Business leaders demand ban on foreign last-mile retailers

Organised private sector leaders and economists have asked the Federal Government to bar foreign nationals from last-mile retail trading, warning that unchecked entry of Chinese traders into Nigerian markets could wipe out the small businesses that anchor the economy.

They spoke in separate interviews with The PUNCH after local traders protested at the Lagos Trade Fair Complex along the Lagos-Badagry Expressway last week against the alleged involvement of Chinese nationals in retail trading.

According to a social media post reported by The Whistler, traders carried placards opposing the retail operations of Chinese nationals in the markets.

One of the traders said the protesters objected mainly to Chinese vendors selling directly to Nigerian consumers rather than limiting themselves to wholesale trading.

The source said the Chinese came into the country originally for wholesale business but gradually moved into retail, adding that their access to resources and direct links to manufacturers and suppliers in China handed them an advantage over local traders on pricing and product sourcing.

The traders’ protest has elicited lively debate on social media, with users noting a lack of innovation in the local trading model and others calling it an inevitable development with the advent of Temu and Sinomart.

But business leaders see a deeper implication. President of the Association of Small Business Owners of Nigeria, Dr Femi Egbesola, said the country must not sacrifice its small businesses on the altar of trade liberalisation.

Egbesola said, “I can see that the trade liberalisation document, also spearheaded by the Nigerian Export Promotion Council, allows foreigners to trade without barriers. But the question is not just trading.

“The question is, are we going to support foreigners at the expense of our own Small and Medium-sized Enterprises, our own business owners? That shouldn’t be. The role and duty of government is to protect everyone, including small businesses. Our stand is that it is not right. It is unacceptable.”

The ASBON leader called for a limit to the participation of foreigners in the marketplace, stating, “Be it Chinese or any other foreigner should not be part of our retail to the last mile. It is not right. Governments and every other key stakeholder must be ready to protect that very delicate segment of the society, which is the small and micro businesses. We should not toy with it.”

He accused many of the foreign traders of skipping the legal and regulatory steps required before opening shops in the country.

“Many of these Chinese do not even go through the legal and regulatory processes that need to be done before they open business. For example, there’s what is called a business permit issued by the state government to authorise doing business locally.

“Many of them don’t have it, because a business permit is actually for the natives. And coming up in Nigeria here to begin to run businesses without going through all the regulatory and legal process is a slap and an insult to us,” Egbesola said.

He warned that government inaction would kill off businesses in the affected clusters, noting that small firms generate 50 per cent of the Gross Domestic Product and remain the country’s biggest job creators.

“If the government leaves this unchecked, we may begin to see the death of some of these businesses where these Chinese have started operations. And remember that these SMEs are the creators of jobs.

“When anything negative happens to them, it has a colossal effect on the economy. There must be clear rules stating the line and boundaries between what foreigners can come and do here and what we should be doing for ourselves. Retail to the last mile should not be part of what foreigners should be engaged in,” he added.

On his part, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the country did not lack capacity in retail and should reserve the space for its own citizens.

Yusuf said, “In this economy, if you’re asking for investors to come, they should come and fill gaps that you don’t have much capacity to fill. As far as retail trading is concerned, especially at the level of all these market traders, we don’t lack capacity in that area. So that space should be left for Nigerians, and possibly maybe people from African countries.

“I don’t think it is fair for the Chinese, who are supposed to be wholesalers or manufacturers selling to our people, to come down to the market to compete with the very people who are supposed to be their distributors.

“That is not fair, and the government should not allow it. We should define a threshold below which we should not allow these foreign people to enter our markets. If they want to do retail, let them do it at the supermarket level, like Shoprite, like all these big supermarkets. Those are retail stores; they can do that.”

He likened the practice to a major manufacturer opening stalls beside its own distributors. “Imagine Nestlé, which is supplying distributors, now going to the market to open stores. We are the wholesaler, then we are now going to compete again with the retailers.

“It’s not fair. We will drive them out of their business. Because it is going to chase many of those people out of the market, and these are the people who supply them the goods,” Yusuf said.

The CPPE chief called for deliberate protection for retailers, describing trading as the largest employer of labour after agriculture.

