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British Government, British Businesses, and the Indigenization Exercise in Post-Independence Nigeria

Published online by Cambridge University Press:  28 February 2013

Chibuike U. Uche
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Abstract

The Nigerian Enterprises Promotion Decree of 1972, which was promulgated in Nigeria after the country gained its independence from Britain, put in place a framework for the varied transfer of equity ownership of expatriate businesses to Nigerians. The decree was replaced by a more stringent order in 1977. Despite the extensive research on the Nigerian indigenization episode, there have been few studies on the role of the British government in the entire exercise. This paper, using newly available evidence from the National Archives London, investigates the role played by the British government during the indigenization episode. Evidence in this paper suggests that the British government explored various strategies, orthodox and unorthodox, in its bid to protect British business interests in Nigeria during the period.

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Articles
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Business History Review , Volume 86 , Issue 4 , Winter 2012 , pp. 745 - 771
Copyright
Copyright © The President and Fellows of Harvard College 2012

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References

1 Before 1960, when it gained political independence, Nigeria, the most populous African country, was a British colony. The country has three main ethnic groups: Hausas (north), Yorubas (west), and Ibos (east). Political and social tensions in the country regularly reflected both ethnic and religious differences.

2 The nationalization of the oil industry in Nigeria, which closely followed the strategy used by other member states of the Organization of the Petroleum Exporting Countries (OPEC), which it joined in 1971, was not covered by this legislation. It is thus outside the scope of this article. For a summary of events that took place in the Nigerian oil industry, see Uche, Chibuike, “British Petroleum vs. the Nigerian Government: The Capital Gains Tax Dispute, 1972–79,” Journal of African History 51 (2010): 167–88CrossRefGoogle Scholar.

3 See Federal Republic of Nigeria, Second National Development Plan, 1970–74: Programme of Post-War Reconstruction and Development (Lagos, 1970), 239Google Scholar. Prior to nationalization, the Nigerian economy was dominated by foreign businesses. See Akeredolu-Ale, Ekundayo, “Private Foreign Investment and the Underdevelopment of Indigenous Entrepreneurship in Nigeria,” in Nigeria: Economy and Society, ed. Williams, Gavin (London, 1976), 109Google Scholar; and Odufalu, Johnson, “Indigenous Enterprise in Nigerian Manufacturing,” Journal of Modern African Studies 9 (1971): 599CrossRefGoogle Scholar.

4 See Economic and Commercial Department, British High Commission File Notes, April 1972, British National Archives (hereafter BNA), Board of Trade (hereafter BT) 241/2558.

5 See Wilson McMeekin (Department of Trade and Industry, hereafter DTI) to John Wilson (Foreign and Commonwealth Office, hereafter FCO) confidential letter, 9 Feb. 1972, BNA FCO 65/1220. See also P. J. Goulden to John Wilson, confidential internal memo of the FCO dated 13 July 1972 (BNA FCO 65/1221).

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9 Most archives, including the British National Archives (BNA) London, have a thirty-year rule in this regard. It is therefore not surprising that most historical studies on the operations of multinational companies in Nigeria during the indigenization era tend to contain limited information on the role of the British government in the indigenization process. In comparison to Fieldhouse, Merchant Capital and Economic Decolonization, for instance, the archival sources used in this study are essentially different. This paper relies extensively on the records of the BNA while the Fieldhouse book, which was sponsored by UAC, relied mainly on the records of UAC. Although Fieldhouse also used materials from the BNA, it was mainly for the part of his work that related to the 1930s and 1940s. By contrast, this article has the advantage of access to BNA archival materials relating to the indigenization period (1970s). Furthermore, by focusing on the activities of various British businesses and the dynamics of their relationships with the British government during the indigenization era in Nigeria, this article provides useful insights that go beyond a one-company case study.

