Let’s Look at the general effects of Monopolies:
Any economy that has a monopoly faces serious threats to innovation, fair market processes, and competition. Nigeria, a country with large oil reserves, has been dealing with the unfavourable effects of monopolistic behaviour in its oil refining industry. The company Dangote Cement, which is well-known for ruling the cement market, has now expanded its influence into the refining industry. This circumstance raises questions about the risks of having a single company control oil production and refining, especially in a nation that depends so largely on this crucial industry.
Why do we fear Monopoly Effect:
Monopolies, by definition, are characterized by a single entity’s exclusive control over a particular good or service, allowing it to set prices, dominate markets, and limit competition. This is why we fear the monopoly effect. Similar tactics have been used by Dangote Cement in order to gain a substantial market share in the cement sector. There is now a real risk that the monopolistic tendencies used by Dangote Cement could be repeated with the Dangote Group’s entry into oil refining, aggravating the problems already present in Nigeria’s oil sector. This is so because both business organizations’ management styles are probably similar.
Effect of Lack of Competition and Innovation:
When one company dominates a market, the lack of competition frequently breeds complacency and a lack of motivation for innovation. Nigeria’s state-owned refineries have struggled to run at full capacity, which has led to ongoing gasoline shortages and the need for expensive fuel imports. Dangote’s announcement of a new refinery may appear encouraging, but it does not guarantee a solution. Without a competitive market, the corporation might not be as motivated to invest in new technologies or increased operational effectiveness, which could lead to a continuation of the inefficiencies that already exist.
