NIGERIA, A PERSONAL HISTORY
by Ian McCall

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Chapter 12 - GEORGE GOLDIE (3): The Rise in the Influence of Expatriate Companies
and the Setting Up of the Marketing Boards

The period between the beginning of the century and the First World War and beyond reflected the influence of Goldie. It saw a revival of the fortunes of the expatriate companies as world prices moved back to a level which gave a good return after the down-turn in trade of the 1880s. They were able to move inland in the late 1890s, originally by the rivers, as the growing political influence of the consuls became more supportive together with their greater capacity to call on military power. Later they followed the railways. The Niger Company, which lost its charter at the end of 1899 and so the ‘Royal’ part of its name, continued to trade on a large scale and was bought by William Lever in 1920. Another company, the African and Eastern Trading Company, itself formed from earlier amalgamations, eventually combined with the Lever organisation in 1929 to form the gigantic United Africa Company. Other companies were active throughout Nigeria in the export of produce, companies like G. B. Ollivant destined to be absorbed within the United Africa Company but retaining its old identity, John Holt and Company, a firm founded by a Liverpool merchant family, Paterson Zochonis which had Manchester connections, the French companies CFAO and SCOA and latterly A G Leventis, a brash new entrant to what was considered a protected association of companies. These were all importing and exporting organisations. They were joined by the specialist exporting company Cadbury Brothers who later operated jointly with their competitor chocolate manufacturers Fry and Rowntree in both Nigeria and the Gold Coast to purchase cocoa for their factories in the United Kingdom which the Quaker families that owned them hoped would see chocolate take over from strong drink as a tipple for the masses. Early on, these companies, along with others in the trade, established a fairly tight control of the export trade in produce by what was tantamount to the sharing of markets.

These expatriate companies began to thrive on their protected produce markets. Bigger and better housing was built for company personnel. Improved living conditions and better public health resulted in an increasing number of wives going out to the coast, a development that was to be reflected also in the number of government officials whose wives began to accompany them, at least for a protracted stay, to the Coast. This was progressively to exert a change in social behaviour as the influence of the womenfolk made itself felt. Hard drinking was moderated, at least in the households where the wives were present. The taking of African mistresses by the menfolk was reduced and there was a general raising of the tone of daily living as a result of the presence of the women.

The Second World War threatened to cut off West Africa from the British market, at least in part, due to the lack of shipping and the continuing threat of enemy action. This could have resulted in the collapse of cocoa prices and a crisis among cocoa producers. After the collapse of vegetable oil and oilseed supplies from the Netherlands East Indies and Malaya as a consequence of Japanese occupation, there was a need to direct supplies of groundnuts and palm oil to Britain. Prices to producers were guaranteed through the West African Produce Control Board. To direct these products to specific destinations export licensing was established and a statutory monopoly in the handling of the principal exports was set up. This was to have a considerable effect on the post-war marketing of Nigerian exports. These controls remained in force until 1945 except for cocoa which was regulated until 1947.

Almost from their inception, these boards began to accumulate surpluses due to rising commodity prices. The merchants who had previously bought and shipped the cocoa became agents for the buying of the crop and shippers under the direction of the authorities. They would share the trade on a percentage quota based on past purchases and new entry into the trade was banned. According to P.T. Bauer in his classic work West African Trade, the quota system was unnecessary and harmful in that it froze the pattern of trade and hindered the growth of new firms. It impeded buying competition and reduced prices somewhat to producers which tends to reduce supplies.

The quota system was originated earlier in the century by the merchants as a confidential market-sharing agreement to restrict competition among themselves and to put up a barrier to new entrants to the trade through the agency of their Association of West African Merchants. It was given official sanction during World War 11 as a convenient means of the crops being bought by the wartime purchasing organisation, the Ministry of Food. Export quotas are easier to establish, to enforce and administer when there is only a single buyer, especially if that buyer is prepared to arrange a settlement between those who exceed their allotted shares and those who do not reach them. Thus the West African merchants were inclined to favour statutory export monopolies. The system was imposed and ultimately managed by the Association of West African Merchants dominated by a handful of the larger firms. Many criticised the quota system, not least aspiring Nigerian nationals and others wanting to participate in it. It brought home to the merchants within the Association the advantages and profitability of market-sharing agreements. This greatly strengthened officials’ determination to see a radical change in marketing methods. There had been criticism immediately before the war in successive reports but the war had put any action on them in abeyance.