10 See John Williams (BHC) to FCO, Confidential Telegram, 12 July 1976, BNA BT 241/2559.

11 See Cyril Pickard (BHC) to Alec Douglas-Home, confidential letter, 15 June 1972, BNA FCO 65/1221.

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34 See Wilson McMeekin to John Wilson, 9 Feb. 1972.

35 The Capital Issues Committee was established in 1962 as an ad hoc committee. It was charged with regulating the orderly development of the capital market in Nigeria, coordinating all issues of capital, and ensuring that each issue fit into the broad capital requirements of the country. Not until 1973 did the Committee, with the promulgation of the Capital Issues Decree, metamorphose into the Capital Issues Commission. This essentially formalized and legalized the function of capital market regulation in Nigeria. See Nwankwo, Green, The Nigerian Financial System (London, 1984), 146–47Google Scholar.

36 See Lawrence Hope, BHC file notes, 27 Jan. 1972, BNA FCO 65/1220.

37 Cyril Pickard (FCO), Confidential notes, 26 Jan. 1972, BNA FCO 65/1220. See also Cyril Pickard to John Wilson, confidential memo, 19 Feb. 1972, 7, BNA FCO 65/1220.

38 Lawrence Hope, BHC file notes, 27 Jan. 1972.

39 Examples of businesses listed in “Schedule 1” in the decree were advertising and public relations, block and brick manufacturing, haulage of goods by road, garment manufacture, radio and television broadcasting, and retail trade (except supermarkets).

40 See sections 4 and 5 of the Decree. Examples of affected enterprises affected, listed in “Schedule 2” of the decree, included beer brewing, boat building, bicycle and motorcycle tire manufacture, soft-drinks bottling, construction, cosmetics, department stores, distribution and servicing of motor vehicles and machines, real-estate agencies, and wholesale distribution.

41 The reasoning behind this provision appears to have been the determination of the Nigerian government to prevent companies that had previously understated their profits in the past for tax reasons from presenting different sets of accounts for determining their share prices. See Graves, E., “Indigenization in Nigeria,” Black Enterprise 4 (1973): 50Google Scholar.

42 See Cyril Pickard to John Wilson, confidential memo, 19 Feb. 1972.

43 See Foreign and Commonwealth Office and Department of Trade and Industry, British Private Investment in Developing Countries, presented to Parliament by the Secretary of State for Foreign and Commonwealth Affairs and the Secretary of State for Trade and Industry by command of Her Majesty (London, Apr. 1971)Google Scholar.

44 See Lawrence Hope (BHC) to Wilson McMeekin (DTI), confidential letter, 27 Mar. 1972, BNA FCO 65/1221. For an explanation of the inclusion of the OAU exemption clause, see George Finlayson (BHC) to T. M. Piercy (FCO), restricted letter, 21 July 1972, BNA FCO 65/1221.

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47 See Cyril Pickard, confidential memo, 19 Feb. 1972, BNA BT 241/2558. See also Brauw-Hay, Elizabeth De, “Investment in Nigeria and the Nigerian Enterprises Promotions Decree, 1972,” Bulletin for International Fiscal Documentation 29 (1975): 201Google Scholar.

48 See Cyril Pickard to FCO, confidential telegram, 10 Mar. 1972, BNA FCO 65/1220.

49 See British High Commission Note to the Nigerian Ministry of External Affairs, 20 Mar. 1972, BNA FCO 65/1220.

50 See Lawrence Hope (BHC) to Wilson McMeekin (DTI), confidential letter, 31 May 1972, BNA FCO 65/1221.

51 See British High Commissioner at Lagos to John Wilson (FCO), confidential memo, 19 Feb. 1972, and British High Commissioner at Lagos to Secretary of State for Foreign and Commonwealth Affairs, confidential memo, 15 June 1972, BNA BT 241/2558.

