The other day I stumbled on a 2012 article on Sahara Reporters by Rudolph Ogoo Okonkwo of “Correct me if I’m right” fame entitled “The End of Igbo Business Model”. I’ll quote elaborately from that piece to establish the kernel of the writer’s concern:
“The Igbo business model of opening stores in markets across city centres is coming to an end. In a generation or two, there won’t be anything like that anymore. It would all go the way Mom and Pop stores disappeared in American cities where Walmart and Targets set up shop.
“The Igbo business model is simple. At the top is an importer. His job is to import items from overseas and have a chain of wholesalers move the goods across Nigeria. The wholesalers on their own have a chain of retailers who buy from them and sell at markets across Nigeria. In one swoop, the Chinese and Walmart will replace all the Igbo traders on this chain from importers to retailers.”
This may sound alarmist, but the realities are there, even if subtle. First, the Chinese have mushroomed everywhere in Nigeria. As I put it elsewhere, “Across all of Africa, Chinese presence can no longer be denied, nor can it be wished away. China is everywhere – in construction, education, telecoms, technology, oil and gas, transport, just name it – and it is not in a haste to leave. China is here to stay.”
Second, the boom in Nigeria’s formal retail sector – led by foreign retail chains such as Shoprite and Spar – has been widely reported. And it is continuing, with Whitey Basson, CEO of Shoprite, announcing plans to establish up to 700 shops in the country. Just recently, Adebayo Jimoh, managing director of Odu’a Group Limited, an offshoot of the Western Nigerian Development Company (WNDC), told BusinessDay that the Group is building a massive mall in the central business district (CBD) of Ibadan, the Oyo State capital, to be known as Heritage Mall. Estimated to cost N2 billion, the mall, with 18,640 square metres of lettable space, will debut on May 29, and Shoprite is the anchor tenant, occupying 4,750 square metres.
Third, big electronics giants, such as LG, continue to open outlets here and there to take care of their growing customer base. This may not be glaring yet, but traders at the Alaba International Market, easily the biggest electronics market in Nigeria, are already losing customers to these outlets. Many middle-income Lagosians, for instance, would rather walk into an LG outlet than go to Alaba. The reason is simple. As a banker friend told me, “I bought all my electronics from LG outlet at 23 Road, Festac. There, I’m guaranteed of the genuineness of the product, warranty, and a good price. Why risk going to Alaba where I might be sold Aiwa in the name of Sony?”
This is what seems to be happening: As the Nigerian middle class continues to grow, accompnied by growth in disposable income (see, for instance, Gregory Kronsten’s “Household incomes rising even if it is not always obvious”, BusinessDay, April 22, 2013), the formal retail sector is growing along with it, while the informal market is going, though gradually, almost unnoticeably, the other direction.
On the Chinese threat, here are samplers. Just recently, Olawale Tanimowo, a Lagos-based marketing communications executive, in an article published in BusinessDay (Tuesday, April 2), reported that in the last week of March, traders at the Oke-Arin Market in Lagos Island staged a peaceful protest against the practices of some Chinese traders who have practically taken over trading in the market. These Chinese, according to him, came in as investors but eventually began very dangerous practices that are making it impossible for Nigerians to sell. “As a matter of fact,” wrote Tanimowo, “Nigerians who wish to remain in business in that market are made to buy from these Chinese who are also competing with them in the same retail and wholesale business. What this means is that if a Nigerian trader buys a bale of lace material from these Chinese traders at N5,000, for instance, he or she is going to sell at a higher value for any margin to be possible. But this margin is being made difficult by the fact that these Chinese who are now representatives of other traders in home country get their goods at cheaper costs and would definitely sell at lower values.”
Similarly, to buttress his point, Okonkwo referred to a similar case around July last year where the Dealers of Bags and Leather Wears Association of Nigeria at Balogun Market in Lagos also held a protest march against some Chinese businessmen whom they accused of retailing leather products at a very cheap rate, thereby forcing the Nigerian traders to operate at a loss – what the traders termed “a systematic plan to undermine and kill off their business”. According to the protesting traders, they had been facing the problem for over five years – that is, since the Chinese came – and they wanted the Federal Government to come to their aid, saying if the activities of the Chinese were not checked, thousands of the local traders would lose their source of livelihood.
I do not, however, agree with Okonkwo that it’s just about Igbo traders, although I believe we are the most affected because we are in heart of the business of buying and selling in the country. It’s also almost impossible not to add, in our blind pursuit of money, that we are the ones likely not to observe the change taking place, just as we have stubbornly closed our eyes to the threat to our lives in the troubled north of the country.
What can be done? Chase the Chinese away, or stop Shoprite and co from expanding? Not likely. Their presence is a positive for the Nigerian economy. Moreover, as Christo Wiese, CEO of Pepkor Ltd, is quoted as saying, “There’s enough for everybody. It’s a growing market.” But it’s possible for government to come up with some legislation to protect local traders, as being done in Ghana where the Ghana Investment Promotion Centre (GIPC) Law (Act 478, 1994) reserves small-scale retail businesses for Ghanaians. The law essentially enjoins all non-Ghanaians, including ECOWAS citizens, who wish to engage in trading to comply with the following: “To set up businesses outside places designated as markets, invest a minimum of US$300,000 in cash or in kind, register with the GIPC, obtain immigration quota and employ at least 10 Ghanaians in the business.”
Another way is for Nigerian traders themselves to key into the expanding formal retail market currently dominated by foreign retailers. This, reportedly, is already being done by some small neighbourhood stores who are adapting to the changing tastes of consumers by changing the profile of products they stock as well as the layout and design of their stores, with the ultimate aim of turning themselves fully into one-stop shops.
But for the Igbo businessmen, Okonkwo advocates: “It will be good if they begin to strategise now. It will be great if ten-year and twenty-year plans for transition are put in place. I believe that a plan to transition into manufacturing, turning Aba and Nnewi and Nkpor into manufacturing hubs will greatly keep the Igbo in play as the Chinese and Walmart take their places in Africa.” They either do this or be caught unawares as Balogun, Alaba International, Ochanja, Ogbete, and other markets across Nigeria “are turned into malls, theatres and football fields”. One cannot but agree.
CHUKS OLUIGBO
Oluigbo is of the editorial department of BusinessDay, Lagos
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