The truth about doing business in Nigeria

For those who can stand the heat (and the corruption), Nigeria has proved a very lucrative market.

by Michael Peel
Last Updated: 09 Oct 2013

At the heart of Lagos Island stands a statue of Herbert Macaulay (1864-1946), founder of Nigerian nationalism. The figure bears silent witness to a great cheer that has just erupted. It's late 2005, and the noise is coming from a group of young men in the courtyard of the dilapidated public library opposite, whose metal bars make it look more prison than place of learning. A broken window reveals a scraggy and uninviting book collection, but the men are elsewhere. They are greeting their boss, Adekunle Godwin Talabi, who walks in front of them with the cool and cockiness of Rocky entering a boxing ring. His support chorus howls with a volume worthy of the Las Vegas cheap seats.

The serenade demonstrates the power of Talabi, one of a new generation of bosses in the society where Macaulay once held sway. Here, Talabi is sovereign master of government and business. He combines the roles of tycoon, policeman and immigration officer. Commercial interests include DVD retail, a barber's salon and a security company. Crucially, though, he is the 'chief of all boys'.

'I am the chairman,' he says. 'I am the manager.' This means he is the head of a group of young - and not so young - men known universally as 'area boys'. These gangs have traditionally controlled large parts of Lagos Island, the city's historic centre, extracting money from everyone, outsider or insider, who wants to do business there - or simply to pass through. Talabi, whose undisputed domain runs from the Bookshop House crossroads to the northern end of Odunlami Street, describes his boys as his 'army staff' and 'soldiers'.

He compares - with just a touch of melodrama - the situation of oil-ravaged Nigeria to that of Liberia during its notorious civil war, when militias roamed, raped and robbed their way around a fragmented nation. 'Nobody can say what's going to happen,' he says. 'So everyone is fighting for his own life, his own living.'

Talabi is a quintessential example of a close-to-the-wind style of Nigerian entrepreneurship seen everywhere from the street to the boardroom. The area boys are part of a grab-it-now free-for-all that helps explain Nigeria's paradox of poverty: its oil makes it richer than most African countries, yet the scale of its social decay ranks among the worst on the African continent.

Like the other hustlers who flourish in Lagos's myriad social crevices, area boys are a reminder of how easy it is for a help-yourself culture to become ingrained in a society where institutions have failed. Talabi's gang are not the atavistic 'feral youths' of Western bourgeois nightmare, but pragmatists profitably playing a broken system.

Nigeria's oil - and the income it yields - has simply magnified threats that face many societies in both the rich and poor worlds, because of the way we live now.

The dependence of Nigeria on a single, volatile source of income has echoes in Western countries grown increasingly and dangerously reliant on the apparent ingenuity of the finance industry and the invisible movement of money. If the world's leading retail banks ever did fail - even temporarily - how long would it be before cash shortages and the inability to buy food brought area boys and girls of all classes out to loot on London's streets?

The territory Talabi's gang occupies is a living history of a city founded on imperialism and oil-driven commerce and hobbled by the hangover from both. At one end are the banks and the key colonial highway of Broad Street. At the other, past coffin shops, is the social centre, Campos Square, built by returnee descendants of slaves who had been taken to Brazil. It is, in Talabi's lyrical evocation, 'a golden unit, a golden area', at least in spirit.

Campos Square and the other run-down areas of Lagos show in microcosm the social forces that have pitilessly impoverished huge numbers of Nigerians.

The World Bank estimated that in 2006 the country had a 10% infant mortality rate. Nigeria - Africa's most populous nation - ranked a lowly 154th out of 179 countries in the UN's 2008 report of human development. The UN estimated that income in the country declined by 1.5% a year over the final quarter of the 20th century.

For some Nigerians, Lagos life exemplifies how the modern state wrought by crude oil has become the kind of dysfunctional world depicted in Thomas Hobbes' 1651 classic, Leviathan. Hobbes described the inevitable results of an absence of checks on people's behaviour, when 'men live without other security, than what their own strength, and their own invention shall furnish them withall'. In such societies, people's lives become 'solitary, poor, nasty, brutish and short'.

It is a vision of another country at another time, but there is no mistaking the Lagosian echo. Lagos is a constant reminder of the impermanence of all human-crafted structures, from buildings to systems of government. In Lagos, in whatever sphere - financial, professional, sexual - you realise you must act quickly, because, as a friend once put it, you don't know what will happen tomorrow.

It's a spirit that's less alien than it might seem to the rich and superficially stable Western states that consume Nigerian oil and thus help finance Lagosian chaos. It only takes a sharp rise in food costs or a crisis in the financial markets to remind even the most complacent Englishman in his castle of the possibility of sudden poverty and social unrest. The anxiety in Britain at the height of the banking crisis in late 2008 hinted at how a stability stemming from seven centuries of parliamentary tradition could easily disappear in the wake of economic catastrophe, extreme violence or environmental disaster.

A latent recognition of this underpins the popularity in the West of Cormac McCarthy's The Road, whose post-apocalyptic ambience surpasses even Lagos at its most dystopian. The cities of the rich world may yet become more like Lagos before Lagos becomes more like them.

Area boys are just one small part of a chaotic environment that makes doing business in Lagos a tough - if potentially lucrative - task. Infrastructure is famously sparse. Water is so scarce that companies and rich residents have to source it from private boreholes or tanker deliveries. During the monsoon, by contrast, poor drainage means streets frequently flood and make the city's notorious gridlocks even thicker.