“We need to protect our retailers, because that is one of our major sources of employment. After agriculture, the largest employer in this economy is trading. So we don’t want people to go and take their jobs again.

“The challenges are big enough. We don’t want some people now to come and add to the problem that these traders are facing. So the government should do something about it. It’s not right. We should not tolerate it,” he added.

Global trade case

The Nigeria-China retail trade debate has, in multiple cases online, veered into economic theory. On one end is a case for local industry, and on the other is globalisation.

The President of the Nigeria-China Investment Club, Dr Chidi Uleli, explained that trade globalisation is the key factor behind the growing presence of Chinese retailers in Nigerian markets. He said the solution is for Nigerian traders to integrate into the value chain and set up cottage industries. He warned that any retaliatory move against Chinese nationals would be untenable.

Uleli said the trend reflects a more interconnected world, stating, “Firstly, the world is now a global village. It has become globalised.”

He said more than 40 per cent of Nigeria’s imports now come from China, a share he said stood far lower four years ago. He added that Chinese suppliers saw goods that cost N2 in China selling for N20 in Trade Fair shops and moved to capture the margins.

Uleli acknowledged the traders’ fears about losing their market size. “Yes, it’s a valid concern,” the Nigeria-China trade expert noted, but he urged the traders to treat the situation as a chance to grow. “What they are trying as a problem is actually a very huge opportunity,” Uleli said.

He pointed to South Korea, Hong Kong, Taiwan and Thailand as economies that competed with a large neighbour without losing out. Uleli said of those economies, “They clustered themselves to plant. They clustered themselves to process. They even clustered themselves at times to trade.”

The Nigeria-China Investment Club president urged the traders to pool resources into cooperatives and identify the fast-moving items they import. He said, “Bring out money and open a cottage industry and begin to be distributors to your own cottage industry.”

He said the machines Chinese small and medium enterprises use to make such goods cost far less than many traders spend on import trips. Uleli dismissed poor power supply as an excuse. He said China generates renewable energy in gigawatts and Nigerian cottage industries can run on gas or solar.

• ProvidusUnity Bank urges SMEs to build system-driven structures
• N2tn goods unsold as consumer spending falls
• When the Card Isn’t There: Why Trust Matters in Digital Commerce by Mastercard

On rice, Uleli said a bag costs less than N29,500 to produce in a year with economies of scale, against the N50,000 to N60,000 the same bag sells for.

The investment club president rejected any move to drive out Chinese traders, asking, “Is it that everybody that is a Chinese that comes should be driven back to China so that all the Nigerians, about 15 million Nigerians that are all over the world, should be brought back to Nigeria? No.”

He added, “There is nothing you can do for the fact that the world has become one.”

LCCI proposes dialogue

The Lagos Chamber of Commerce and Industry, affirming other OPS members, urged the Federal Government to protect consumers. It further requested the groups involved in the dispute to sit down and resolve it.

President of the LCCI, Leye Kupoluyi, said, “The Federal Competition and Consumer Protection Commission and others have to look into such issues so that somebody will not take total advantage of the market, and more importantly, consumers.”

Kupoluyi said no economy should tolerate a monopoly, agreeing that the situation tends towards one. He said, “The interest of consumers is very important.”

He opposed street protests and urged the parties to meet. Kupoluyi said, “We need to sit down at the round table and sort it out.”

He said protests would disrupt traffic and hurt the interests of the people they aim to protect. “I don’t support protests,” he said.

Kupoluyi said the LCCI would step in as mediator because some affected traders are likely its members. He said, “We are ready to intervene since it is happening in our territory. That is our interest for there to be harmony.”

Economists react

Meanwhile, economists, including the Director of the African Retail Academy, Lagos Business School, Prof Uchenna Uzo, said market associations should pull the manufacturers to the negotiating table instead of allowing the dispute to spill into the streets.

Uzo said, “What’s happening here is that you have foreign manufacturers trying to get into retail directly and competing against the very same distributors they sell through. That is usually a conflictual situation, because it may create unhealthy rivalry, it may force the distributors out of business, and it may create a situation of lack of trust between the manufacturers and the distributors themselves.

