services. In 2006, it got the Unified Access Service License from NCC to provide both fixed and wireless telephone in addition to a wide range of services including broadband and international gateway services. Today, it is amongst the largest CDMA 3G mobile networks that provide one-stop telecommunications for fixed and mobile market segments.
Starcomms became the first CDMA operator to deploy 3G IZAP Mobile Broadband Data service in Nigeria in the year 2006. It was also the first 3G CDMA operator in Nigeria to have over 1.5 million subscribers on its network. Its areas of coverage include Lagos, Ibadan, Abuja, Kaduna, Zaria, Benin city, Sango-Ota, Mowe, Ijebu-Ode, Shagamu and Abeokuta.
Visafone is a wholly-owned Nigerian Telecommunications Company incorporated on 20th June, 2007, following the acquisition of Cellcom. It acquired the Unified Access Service License from NCC on the 1st August, 2007 to operate a CDMA network on 3 Carriers 800MHz band.
Visafone, which is in its eight month of operation, has covered over 100 cities in the following states of the federation, Abuja, Lagos, Abia, Anambra, Akwa Ibom, Cross River, Delta, Ebonyi, Edo, Enugu, Imo, Kano, Kaduna, Ogun, Oyo and Rivers.
Multilinks obtained a Unified Access Service License from the NCC on 2nd June, 2006.
ZOOM Mobile (formerly Reltel Wireless)
ZOOM Mobile was incorporated on August 25, 1998 as Reliance Telecommunications Ltd (Reltel Wireless). It started business as fixed telephony service provider and later took advantage of the deregulation in the telecommunications sector to acquire a Unified Access Service License from NCC.
Intercellular Nigeria Limited is a private Company limited by shares incorporated in December 1992 under the Companies and Allied Matters Decree No. 1 of 1990. Its main objectives include the provision of all facets of telecommunications services within Nigeria and the West African sub-region.
The company was awarded a license in 1996 to operate a private network link based on the Code Division Multiple Access (CDMA) technology. Intercellular deployed the Wireless Local Loop (WLL) platform in 1997.
Intercellular commenced commercial operation in Lagos in March 1998 with a 10,000-line capacity switch and three (3) Base Stations. In May 1999 Intercellular increased the number of its Radio Base Stations to six (6) to provide additional coverage in the Lagos area. Two more Base Stations were added to the Lagos network in March 2001, four (4) were cutover to the network in July 2001, a high capacity CBSC was also added to the network in May 2001 to increase the traffic handling capacity of the network to 2400 Erlangs.
The Company provides telecommunication services in Nigeria’s commercial capital Lagos, Port Harcourt in the heart of Niger Delta, Kaduna, Zaria, Kano and Maiduguri in the Northern part of the Country. Kaduna/Zaria and Maiduguri have joined the Intercellular national brand drive with 15,000 and 5,000 line capacity respectively. A 5000-capacity switch was also brought into service in March 2000 in the city of Port Harcourt with two base stations. Two more Base Stations were later added. The Switch and CBSC Capacity have also been raised to handle up to 10,000 subscribers. Services commenced in Abuja in August 2001 with a 10,000-line switch and five Base Stations.
REGULATORY FRAMEWORK OF THE TELECOMMUNICATIONS
This chapter sets the scene of the regulatory framework for telecommunications in Nigeria. The chapter will analyse the position and functions of the Regulators and the successes they have achieved in the telecommunications industry.
As previously discussed, Nigeria is a largely liberalised and deregulated market. The wireless sector of the telecommunications industry in Nigeria is regulated by the Nigerian Communications Commission (NCC), operating under the Wireless Telegraph Act of 1990 and the Nigerian Communications Act (NCA) of 2003. The primary objective of the Communications Act 2003 is to create and provide a regulatory framework for the Nigerian Communications Industry. The Act also establishes the Nigerian Communications Commission (NCC) as an effective, impartial and independent regulatory authority.
Whilst policy direction for information and communication technology (ICT) industry in Nigeria is administered by the Minister of information and communication, The NCC forms the major regulatory authority for the telecommunications industry and it monitors compliance and regulates the telecommunications industry and licensing.
In 2000, The National Telecom Policy (NTP) was established by The Federal Government of Nigeria in conjunction with key industry stakeholders. One of the policy thrusts of the NTP is the liberalization of the telecoms sector by divesting government interests, encouraging private enterprise and investments as well as fostering effective competition in the industry.
Generally, The Government plays a vital role in the telecommunications regulation. It gives the overall direction for telecommunications development, to ensure policy consistency of telecommunications with other national policies and to enact necessary laws and take other measures in support of the already mentioned National Telecommunications Policy.
