ECONOMY - 19 DEC 2018

Nigerians love free things, but this comes at a price

Nigerians love free things, but this comes at a price
Mobile telephone lines were initially sold for as high as ₦50,000 in 2001, but today retail for as low as ₦100.

The typical Nigerian is unsatisfied with the nation’s frequent power blackouts, substandard education system, and regular petrol scarcity. But when given the option to pay the market price for any of these services to eliminate these dissatisfactions, he is unlikely to accept this option.

In essence, the typical Nigerian is often unwilling to pay the market—and fair—price for goods & services, even if doing so would lead to better quality provision. He would rather pay little or nothing to receive a substandard product or service.

 

Paying nothing to get everything

In Nigeria, social goods and services such as electricity, water, and education are expected to be free or cheap. Protests over increases in the prices of goods and services are not uncommon, even when these products are offered by private businesses.

The love of free things partially explains the general unwillingness to pay taxes and tolls and why many Nigerians feel no unease about illegally sharing or receiving copyrighted materials, whether music, movies, or books. The same malaise extends to the Nigerian public education system, particularly at federal tertiary institutions where students often pay a paltry sum as tuition. Attempts by university authorities to charge higher tuition are often met with strikes and demonstrations, forcing a reversal. In fact, the first violent student demonstration in Nigeria, the Ali Must Go Protest in 1978, started in opposition to a 50 kobo increment in the price of government-provided meals on campuses.

The defence provided for our unwillingness to pay the market price for goods and services is that Nigerians are very poor. Having just assumed our throne as the poverty capital of the world, that holds some truth. But poverty does not tell the whole story. Many Nigerians with higher incomes also resist increases in the prices of non-essential goods and services, from cable television to flight tickets, indicating that there exist other broader factors which predispose Nigerians to this attitude.

When we look closer, we see that this culture has been tacitly fostered by the Nigerian state and its willingness to appease the masses through subsidies and price regulation. For instance, Nigerians buy petrol at a subsidised price of $0.41, less than $1.02 paid by Ghanaians and $1.07 paid by South Africans. Even though petrol subsidies have been shown to be incredibly wasteful and corruptible, Nigeria’s leaders have persisted with the policy, with not-so-tacit support from the masses.

In other words, Nigerians’ excessive sense of entitlement has been cultivated by successive governments. Everyone likes free things, but the Nigerian government has anchored people to free things or low prices through unsustainable subsidies. The behaviour is not intrinsically Nigerian, but a function of how we have been conditioned to behave.

 

A breakdown in public trust

There is another angle: trust. The erosion of trust between Nigeria’s private sector and its customers has resulted in the tendency to attribute high prices or price increases to exploitation. Even more significantly, the erosion of public trust, stemming from persistent failures of the successive administrations to deliver on electoral promises, has created a generation of sceptical citizens unwilling to pay a high price for a service or product for fears that such product might end up being a dud.

Unfortunately, we pay the price for our willingness to pay fair prices. There is no such thing as a free lunch. The consequences are our crumbling infrastructure, failing education system, and general underdevelopment. Ironically, we struggle to see the link between the low price we pay for goods & services and the poor quality we receive. Nigeria’s infamous electricity problem is directly traceable to the fact that electricity tariffs are too low to cover the costs of generating and distributing electricity.

Breaking a society away from this culture is particularly difficult to achieve because the unwillingness to pay a fair price often leads to poor service delivery which further reinforces the refusal to pay a fair price in the future, thus creating a cycle. For instance, few Nigerians would be willing to pay a fair electricity tariff based on a promise of constant power supply given the historical failures of power companies, yet it would be impossible to create a viable power sector without market-based tariffs.

 

Give a man fish and teach him about the river

To break this cycle, you need to work on two things: income levels and public trust. The first requires development, and the second suggests a shift in societal orientation.

Nigerians are indeed poor, and raising incomes is a necessary step to building a willingness to pay the fair price. It would be futile to expect people to pay for goods and services they cannot afford.

Meanwhile, a shift in social orientation to highlight the value in enterprise and even social goods is essential. For a start, the notion that higher prices equal exploitation needs to be dispelled. Many private companies charge initial high prices to recoup investments, before letting prices fall over time. A perfect example of this is the Nigerian telecoms sector post-liberalisation where mobile telephone lines were initially sold for as high as ₦50,000 in 2001, but today retail for as low as ₦100.

There must also be a political will to wean Nigerians off subsidies and regulated prices. However, to achieve this, public trust in institutions must be restored via the provision of high-quality services even if Nigerians are initially unwilling to pay for them. Only when consistent high-quality service delivery has been demonstrated will people be willing to pay a fair price for them.

Encouraging people to pay fair prices is an arduous task, but it is one which is required in order to free Nigeria from the underdevelopment facilitated by the deceptive allure of free things. Nigerians must quickly learn that in a capitalist society, very few of the best things in life are free.

Olanrewaju Rufai

Olanrewaju Rufai

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