52 See P. J. Goulden to John Wilson, confidential internal memo of the FCO, 13 July 1972, BNA FCO 65/1221. The infiuence of the economic permanent secretaries subsequently came under attack from Nigerian “tycoons,” who felt that the profit motive was endemic in Nigeria and that the future development of the country required the full support of private enterprise. See Richard Parsons (BHC) to John Wilson (FCO), confidential letter, 8 May 1972, FCO 65/1221.

53 See John Wilson to P. J. Goulden, undated memo, BNA FCO 65/1221.

54 Ibid.

55 See John Wilson to Wilson McMeekin, confidential letter, 17 Nov. 1972, BNA FCO 65/1222. See also Graves, , “Indigenization in Nigeria,” 52Google Scholar.

56 See A. M. Ferguson (Irvin and Bonnar) to Lawrence Hope (BHC), 24 Mar. 1972, BNA FCO 65/1221.

57 See BHC file notes, 1 Aug. 1972, BNA FCO 65/1221.

58 Ibid.

59 See Federal Republic of Nigeria, Federal Military Government Views on the Report of the Industrial Enterprises Panel (Lagos, 1976), 6Google Scholar. Even before the promulgation of the NEPD 1972, it was widely believed that corruption played a part in determining the shape of the final decree. See Collins, , “Public Policy and the Development of Indigenous Capitalism,” 134Google Scholar.

60 See Lawrence Hope (BHC) to Wilson McMeekin (DTI), confidential letter, 31 May 1972, BNA BT 241/2558.

61 See Fieldhouse, , Merchant Capital and Economic Decolonization, 509–10Google Scholar.

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63 See Alfred Hall (BHC) to Wilson McMeekin (DTI), confidential letter, 15 Dec. 1972, BNA FCO 65/1222.

64 See, for instance, undated editorial in Nigerian Observer newspaper, BNA FO 65/1222. See Jones, Geoffrey and Decker, Stephanie, “Unilever as a ‘Multi-local Multinational,’” Harvard Business School case 9-808-025 (Boston, 2007), 12Google Scholar.

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68 For a general appreciation of the global practices of multinational banks at the time see Jones, Geoffrey, British Multinational Banking, 1830–1990 (Oxford, 1993)Google Scholar, Ackrill, Margaret and Hannah, Leslie, Barclays: The Business of Banking, 1690–1996 (Cambridge, 2001)Google Scholar and Crossley, Julian and Blandford, John, The DCO Story: A History of Banking in many Countries, 1925–1971 (London, 1975)Google Scholar. For more specific studies on the practices and strategies of multinational banks in Nigeria, see Fry, Richard, Bankers in West Africa (London, 1976)Google Scholar, Decker, Stephanie, “Decolonising Barclays Bank DCO? Corporate Africanisation in Nigeria, 1945–1969,” Journal of Imperial and Commonwealth History 33 (2005): 419–40CrossRefGoogle Scholar and Uche, Chibuike, “Accounting and Control in Barclays Bank (DCO): The Lending to Africans Episode,” Accounting, Business and Financial History 8 (1998): 239–60CrossRefGoogle Scholar.

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70 See Hope to McMeekin, confidential letter, 31 May 1972.

71 See BHC to Wilson McMeekin (DTI), confidential letter, 21 Dec. 1972, BNA FCO 65/1222. This arrangement no doubt pleased Standard Bank. Mr. Piercy, its executive director “stated quite categorically that his Bank was well content.” See Patrick Roberts to Alfred Hall, confidential BHC internal memo, 19 Dec. 1972, BNA FO 65/1222. With respect to pricing in other industries, the Nigerian Capital Issues Committee faced “strong criticism” that its policies were arbitrary. An FCO official, however, concluded, “I have doubts whether the Capital Issues Committee's action justifies the strong criticism made.” See Cyril Pickard to John Wilson, confidential memo, 19 Feb. 1972, 7, BNA FCO 65/1220. For various views on CIC pricing, see Aboyade, Teriba, “Financing Indigenization,” 164Google Scholar; Ojetunji, , “Indigenizing Foreign Enterprises: Some Lessons from the Nigerian Enterprises Promotions Decree,” in Industrial Development in Nigeria: Patterns, Problems and Prospects, ed. Teriba, Owodunni and Kayode, Michael (Ibadan, 1977), 381–82Google Scholar; and Judd, E. C., “The Changing Face of Foreign Business in Africa—Participation and Integration,” African Affairs 76 (1977): 101CrossRefGoogle Scholar.

