Managing Director, Poco Enterprises
A paper presented at the Twelfth Annual National Management Conference at the Federal Palace Hotel, Lagos.
Nigerians have been known to engage in business for centuries. Long before what is known today geographically as Nigeria, businessmen in Kano City had done business across the Sahara Desert with North Africa and Europe. The people of old Benin Empire and the Kings of the Oil- River States of Opobo and Bonny had traded with Europe across the Atlantic Ocean. Within Nigeria itself a lot of internal business had been done and is still being done among its peoples. Therefore, in examining the subject, “Developing Nigerian Businesses”, in the context of the theme of this Conference — Management of National Resources our efforts must be directed towards examining the development of Nigerian businesses in the past, the present, and we must dare to suggest the pattern that this development should take in the future. Essentially, what we are concerned with is the philosophy and practice of developing Nigerian businesses in three periods. Obviously, there be a great deal of debate on the dating of the three periods. For convenience, may I suggest the pre-colonial, colonial and post independence periods?
It is also essential in this discourse to exclude the developing of Nigerian businesses, by Nigerians outside this country because such businesses are set in different environments which offer different incentives to and generate different inspirations in the Nigerian businessman, outside his home market place.
Philosophy and Practice of Business
In pre-colonial times internal business was centred around agricultural trade by barter. Because of limited communication systems and the absence of a good monetary system. businesses were small-scale and transacted at the local market places, on special days. For want of a better expression, business was then on a subsistence basis. The ability to develop one’s businesses depended on the size of the businessman’s natural or hired household. To this and other reasons we owe our traditional polygamous homes and the beginning of the slave trade. Business within Nigeria in the pre-colonial period was therefore unsophisticated and open to all corners.
When contact was made ‘with the outside business world across the Atlantic and the Sahara Desert, things changed dramatically with the injection of new business ideas, practices and goods into the Nigerian market place. Subsistence local business was transformed overnight into a buoyant international trade with the outside world. Within a short time trade between the oil-river Kings of the Coast and our hinterland developed out of all proportion into big business. But it was concentrated in only a few hands. To spread it to more hands required the trappings of a more advanced business practice.
The Colonials arrived. The British Government took over full administrative responsibility for the foreign oil-river traders’ businesses. Business and commercial activities could no longer be separated from the social and political Lives of our people. As a matter of policy, a full-scale drive was embarked upon to open up the hinterland with modern communication and transport so that foreign business, hitherto confined to the coastal area, could get to the hinter land. This was a good thing but with it Nigeria lost its independence. Also trade by barter soon gave way to modern business practices and systems banking, communications, transport, modern office routines and other business systems — all these were new and strange to the average Nigerian businessman or woman. They were not educationally equipped for the change. So for nearly one hundred years good successful businesses were largely in the hands of foreigners.
Efforts by the average Nigerian to develop any business during the colonial era were always thwarted by checks and balances inherent in a colonial regime. The education of the people was in foreign hands and therefore its content and objectives were restrictive. Financing houses were completely foreign owned and their unpublished financing policies for the Nigerian businessman or woman were usually negative. As a result the Nigerian businessman could only play second fiddle within the limits of his business abilities. This gave rise to small mushroom businesses, which usually engaged in the same activity. A herd instinct you might say, but they bad no alternative. The chains had to be broken.
There are to well-known pioneers of successful Nigerian businesses. The success stories of some of them are well-known. But let it be said that in nearly every case, they got their inspiration from outside the Nigerian environment; they are the missionary-type pioneers who believed in themselves and dreams and had the courage of their conviction to take a business risk. We also had institutional pioneers like the African Continental Bank of Nigeria Limited and the National Bank of Nigeria Limited. These two banking institutions, their chequered history notwithstanding, will go down in the history of Nigerian businesses as providing the initial funds with which many Nigerian businesses were launched, Also the post-independence government of the First Republic, pioneered the revision of our educational system which produced the appropriate educational foundation for a people in a developing economy. Perhaps the most courageous pioneering body in this respect is our present Federal Military Government, which will be long remembered for its Decree No. 4 — The Nigerian Enterprises Promotion Decree 1972. The provisions of this decree are well known to provide the first equitable distribution of business opportunities to all comers in business. Now that opportunities are wide open for the enterprising Nigerian businessman he is still confronted with some problems in developing his business. Let us examine these problems which still hinder the successful development of a Nigerian business.
Selection of Business
There is too much tendency for Nigerians to engage in a business because Mr. X, a neighbour or friend, is engaged in it and appears to be successful in it. There is not enough original thinking in the selection of a business project. Indeed the success or failure of any business lies in the initial selection of a business project. It must be remembered that there are three important elements in any business: the sponsor (or businessman) the business and the market. For every particular business project each of the three elements has its own particular specifications. These specifications must of necessity harmonize for one to pull-off a successful business. The process of selection is like a jig saw puzzle game. The sponsor of any business must ab initio be able to put together the various specifications of his business and have a clear picture of what his business is all about before he starts the business. A correct solution of the jig-saw puzzle means money for him in the tong run.
