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2. Patronage and corruption- Going, going, gone!
Markets can be skewed by incumbents or intermediaries who hoard information, a distortion economists call asymmetric information, famously illustrated in George Akerlof’ s‘ lemons’ paper, where hidden knowledge about product quality causes markets to unravel.
Auctions, properly designed, can level that playing field. A sealed-bid auction, for instance, prevents dominant players from signalling to rivals, thereby curbing collusion. Open ascending auctions- where prices rise until only one bidder remains- allow smaller entrants to bow out without wasting resources, while ensuring the asset goes to whoever values it most.
This is especially useful in developing economies, where weak institutions struggle to police cartels but can still run a transparent auction.
Nigeria offers a valuable recent case in point. The country’ s GSM spectrum auction in 2001 used an ascending clock auction to allocate these mobile licenses. The bids were public, and the rules were clear: the price starts low and rises step by step, bidders stay in until the price exceeds their valuation, can exit but not return, and the last bidder remaining wins at the final price. The transparent mechanism raised $ 855 million from MTN, Econet, and others, and helped lay the foundation for Nigeria’ s telecom boom.
From a private sector investment of about US $ 50million in 1999, when the reform process started, the telecoms industry in Nigeria had by the end of 2009 attracted more than US $ 18billion in private sector investments, including foreign direct investments( FDI).” In 2001, Nigeria had fewer than one million active telephone lines, most of them being landlines. By 2024, the total number of mobile subscriptions in Nigeria had soared to over 224 million.
36 REI MAGAZINE OCTOBER 2025