Price Legislation and Control Policies

Price Legislation

• The government can regulate the price of essential commodities, known as price legislation or price control.
• Minimum Price Control Policy: Sets a minimum price for commodities, primarily to protect producers, especially farmers.
  • This can involve measures like increasing taxes on competing goods, reducing taxes for producers, or withdrawing subsidies.
• Maximum Price Control Policy: Sets a maximum price for goods and services, preventing sellers from exceeding the stipulated price. This policy aims to protect consumers from exploitation.

Objectives of Price Control Policy

• Prevent exploitation: Ensures fair prices for consumers and prevents sellers from charging excessive prices.
• Control inflation: Curbs rising prices by limiting price increases.
• Help low-income earners: Provides affordability for essential goods for those with limited financial resources.
• Control profits of monopolists: Limits large profits earned by companies with dominant market positions.
• Stabilize income for producers (farmers): Guarantees a minimum income for farmers, enhancing their financial security.
• Accumulate surplus for the government: The government can collect revenue through taxes or price differences.
• Prevent price fluctuation: Aims to maintain consistent prices, reducing market instability.

Effects of Price Control Policy

• Hoarding: Producers may stockpile goods to sell at higher prices later or in the black market.
• Parallel market: Informal markets emerge where goods are sold at prices above the controlled rate, leading to a dual pricing system.
• Excess demand: Price controls can create a demand exceeding supply, leading to shortages.
• Rationing: Distributing goods in limited quantities due to shortages.
• Preferential treatment: Certain individuals or groups may receive preferential access to goods due to influence or connections.
• Queues: People wait in line due to limited supply and high demand.

Nigerian PMS Price Regulation

• The Nigerian government has implemented price controls on Premium Motor Spirit (PMS), commonly known as petrol.
• The consequences of such regulations are complex and wide-ranging.
• Possible consequences:
  • Shortages, long queues at filling stations
  • Fuel hoarding
  • Development of black markets with higher prices
  • Increased government intervention in the fuel sector
  • Potential for corruption and inefficiency