Financial Appraisal of Business
The Nigerian political set-up allows for the healthy development of public and private enterprises, side by side. In the private sector, foreign businesses have tended to develop more satisfactorily than indigenous ones. This is because, more often than not, a thorough feasibility study has been done by sponsors of foreign businesses. Generally, the feasibility reports are produced overseas where all the facilities and statistical information are available. In addition, the reports and the financing of the projects are usually fully discussed and agreed upon with the Head Offices of local banking houses. All that is requited in Nigeria is ‘automatic’ implementation of the business project.
With the Nigerian businessman the situation is different. Hitherto it was not always easy to find a good organisation qualified to carry out feasibility studies. When one was eventually produced, it took months to have it studied by financing houses. The most pathetic situation is that in practically all banking houses in the country, officers who can understand and are prepared to discuss feasibility studies properly with their clients are only a handful and they are in the Lagos Head Offices. Even within Lagos itself, branch offices are not often competent enough to handle these matters. This problem is bound to be further complicated by our rapid indigenisation of posts in banking houses. The ideal situation is one in which every commercial bank should have a client service section dealing in reasonable detail with feasibility reports submitted by customers. The current practice of a branch manager transferring figures from a client’s feasibility report into the bank’s standard form and then mailing it to Head Office for a decision is unsatisfactory. Decisions taken on whether or not to deal in such a set-up are too impersonal, protracted and unrealistic.
For example, a Maiduguri client would have to wait for a decision on his transcribed feasibility study to come from Lagos. This problem, of course, has to do with our national manpower development which has been adequately dealt with in Professor G. A. Jawando’s paper. But it is enough to say that until tomorrow’s commercial bank managers, particularly at branch levels in our hinterland, are fully equipped for their job we will have to live with this problem for many more years; effective business development will continue to suffer as a result.
The other important problem which businessmen have with banks is the lack of frankness which should exist between customer and bank. Often because of some internal policy of a commercial bank they are really not in a position to do a particular business with a customer. Some banks do not have the integrity of coming out plainly and telling the customer.
“Sorry we cannot do this business” and give a frank reason for rejecting it. If the project is a bad one, they should say so in order that the customer can go back and repeat the study or if necessary go immediately to another bank.
The reluctance of commercial banks in giving this type of client service is because in the banks’ view, client service appraisal departments are not usually money earners. They earn money for the banks only when the business is approved and implementation. In a developing economy like ours, this service is badly needed and rather than pass the job of business appraisals to an outside organisation, why should banks not take on the jobs for their customers and charge them a fee? At this stage in our economic development our commercial banks should graduate from a house where customers keep their money into a house where customers can also go and discuss fully their business problems and get sound financial advice and pay a fee for the service.
Running a Nigerian Business
“Young men contemplating a commercial career in West Africa today are rightly advised to rid their minds of any romantic illusions about bartering beads for ivory tusks with tribal chieftains under the palm trees. In the big towns at any rate, the trappings of trade – banking, communications, transport and modern office routines – are not much different from those in any European city. But it is not so long after all, since bartering under palm trees was neither an illusion nor, for that matter, particularly romantic but bread-and-butter reality of West African Trade.” That quotation is taken from a book written over twenty years ago entitled “Merchant Adventure” on a multinational trading company in Nigeria. The extract gives a precise picture, in time and scale, of the dramatic transition of business in Nigeria from the past to the present day.
In developing business in Nigeria today we must accept that business is no longer an adventure – it is now an art. Therefore every businessman should equip himself with all it takes to develop a successful modern business. But what does it take to develop a successful business?
1. Integrity: Today the streets of the big cities of the world:
London, Paris, New York and Tokyo abound in pseudo Nigerian businessmen who are nothing but confidence tricksters. They have earned the average reliable Nigerian businessmen bad names overseas. Here at home, these confidence tricksters also abound. They are usually in partnership with foreign confidence tricksters and if Nigerian businesses are to develop to enviable heights, we must rid our business life of these criminals.
The fact that such people exist in our business life has often slowed down the pace of business development. Invariably, every honest Nigerian businessman today is first accepted as unreliable until he proves himself the opposite in his dealings with financing houses or overseas partners. The cost of financing business is sometimes inflated as a precaution against unreliability. Unfortunately, we will have to live with this situation for a time.
Lack of integrity in Nigerian business has also been responsible for the slow amalgamation of small individual, private or family businesses into bigger corporations. It is only in very specialised fields that small businesses can thrive in today’s business world. The cost of research and development, com petition and marketing are too high today to justify the continued existence of very small businesses. Nigerian business men must learn to team up together.
