Discuss about the Impact of Power Market Monopoly.
An economy is any sector that covers production, distribution, consumption of different agents, individual and institutions. A market structure is one that contains features of a single seller, unique products that runs a monopoly market. The market structure defines and sales on unique product in the market, with low or no competitions. The monopoly is expected to provide and sale the product as a sole provide, with no alternative (Koziashvili, 2011). A monopoly’s potential to raise prices indefinitely is its most critical detriment to consumers because it has no industry competition, a monopoly’s price is the market price and demand is market demand. A business monopoly market structure can influence the operations of an economy; they can dominate production and distribution of goods and services (Koziashvili, 2011).
Nigeria is classified as the one of the two largest economies in Africa with a well-established capital market, and highest literacy levels. The Nigerian population has been growing rapidly over the years where it is estimated to be over 160 million people according to its 2006 census (Onazi, 2013). The large population and high literacy levels as contributed the country to be a regional power house in West Africa. In addition the country enjoys numerous natural resources which include fertile lands for agriculture, mineral solids, and large deposits of oils and gas reserves. The country is estimated to be the leading producer of oil ranked 12th in the world, in addition it is well known in production of gases in the entire worked ranked position eight (Obadote, 2009).
Nigeria companies and business operations are affected by use of power. The power holding company has become a natural monopoly that is state owned. Despite several challenges facing the authority the company has taken part in nation’s socio-economic development encouraging Nigeria to be a well industrial society (Chukwu, 2011). Despite investments by the federal government of Nigeria it is reported that there is power outages. The outages as affected many business industries depend on it. Other challenges reporting from monopoly of the industry is unreliable service provisions to its customers. It has led to more privatization of the industry into series of successor companies. In ensuring that problems are solved an independent regulatory agency was formed as per electric power sector reform act of 2005. The agency was to improve undertaking of the power industry by issuing licenses, monitoring and regulations, and providing guidelines for operations (Fare, 2016).
The economy of Nigeria is characterized with divergent challenges covering different characteristics, outcomes, contradictions that directly affect its citizens. In service provision of power, Nigeria faces a challenge majority of poor service originates from the power industry (Bello, 2016). A critical scrutiny of the structure of the economy in respect to a power market monopoly market shows negative inclinations.
Nigeria economy performance indicators are based on product and service provisions. The power industry controls various functions of the economy. Sales performance in companies in Nigeria has been reported to have reduced by a lower % due to cost and inconsistencies in power supply. Production industry is affected by prices charged by the power industry market monopoly (Adoghe, 2009). Recent statistics by the ministry of economic and research showed that amount produced, consumption levels, and product pricing is directly affected by monopolized decisions done in electric power industry. Statistics have shown consumption among consumers declining each year at a constant rate of 2.1% yearly which affect performance of Nigerian Economy. From this basis the study found it necessary to analyze, understand how power market monopoly structure can influence the performance economy of Nigeria. In understanding the aim the study will limit itself on sale of products and consumer demand (Iyoya, 2002).
The purpose of this research is to find out how power market monopoly impacts sales performance of Nigerian companies.
The study will seek to address the following research objectives:
To establish the impact of power market monopoly on sales performance in Nigeria companies.
To find out how power market monopoly affects sales performance in service provision in Nigeria companies.
To find out how power market monopoly affects consumers demand for sales of products and services among Nigeria companies.
Research questions
The study will be guided by the following research objectives:
That is the impact of power market monopoly on sales performance in Nigeria companies?
How does power market monopoly affect sales performance in service provision in Nigeria companies?
Do power market monopoly affects consumers demand for sale of products and services among Nigeria companies?
The outcome and results of the study will useful in addressing issues related to business market and economy. By carrying out the research it provide solutions to problems relating to economy and consumers. The outcome of the study will be useful to the Government of Nigeria in coming up with policies regarding performance of the economy caused by influence of market monopoly. The results will be useful to Ministry of economic research as additional knowledge. In addition customers will find avenue for decision making regarding monopoly market in power industry. Researchers and future scholars will find useful additional knowledge available to them.
Figure 1 conceptual framework
The demand and sales of products and services defines performance of an economy, but is depended on the industry providing the service. The power market industry is characterized as a monopoly market with few entrants, no industry competition, and high barrier to entry.
The term monopoly is defined by a single service provider that serves whole the national economy. The economies of scale that a firm owns make it a monopoly (Rosenthal, 2012). Majority of power in world employ monopoly because it owns supply and provisions of electric power to its citizens. Many business or organization units providing utility services have unique features or characteristics that make other firms difficult to join or sustain (Koziashvili, 2011). If any monopoly unit is not regulated it can lead to cases of poor service, and unsatisfied products. The power industry is expected to be subsidized provided at lower costs. In Europe matters of power industry is privatized which has led the government to share the burden with the private firm (Asker, 2013).
In a competitive market the monopoly powers can directly affected by increase in prices, lower costs, and no innovations. In power industry the market power combines with monopoly power to have a total control of the market (Makwe, 2012). In Nigeria power is control, supervised and managed by a single firm, where they can raise prices for any service provision. Economists argue that when power is not fully regulated or maintained it can directly lead to a fallen industry (Lehdonviita, 2014).
The economic growth and development of any nation is depended upon adequate and affordable power supply. Countries and individuals economy is measured based on the income it raises less expenditure that it consumes (Iyoya, 2002). Example of one of the current expenditure that touches all the areas of economy it is the cost of power. The economy according to economists can be measured on the basis in which it can provide quality goods and services at affordable pricing. The provision of service means that it must be adequate and sufficient enough to meet citizens of a country (Shaaban, 2014).
