Inflation is currently at 33.95 percent in Nigeria and basic necessities like education, water, food, and electricity are no longer affordable to civil servants, not to mention the unemployed and the poor. For this reason, some concerned Nigerians have suggested a total price control for temporary relief without the requisite long-term consequence.
Our findings revealed that by dictating to hardworking Nigerians how much to sell their goods, not only is the price control immoral, but such policies can create more scarcity and further inflate the price of goods.
The Claim
Dr Sultan Abaji, in an open letter written to President Tinubu, proposed the establishment of the National Goods and Services Pricing Regulatory Agency to fix and regulate the price of goods in Nigeria. According to him, price control will mitigate inflation and bring down the prices of food items among others.
In his words: “Some countries are putting subsidies on electricity and essential basic commodities to ease the sufferings of their citizens while others are subsidising the basic inputs for manufacturers of these commodities. Hence, in Nigeria, subsidies for these commodities would not work but price control will.”
The proposition is meant to force business owners—producers and retailers—to sell at a fixed price. For example, the government might mandate that a bag of beans be sold for ₦10,000, even when the production cost, which largely dictates the price of goods, says otherwise.
Consider a businessman who buys 100 bags of beans from Kwara state, where they are abundant and cheap, for ₦120,000 and drives hundreds of kilometres and travels for over 9 hours to sell them in Abuja. Should we force him to sell at the rate of N120,000 that he bought it?
If the government fixes a price of ₦120,000, the businessman would struggle to make a profit. If they buy the beans for ₦120,000 in Kwara and sell them for the same price in Abuja, the formula essentially eliminates the cost of transportation not to mention the profit of their efforts. With this, the businessman runs into loss. Since no businessman would enter a business and run into a loss, Abuja residents might suffer scarcity of goods not produced in the area as no one would be interested in journeying hundreds of kilometres for nothing in return.
Also in his letter, Dr Abaji said that nobody has the right to increase the price of the goods he or she produces and any necessity that demands a price increment must have the consent of the legislators.
He wrote: “…no individual, group of people or company has the right to increase the price of any commodity without writing to the agency who would forward the same to the legislators for all the legislative protocols.”
In the world of Dr Abaji, an individual has the right to produce goods but must get permission before setting the price to sell them. This looks more like slavery. Even if we ignore the moral perspective, a policy like this one is not only difficult, it is impossible to execute.
Price Control, Venezuelan Error
In 2003, in the face of unprecedented inflation bedevilling the Venezuelan economy, the country implemented stringent price controls to cut down the price of goods. The regulations were on a broad spectrum of essential items, including foodstuffs, pharmaceuticals, and petroleum products. However, this well-intentioned measure ultimately led to widespread scarcity and rampant black market trade and significantly deteriorated the quality and availability of vital goods and services.
Though the policy immediately slashed the prices in the market, it was not long before the country ran out of food and other essential items. Today, Venezuela tops the list of countries with price control measures and a projected inflation rate of 150 percent by 2025, according to Statista.
Fight Insecurity, Not Prices
Years of Boko Haram insurgency, banditry, and farmer-herder clashes, among others have undeniably hampered food production in Nigeria, subsequently causing food scarcity in the country. Every time a hamlet is razed by bandits, displacing farmers in the process, or a farmer-herder crisis destroys farms, the country moves closer to the food price inflation it currently suffers.
While price fixing is brought about by good intentions, the unintended consequences are capable of crumbling an entire state’s economy. Countries like Nigeria that find it hard to secure the safety of farmers are likely to suffer food item scarcity and price inflation. And just like Venezuela, a country that controls prices is signalling scarcity and hyperinflation.
Contrary to what Dr Abaji proposed, price control will not work in Nigeria. More specifically, it will help fuelling inflation rather than deflating it.
