By Chuks OLUIGBO
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,
accompanied 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 the 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.
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