The cost of production will be higher if the power used to produce the products is higher in comparison to the output. When products and services matrix is consumed more due to its lower value the sales of companies grows (Makwe, 2012). Investors would like to invest their resources in countries with lower cost of production. The cost of electricity as made other countries in the world to look for other alternative methods to supply power to its industries and firms (Okonjo, 2012).
One of the macro service provisions in the world is the sale of power industry service to specific countries. In countries the sale of power products covers a single supplier framework agreement (Greatorex, 1994). The power industry covers energy services like conservation, management, and renewable services. The state of Nigeria only sales energy power requirements, other energy products like gases and power electrical have been left for private sector to manage (Bello, 2016).
Dependability of electric power service is well known to rest upon provision of certain ancillary services. With industry integrated structure, the burden for providing some of these services should be enhanced by integrating certain utilities to compete with other generation firms (Lehdonviita, 2014). Sale of energy products directly depend on foreign barrel prices, high standard of living, transport systems, and tariffs and taxes imposed by the country (Obadote, 2009). Pricing of power industry depends with different states policies and regulations. To avoid customer exploitations power regulatory agencies have been instituted to cover customers against exploitation by cartels found in the industry. (Oyewunmi, 2016).
The economy of countries is controlled by the demand and supply matrix. If the supply is higher demand is higher to and vice versa. Consumers will demand for products which have certain characteristics and features (Shaaban, 2014). Because majority of consumers are depended on power on their daily basis it becomes difficult to work without it. The consumers cannot control the supply of power because it is controlled by a single monopoly provider (Asker, 2013). They have to tolerate with what they are being offered even if it is unfriendly, poor and expensive. One of the factors influencing customer’s purchasing power is lack of alternative substitutes, low competition, and acceptance of one supplier pricing. (Lehdonviita, 2014). Universally it is reported that customers will be satisfied if the service offered is of quality and delivered at the required time. In monopoly market especially power industry complains have been emanating from poor service provision. The poor service delivery has led to other countries privatizing the power electric industry (Obadote, 2009).
The chapter will address the methodology applied to obtain the end results of the project. It will outline the design, data collection procedure and analysis.
The study will utilize descriptive explanatory and survey type of design. Descriptive explanatory and survey type of design is used to explain the cause and effect of a phenomenon (Fink, 2006). Survey design will be used to seek opinions of consumers on demand of goods and services. Both will be used to explain how electric power market monopoly impacts performance of an economy.
The study will cover ministry of Economic Research that handles matters regarding Nigeria’s state of economy. The ministry has collected major findings and articles regarding Nigeria economy and measure statistics of a monopolized market. From the Ministry data bank companies, businesses and units can use to develop policies regarding market structures, and economy (Asker, 2013). The study will target an average of 100 customers who will randomly visit the online forums on first to come basis.
Both qualitative and quantitative data will be used for the study. Primary and secondary sources will be used to obtain the information (Flick, 2015). Documentary review will be done on journals, company records, and books to obtain information on impact of power market monopoly on the economy (Neuman, 2012). Online forums to customers will be conducted to obtain information regarding to sales and demand of power market products and services. Questions on sales trends, product pricing, consumer behavior and barriers to consumption opinions will be asked
The data collection of secondary will involve visiting the Ministry of Economic Research offices after a pre-visit for authorization had been done. A customized user friendly website that will facilitate online forum and discussion will be created (Taylor, 2015). Data collection period will be three working days. Data collected will be arranged and coded ready for analysis. Qualitative data will be analyzed based on jigsaw approach analogy. Jigsaw approach is where pieces of information are stitched together those that are related (Mackey, 2015). Quantitative data will be analyzed using inferential statistics. Use of mathematical measurement regression analysis, statistical modeling to be used will be presented.
Y = XB1 + XB2 + XB3
Where: X= Independent variable (power market monopoly)
B1 to B3= Dependent variable (performance of economy indicators)
Regression will be tested to establish variables predicting other variables.
References
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Asker, S. (2013). On complex dynamics of monopoly market. Economic modelling, 31(1), 586-589.
Bello, D. (2016, January 10). Tarriff regulated design in electrical distribution industry. Tariff regulatory design industry, pp. 12-45.
Chukwu, U. &. (2011). VZG electric power company estimate and axilliary service market evaluation. Power and energy society general meeting, 3(1), 1-8.
Fare, R. &. (2016). Market power and technology. Review industrial organization, 40(2), 134-146.
Fink, A. &. (2006). How to Conduct Surveys: A Step-by-step Guide. Beverly Hills. CA: Sage.
Flick, U. (2015). Introducing research methodology: A bigginers guide to doing research project. New York, United States: Sage.
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Koziashvili, A. &. (2011). Monopoly vs. competition in light of extration norms. Public choice press, 148(3), 561-567.
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Mackey, A. &. (2015). Second language research: methodology and design. New York, United States of America: Routledge.
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Neuman, W. &. (2012). Basic of social research: qualitative and quantative approaches. London, Unted Kingdom: Sage.
Obadote, P. (2009). Energy crisis in Nigeria: technical issues and solution. Industrial sector prayer conference (pp. 1-9). Lagos: Nigerian press international.
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Onazi, O. (2013). The good governance of electricity: Nigeria as case study. In human rights from community: a right based approach to development, 10(3), 123-149.
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Rosenthal, J. (2012). The ministry monopoly and market monopoly. University of Rittsburgh press, 25(3), 62-93.
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