THE NIGERIAN COMMUNICATIONS COMMISSION (NCC)
The Board of the Commission consists of nine Commissioners made up of the Chairman, the Executive Vice Chairman/Chief Executive, two Executive Commissioners and five non-executive Commissioners. The main functions of the NCC are; Licensing of telecommunications operators; Assignment and registration of frequency to duly licensed operators; Administration of national numbering plan, Facilitating private sector participation and investment in the telecommunications sector of the Nigerian Economy, Promoting and enforcing a fair competitive environment for all operators; Defining standards for economic regulation of dominant operators, including tariff regulation; Establishing mechanisms for promoting universal access to telecommunications services in Nigeria; Establishing and enforcing technical operational standards and practices for all operators including the imposition of penalties for violations and Ensuring that the public interest is protected.
The objectives of the NCC as listed by the website are; The promotion and implementation of the national communications or telecommunications policy as may from time to time be modified or amended, To establish a regulatory framework for the Nigerian communications industry and for this purpose to create an effective impartial and independent regulatory authority To promote the provision of modern, universal, efficient, reliable, affordable and easily accessible communications services and the widest range throughout Nigeria. To encourage local and foreign investment in the Nigerian Communications industry and the introduction of innovative services and practices in the industry in accordance with international best practices and trends, To ensure fair competition in all sectors of the Nigerian communications industry and also encourage participation of Nigerians in the ownership, control and management of communications companies and organizations To encourage the development of a communications manufacturing and supply sector within the Nigerian economy and also to encourage effective research and developments efforts by all communications practitioners., To protect the rights and interests of service providers and consumers within Nigeria, To ensure that the needs of the disabled and elderly are taken into consideration in the provision of communications services and To ensure an efficient management including planning, coordination, allocation, assignment, registration, monitoring and use of scarce national resources in the communications sub-sector, including but not limited to frequency spectrum, numbers and electronic addresses, and also promote and safeguard national interests, safety and security in the use of the said scarce national resources
The successful performance of the NCC can be seen in the subscriber data indicated in the table below which shows the subscriber data from year 2001 – December 2008.;
Teledensity was calculated based on population estimate of 126million people uptill Dec 2005; from Dec 2006, teledensity was based on a population estimate of 140m.
Teledensity from 2001 to 2006 was based on number of connected lines
Teledensity from December 2007 was based on active subscribers
From the tables above, it can be seen that the overriding objective of the deregulation of the telecommunications industry to achieve the modernisation and rapid expansion of the telecommunications network and services, is fast being achieved as a result of the ongoing reforms. The table shows that the reform has brought more private sector investment, increase in the number of market players, unprecedented growth in the network, an expanded geographical coverage, and most importantly, it has created employment. Clearly, the present reforms have enhanced national economic growth and social development and integrated Nigeria internally as well as into the global telecommunications environment.
The Liberalization of the telecommunications sector has been largely successful and it has led to an increase in the range and quality of telecommunications services available in Nigeria. Further, it has led to a reduction in costs of acquiring and using the services, increased level of private sector participation and foreign investment, creation of employment opportunities and additional revenue for the Government through spectrum and numbering fees, import duties, VAT etc.
Liberalization of the telecommunications industry has led to the availability more communication services in Nigeria such as Gentex which is the extension of telex services to rural areas, Voice cast, private leased circuit, alternate leased circuit, maritime mobile services, radio/television carrier and off course telephony, telex, cellular mobile telephony and facsimile.
It is however vital that market Liberalisation be accompanied by the appropriate regulatory measures to ensure that it progresses smoothly.
One of such measures is the adoption of a Competition Law regime. It has been argued that if Governments like Nigeria’s which have committed themselves to market liberalisation, through privatisations and deregulation of various sectors of the economy, do not have a competition law, they might unwittingly end up creating new dangers.
To illustrate this point, arguments have been canvassed that when vital sectors of the economy are deregulated, ushering in, in place of government monopolies, private players who are not constrained by social interests and whose overriding drive is profit, there is nothing to prevent the new undertakings from engaging in cartel and abusive behaviour such as price fixing, market division, and excessive pricing. Yet, in what would appear to be a bitter irony, in the absence of a competition law, such practices would not be illegal, no matter how much they hurt the economy and the consumers.
The moral that sought to be drawn from the above is that half liberalisation could in some cases be worse than no liberalisation at all, since it ends up engendering hitherto unknown dangers. It is therefore concluded that any market liberalisation programme like Nigeria’s that is designed in such a way as to lack an essential component like a legal regime to regulate competition in the market, could be fundamentally flawed
The foregoing leads to the next issue to be considered in this thesis which is competition law and its role in the Nigerian economy and in the telecommunications industry in particular.
DEFINITION AND TERMS
“Competition” in its ordinary usage means a contest in which people try to do better than their rivals.In the sense of the markets, it appears to be a continuous or a repeated process not necessarily subject to a quantified period, and with the implication that the competition process and the reward entailed are factors that can spread over a long or short period.The idea of this reward revolves arounOrder Now