3 Practical Reasons Why Monopoly Is Bad

3 Practical Reasons Why Monopoly Is Bad
May 22, 2013 Yomi Jegede

When I say monopoly, I don’t mean the board game; I am referring to a situation where a specific person or enterprise is the only supplier of a particular commodity. Economists have managed to confuse us on this matter as they will just draw some complicated graphs and use sophisticated grammar. In this article, I have given practical examples that will help you understand and take a stand ON or AGAINST monopoly.Monopoly_electronic_banking_edition

  • Monopoly leads to increase in price: I remember in the year 2001 when GSM was newly introduced in Nigeria, the price of one Econet SIM card was about N35000, if you compare it to now when SIM cards are about N100 and you even still get about N200 free airtime which means that technically, a SIM card costs about –N100. This is a huge difference in price, what changed? The answer simply is COMPETITION, the competition in the communications market which has seen the entry of different mobile and CDMA operators such as MTN, Zain, Glo, Etisalat, Visafone, Retel, Starcomms and so on. This fierce competition has led to a fast decline in the cost of communication in Nigeria and I can only see the situation getting better. In other words, the higher the competition, the lower the price.
  • Deliberate act to withhold output: In year 2003 when Dangote was given monopoly to be the only supplier of cement in Nigeria, something very interesting happened. People began to protest about the price and a lot of people wanted to go into cement business at the time but they couldn’t start production because they needed the government to give them approval first. When Dangote discovered this, they knew that they were going to lose market share if government removed their right to monopoly so they just stopped supplying cement to the whole country and you can imagine the consequences of that, everyone was now at the mercy of Dangote cement.
  • Reduces Consumer Sovereignty: There is a popular saying that “the consumer is king”. That’s not true of a monopolistic market; the producer is king because he dictates everything in the market, the price, the class of people that patronize that market, when to sell and when not to sell and so on. This removes the power of choice possessed by every consumer, so it’s either you buy or you get out.

The reason why I’ve pointed these things out is to bring to your awareness exactly what’s going on in Nigeria. We have a choice but it seems like we don’t because the government is not controlling the price of goods and services as they ought. Take a look at basic amenities like light, water, internet connection, cement, a meal at KFC and the likes, those things are way overpriced but we have no choice but to purchase them at the prices set for them. Apparently, there is only one way to regulate prices now, get up and do something. Engage yourself in one business or the other, the more the competition, the lesser the price. Do something now, don’t be afraid because you will make more money than you can imagine.


Comments (2)

  1. Leyton 2 years ago

    The government is the biggest monopoly that needs to be killed


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