“Most markets in Nigeria are organised by associations. Rather than protesting in a violent way, I think it’s an opportunity for the associations to step in and play the roles they constituted themselves to play, which is to call in those manufacturers and to discuss, negotiate and engage with them about fair distribution and retail practices.

“What should be left for the distributors to do should be left for them to do, and what should be left for manufacturers to do should be left for them to do, rather than having one encroach into another’s space.”

However, the don urged Nigerians not to treat foreign competition as a threat in itself. “We shouldn’t also discount the fact that as the economy opens up, we are going to have foreign entrants competing against local players, and we should be open to that, because it is a sign of gradual growth and recovery of the economy.

“You have a strong economy when local and international players can compete favourably, and everybody wins something at the end of the day. So the fact that they are foreigners should not make us unduly apprehensive,” Uzo said.

The retail expert identified the absence of a national retail policy framework as the deeper problem and described it as urgent.

“It’s not just that there’s no law. Nigeria doesn’t have a national retail policy framework, and that is an urgent matter to be addressed, because as long as that is not available, there are always going to be areas of conflict and encroachment.

“Let us also see this as an opportunity to work with stakeholders in the public and private sectors to develop a policy framework that will guide and standardise retail practices in the country. We don’t have standardised retail practices at the moment. And when you don’t have that, there’s bound to be conflict and maybe exploitation,” he explained.

Uzo added that the Federal Competition and Consumer Protection Commission had a voice in the conversation to the extent that the dispute affected buyers.

Also speaking, the Director of the Lagos Business School Public Sector Initiative, Prof Franklin Ngwu, described the traders’ fears as valid but located the real problem in Nigeria’s business environment.

Ngwu said, “Previously, Nigerian businessmen normally bought from Chinese manufacturers and wholesalers, and they did not retail. So that’s the value chain. But now the Chinese businessmen are taking over as manufacturers, wholesalers, and retailers. Expectedly, this should raise serious concerns for Nigerian retailers.

“But the main challenge or the main problem is not even between the Chinese and the Nigerian retailers. The main challenge is our business environment that has constrained productivity and manufacturing in Nigeria. And that’s why we keep emphasising that the only way to grow the economy is through manufacturing productivity.”

He said Nigerian entrepreneurs had the willingness and the creativity to produce, but faced costs their Chinese counterparts did not.

“For you to expand your business, for you to produce, you need cheap capital. That cheap capital is not very feasible in Nigeria. So you borrow at a very high interest rate of about 20 per cent sometimes. The Chinese businessmen borrow at a far, far, far lower interest rate, a single-digit interest rate, even sometimes with a kind of waiver for some years before you start repaying.

“One of the key factors of production required, not only in Nigeria but across the world, is electricity, power, energy, which we don’t have. So, to manufacture in Nigeria, you have to figure out how you get your source of power.

“Then, of course, the regulatory challenges. There are so many regulators, all of them asking you for something. And then the supply chain environment in Nigeria, the roads, the market access. So at the end of the day, the Nigerian business environment cannot be said to be friendly to business growth and manufacturing. And that is the reason why Nigerians now import almost all importables,” Ngwu said.

He warned that the country’s estimated 14 million micro, small and medium enterprises sat squarely in the affected segment.

“They are actually the big pillar of the Nigerian economy. So if this continues, they will be significantly impacted and possibly wiped out. So it’s not a discussion to say some traders are protesting because of what the Chinese are doing. It’s far, far deeper and far, far connected to the whole Nigerian economy. And that’s the way the discussion is supposed to go,” he said.

Ngwu urged the three tiers of government to build industrial clusters mapped to the comparative advantages of each geopolitical zone, with constant electricity, clear regulation and limited bureaucratic friction, and to channel incentives into manufacturing.

“You cannot stop the Chinese from bringing their goods into Nigeria, because it is a global market. It is a free market. So the question is how do we improve the competitiveness for Nigerian businesses?

“And that is where the government has to come in, in terms of creating a business environment, creating industrial clusters, providing cheap loans, providing a good business environment, roads, infrastructure, power, training of the employees, and innovation for us to be able to compete globally,” the professor concluded.