Even if you are a corporate titan, the pervasive rawness of this mega-city is hard to avoid. Once, in a business executive's waterside office, I told him what a fine view he had. Yes, he replied, but there was one problem: corpses of drowned victims washed up now and again beneath the sill. They often remained there for some time, because the authorities failed to come and remove them.

And then there's the fallout from the execution of Ken Saro-Wiwa in 1995, and the increasingly violent opposition to the oil industry that has followed it. Writer and activist Saro-Wiwa and some of his colleagues were arrested for allegedly murdering four local chiefs. Despite a lack of evidence or process, Saro-Wiwa and eight others were sentenced to be hanged by a tribunal set up by the Abacha military dictatorship. The executions, carried out for maximum shock during a summit of Commonwealth leaders in New Zealand, led to Nigeria's suspension from that organisation amid near-universal condemnation.

The executions marked the start of an era of deepening problems for the oil industry in the Niger Delta, during which the regime's legitimacy has come under attack from groups ranging from armed militants to environmental activists. Lawsuits brought by Saro-Wiwa's family against oil giant Shell and its Nigerian subsidiary for their alleged role in the affair were settled out of court in May this year.

And yet for all its difficulties, Shell is one of a number of companies with a long history in Nigeria that have found it a very profitable place to do business. Heineken and Diageo are two more, multinational consumer goods companies that dominate the lucrative beer industry. The country is ranked as one of the world's top 10 growing markets for the sector. More Guinness is drunk in Nigeria than in its spiritual home of Ireland.

Other industries have boomed, creating a generation of plutocrats that former president Olusegun Obasanjo once compared - intending a compliment - to Russia's oligarchs. Mobile phones have been embraced by a country that has a population of more than 120 million, but has been estimated to have no more than a few hundred thousand working landlines. Construction flourished, along with the rising oil price and interest in the country's crude from investors in China and other emerging economies.

But recession, the global financial crisis and plunging oil price have shown the severe limits of what some investors - at times disingenuously - portrayed as a far-reaching renaissance in Nigerian business. In December 2008, in what was seen as something of a bellwether event, the Financial Times reported that Dangote Group, a sprawling Nigerian conglomerate, had postponed plans to buy $3.3bn of cement plant building and materials from Sinoma International Engineering, a Chinese contractor.

In August, Lamido Sanusi, Nigeria's central bank governor, sacked the management of five leading banks and announced a $2.6bn bailout. Nigeria's banking industry, it turned out, was no better - and no worse - than failing and flailing counterparts elsewhere.

The spectre of corruption - and, even more pertinently, of international investigators' increased interest in it - also hangs more heavily over companies in Nigeria than in many other countries. The low-level bribes or 'dash' commonly paid by both Nigerian and foreign companies to government officials - once memorably described to me by an expatriate businessman as 'like tipping a cab driver in London' - are now technically illegal in many countries. A series of US investigations into the oil industry has identified wrongdoing by leading multinationals such as Halliburton, Baker Hughes, Vetco Gray and Willbros. It all leaves the sense that the Bookshop House boys aren't the only ones doing business at the edge.

When I revisited Talabi's old haunt in May, it was no surprise to find the protean metropolis around it changing yet again. Governor Babatunde Fashola of Lagos State, who took office in 2007, is trying to bring a degree of order. Highways have been paved, dustbin lorries set to work and area boys quietened with jobs or by other means. Public spaces are being cleared by razing the ad hoc markets colonising them. The clean-up is widely welcomed - except, of course, by the many small-time businesspeople arbitrarily detained or who have seen property destroyed and possessions seized by roaming official hit squads.

Talabi and his gang have moved on from the Bookshop House crossroads, where a new building has sprung up in place of the old library. Yet I see enough in my brief visit to suggest that - for all the alterations in personnel and the physical environment - the essence of the place isn't so different. Down the road, at a Total petrol station on Odunlami Street, a group of young men swarms noisily round a line of cars. One, George David, tells me he is protecting the queuing drivers for 1,000 naira a time, although from what is not clear.

'We are providing security,' he barks at me, in the briefest of interviews. Then he turns back to a pullulating fray that suggests that this most engaging and enlightening of cities hasn't lost its industrious mojo just yet.

Michael Peel is the Financial Times' legal correspondent. This is an edited extract from his new book, A Swamp Full of Dollars: Pipelines and Paramilitaries at Nigeria's Oil Frontier (IB Tauris, RRP £17.99)

Find this article useful?

Get more great articles like this in your inbox every lunchtime

35 Women Under 35 2020: Nominations open

Management Today's 35 Women Under 35 showcases the country's rising stars in business. Here's how...

Practical steps for breaking silos

Briefing: Adam Williams, former CEO of influencer marketing agency Takumi, shares what he learned about...

The Power 50: Proof that you can be a part-time CEO

Just a few years ago, executives were reluctant to admit they worked part-time for fear...

The 9 worst things a leader can say

Actions may speak louder than words, but words can still drop you in it.

Why you overvalue your own ideas

And why you shouldn't.

When spying on your staff backfires

As Barclays' recently-scrapped tracking software shows, snooping on your colleagues is never a good idea....