DEREGULATION, Definition is deregulation: Deregulation is the act or process of removing or reducing state regulation state regulations. It is the reducing or elimination of government power in a particular industry, usually enacted to create more competition within the industry.
Advantages of deregulation
In other words, deregulation refers to a decrease in state or federal government oversight of industries and business. It is characterized by repeal of laws that restrict trade and competition. Through this process, industries may become more efficient in deregulated economies
Deregulation in Nigeria
Deregulation in Nigeria refers to the doing away with regulation that is concerned with financial markets and trade from 1994-1998. This is considered as an element of economic reform programme aimed at improving the overall economy through well spelt out ways. Deregulation is therefore the opposite of regulation which refers to the process of the government regulating certain activities.
The government has an interest in regulating some industries, such as telephone, gas, petroleum, and electric companies, with tougher rules and requirements because they serve so many people as a matter of necessity. Deregulation removes some of the control the government has over these types of industries so that other companies can enter the market and serve customers.
Advantages or Benefit of Deregulation of an economy
- Completion: deregulation lowers barriers to entry in a given industry. When more films enter an industry, competitions increases and consumers have more choices for products and services. Individual business tend to decree prices, to achieve a more competitive position in the market
- Cost saving: Deregulated industries provide cost savings to customers. By greatly reducing or eliminating tariffs, deregulation can lower prices, company profits increase and cost savings can be passed on to customers
- Reduced Bureaucracy: Society can benefit from a reduction of bureaucracy. Resources not spent on regulation can be channeled to other programme.
- Consolidation: Deregulation aids industry consolidation for instance, a 1996 law allowing out-of-state holding companies to buy banks allowed strong banks to acquire weaker-performing banks.
- Generation of employment: Deregulations do bring private individual to set up industries which can generate employment
- Steady supply of goods: Deregulation ensure steady supply of goods to customers as against government control of industries
- Reduction in corruption: Deregulation do reduce corruption as the industries are no longer in the hands of government officials
- Removal of cheats in the system: Deregulation helps to remove cheats from the system e.g. smugglers are kick out of oil smuggling
Disadvantages or problems of Deregulation
- Decrease in prices: While a price decrease across the board is a positive effect of deregulations for customers, it can have a negative effect on the company that previously controlled the markets or industries
- Degrading of quality: If an industry is deregulated, it will bring competitors to the market. Since with deregulation, the government has less of an influence, there is no guarantee that the new competitors will offer a product with similar or comparable quality as the current as the current offerings
- Fly-by-night: Customers left “Holding the Bag” if new companies crop up in an established yet newly deregulated market, this could draw scammers or “fly –by-Nights” companies. These companies play on the novelty of being able to offer an alternative option to customers who believe that any alternative option to customers who believe that any alternative would be better that what they have now. If the new company goes out of business unexpectedly due to bad business practices or poor products its customers are left to deal with the negative effects.