2. Communication: No business can be transacted today without effective communication. The first thing that the word communication conjures up in our minds is our very bad telephone and postal systems. Seriously, any Nigerian business which hopes to develop without fetters, must find its own answer to the communication problems of business. As it is, there is nothing we can do about our present internal and external communication systems. We just have to live with them until our Government solves these problems. So much for the media of communication. What about the information communicated? Few Nigerian Businessmen will admit that they really do not know enough about the business they are engaged in. Except for professional bodies, there are few forums other than the Chambers of Commerce which Nigerians can resort to, to learn more about their business. In the absence of these, one valuable way to improve oneself, is to become an external or over seas member of a foreign association which caters for the interests of one’s business. From conferences and seminars organised by such associations one can keep abreast of modern development trends. Self improvement in modern business techniques is a must for all Nigerian businessmen.
3. Supervision and Management:
The biggest bane of Nigerian business is the lack of proper and effective supervision and management. This element in business has rightly become the most important factor which determines whether one can have one’s business financed by a bank or not. An improvement in any business under taking is invariably synonymous with an improvement in the supervision and management of the business. Nigerian Business men should therefore take ad vantage of any opportunity to improve the quality of their supervisory and management staff.
After Decree No. 4 What next?
True, Decree No. 4 has paved the way for the economic emancipation of Nigeria. But on closer examination one will notice that the provisions of the decree have not really broken new grounds for the Nigerian business man. The decree has only made it possible for more Nigerians to share more in existing businesses. Schedules I and 2 cover only 55 c asses of businesses. Surely, there are hundreds more classes of business which are still to be started in this country. My concern is that something more courageous should be done by our Military Government before they return to the barracks.
It is obvious that we have a man power problem in the middle management cadre of our economy. But perhaps a more serious management problem in our economy is that in a couple of years time, following the full implementation of Decree No. 4 and the Nigerianisation programme, serious staff problems will arise in both the public and private sectors. A careful analysis of the staffing positions of the top management of public and private establishments will show that comparatively young men have found themselves at the top of their chosen careers earlier than would be the case anywhere else in the developed world. The irony of it all is that both the boss and his deputy are in most cases of the same age, of the same academic background in time and depth, of equal brilliance on the job in practice and in theory. The result? 1 fear we might be faced with a country-wide frustration among the top echelon of our public and private corporations. The evils of this sort of situation are too well known.
In the interest of developing Nigerian businesses and the maximisation of the management of our national resources, 1 would propose for serious consideration, a redistribution of the top echelon of our national man power as follows: –
1. There is a provision in both public and private corporations for an early retirement with full benefits for those who wish to do so. I estimate that provided that there is something tangible in the form of business which they can with certainty embark upon no less than 1000 top management quality men and women would opt for an early retirement. They will come from the Government Ministries, Universities, Public Corporations and the private sectors as well.
2. An extension of Decree No. 4 or a follow-up of the decree should entail the preparation of a schedule 3 covering other important and strategic classes of businesses not already cove red under Decree No. 4. This class of businesses must avoid the beaten track and break new grounds.
3. Favourable conditions should be created by this decree to make them attractive for those retiring to take up the businesses. The conditions should include a special instruction to the Nigerian Bank for Commerce and Industry to give priority consideration to applications from this group of new Nigerian businessmen. A reasonable limit of loans to be given to them must also be spelt out.
4. As qualification for this special favour, those retiring have had long years of experience in their respective former jobs; they have handsome gratuities and end of service benefits sufficient to cover their equity share in their new businesses; it is likely that most of those opting to take up the offer would have acquired personal properties which would serve as collaterals against any loan they may require to start off their new business. They should also have exhibited during their former career the integrity which their new venture will demand. They would form the much sought after new breed of Nigerian Entrepreneurs that will raise the standard of Nigerian business at home and in the eyes of the world.
The transition of the development of Nigerian businesses from ancient to modern has taken place over a very short period of time. It has been dramatic. Business today is an art. Therefore the Nigerian market place calls for qualified business artists if we must raise the standard of Nigerian Business in this country. To this end Nigerian businessmen and women must have integrity; they must keep abreast of research and development in their respective businesses; they must keep themselves continually informed of changing trends in their business, at home and abroad; above all, the quality of the supervisory and management staff is as important as the money invested in their business.
Commercial Banks should improve their banking practice vis-a-vis the needs of their customers with respect to feasibility studies, financial advice and above all they must always be frank in all dealings with their clients. Lost time in the development of any business means lost money.
The age of small-scale business is coming to an end as a result of the rising costs of research and development in business. Competition is becoming stiffer and more professional. Therefore, Nigerian business men should begin to get together to form bigger corporations to cut down costs and so be more efficient and competitive.
Finally, we need a new breed of Nigerian Entrepreneurs to take over a new class of businesses not covered by Decree No. 4. To ensure the proper take over of our business life by Nigerians, in perpetuity, we must depart from the beaten track, break new grounds and create the necessary conditions sufficiently attractive to satisfy the near frustrated top echelon of our man-power in most public and some private corporations, to induce them into establishing their own businesses, if all these can be achieved the successful development of Nigerian businesses will be assured for the future.