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73 See File Notes by Lawrence Hope, 26 July 1972, BNA BT 241/2558. See also Kenneth East (BHC) to John Wilson (FCO), brief, 18 Nov. 1972, BNA FO 65/1222.

74 See Alfred Hall (BHC) to Wilson McMeekin (DTI), 5 Sept. 1972, BNA FO 65/1222.

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80 See L. G. Faulkner (BHC) to Harold Formstone (DTI), 15 July 1976, BNA BT 241/2559.

81 See John Williams (BHC) to FCO, confidential telex, 9 July 1976, BNA BT 241/2559.

82 See Section 7 (1) of the NEPD 1977.

83 See Harold Formstone to Secretary of State for Trade, internal Board of Trade memorandum, 12 Aug. 1976, BNA BT 241/2559. See also Secretary of State for Trade, office minute no. 999, 19 July 1976, BNA BT 24/2559.

84 Blankenheimer, Fieldhouse, Merchant Capital and Economic Decolonization, 665Google Scholar. See also Bernard, , “The Foreign Investment Climate in Nigeria,” Vanderbilt Journal of Transnational Law 10 (1977): 597Google Scholar.

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88 See Secretary of State for Trade, office minute number 999, 19 July 1976, BNA BT 24/2559.

89 Ch. 2, par. 29 of the plan.

90 See BHC notes for the records by John Williams, 1 Sept. 1976, BNA BT 241/2559.

91 See Nigerian Chronicle newspaper, 24 July 1976 and 26 July 1976. See also Nigerian Herald newspaper, 24 July 1976.

92 “Transfer Pricing—the pricing of goods and services traded among units of the same multinational corporation—has presented a major problem for African host countries in their relations with MNCs [multinational corporations]. The difficulty largely relates to the inability of African governments to investigate and monitor transfer pricing of commodity trade by multinational corporations. Numerous difficulties African host nations have experienced in this regard arise from four factors in particular: conceptual issues in defining appropriate transfer prices; an imbalanced or uneven incidence of transfer pricing across different industries and by different firms; internal and external problems in gathering data relevant to checking and monitoring intra firm pricing; and, management and procedural problems in monitoring transfer pricing and detecting improper conduct.” See Bobo, , “Multinational Corporations,” 16Google Scholar.

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94 See statement by the Federal Commissioner of Finance, A. E. Ekukinam, to the chief executives of banking institutions on aspects of federal government banking policy, 29 June 1976, BT 241/2559.

95 See BHC file notes by John Williams, 20 Aug. 1976, BNA BT 241/2559.

96 Barclays Bank eventually changed its name to Union Bank of Nigeria Ltd. in 1979.

97 See BHC file notes by John Williams, 20 Aug. 1976, BNA BT 241/2559.

98 Ibid.

99 See Diai, Ndongko and Abraham, , “The Problems and Prospects of Implementing Nigeria's Indigenization Policy,” 67–86Google Scholar; Stella, , “Encouraging Response to Indigenization Decree,” Nigeria Trade Journal 26 (1979): 19–20Google Scholar; and Ejiofor, , “The Limitations of Indigenization Decree,” 36Google Scholar.

100 See Onwuka, , A Political Economy of the Control of Transnational Corporations, 80Google Scholar.

101 Ibid., 84.

102 See John Williams (BHC) to FCO, confidential telex, 9 July 1976, BNA BT 241/2559.