A number of factors combined to bring about the establishment of the Produce Marketing Boards. Indigenous businessmen found that lack of capital inhibited their participation in the export trade and they brought political influence to bear on the decision makers to produce a system that made it easier for them to gain entry. There was a resentment directed against the larger and more successful expatriate firms. This stemmed largely from a profound ignorance on the part of many Nigerians of the working of an exchange and market economy. Accumulated wealth was thought to have been earned solely by the impoverishment of customers and competitors. It was a widespread article of faith that the wealth of mercantile firms had been extracted from the Africans and had in no way been created by the activities of the merchants themselves. Falls in prices on the terminal markets were likely to be seen as a deliberate attempt by expatriate companies to put them out of business. Any such fall in price was followed by assertions that the ‘sons of the soil’ were not getting their due returns. In the full knowledge that they had been excluded from the export trade during the period of quotas, they now reacted by demanding what they saw as a fair share of the trade by local businesses. They looked to government to assist in this. There were many officials who were only too willing to support such an argument.

There was also concern among officials about the ability of producers to survive the swings of the market prices and there was a strong lobby in favour of stabilising the payments to them. This was a course of action reflected in two important British parliamentary White Papers which dealt with arrangements for post-war marketing of West African cocoa. If surpluses could be accumulated when the world price is high, these could be used to support producers when the market price was low. There was also evidence in these papers of a distinct dislike of traders and intermediaries and this may have given an added impetus for urging drastic changes in marketing arrangements.

It was, however, the presence of the West African Produce Control Board at the end of the war that was a principal factor in the setting up of the marketing boards. Once a statutory monopoly has been in existence for some years, strong tendencies for self-perpetuation begin to appear. It causes intellectual and administrative vested interests. By and large it is easier to continue a system that is already established than to discard it. The proposals for cocoa were extended to the marketing of other West African agricultural exports. Legislation was enacted which set up the boards and defined their extensive duties. It is clear from the Nigeria Cocoa Marketing Ordinance of 1947 the wide extent of its authority. It is clear too that from their powers and organisation the boards were organs of government and not independent commercial organisations as had been officially claimed on their behalf. They could control and fix prices, prescribe quality, buy the total cocoa crop, appoint licensed buying agents to act on their behalf, grant or withhold licences and impose conditions under which they might or might not be renewed. Similar powers were given in respect of other products. Among the advantages to indigenous businessmen of the establishment of the boards was the system of payment on declared, graded purchases which allowed them to receive payment subject to a monthly reconciliation against actual deliveries to Board stores at port. This enabled them to operate with a lower capital outlay as compared to the previous system. A separate government initiative set up a Cooperative Department responsible for the development of cooperative activities by these newly appointed buying agents whereby they achieved further economies of scale in transport, storage and administration reflected in the Association of Nigerian Cooperative Exporters. A Labour government in London was sympathetic to such monopoly practices by the Produce Marketing Boards. This reflected its own approach at the time to problems of production and marketing of many basic commodities at home and was a continuation of immediate post-war domestic arrangements.

Palm oil as an export commodity was originally used in the manufacture of soap and candles but, as production methods and hence its quality improved, it became increasingly used in the manufacture of margarine. It is an element in generic vegetable oil, a cooking medium, a covering description that enables the blenders who purchased it to alter the mix according to the price and availability of alternatives. Hydrogenated palm oil is used extensively in various food preparations including some ‘ice creams’. Palm kernel oil, mostly extracted overseas, is used principally in the manufacture of margarine but is also used in the manufacture of soap. The combined market value of palm oil and kernels over the 1950s was approximately the same as that of cocoa, these two classes of produce leaving groundnuts as the only crop to come anywhere near them in money terms. In relation to weight there were more groundnuts shipped than cocoa indicating the much higher value of cocoa for a given weight.

Cocoa had not been a significant crop until after the First World War when it assumed a respectable share of Nigerian exports growing steadily in tonnage shipped right up to and through the 1950s. Groundnuts were not a commercially viable crop until the railway was completed to Kano in 1911 from which time exports increased spectacularly. It was not possible to gauge exactly how much was Nigerian production and how much came from the neighbouring French territories of Niger and Chad due to the cross-border trade. Of the marketing board products cotton had a relatively small production although important for the growers in the areas of its cultivation and for the incipient textile industry it served..

This growing importance of Nigerian produce was recognised by the British government in the mid-1920s and practical steps were taken to ensure that it was competitive with other suppliers by the establishment of the Produce Inspection Service within the Department of Agriculture. Produce inspection was also introduced about the same time in the Gold Coast and Zanzibar. All Nigerian commodity exports with the exception of minerals, hides and skins, timber and bananas were subject to compulsory official inspection. On the establishment of the Marketing Boards, it was a reasonable organisational step to attach the Produce Inspection Service to it as it was a self-contained unit with its own administrative mechanisms. The system consisted of minimum export standards; only produce inspected and rated above the minimum could be exported. Compulsory grading was superimposed on the minimum standards and the differences between grades were spelt out in the standards laid down. There was in addition compulsory inspection of some produce not controlled by the marketing boards, notably rubber, ginger and chillies. I was now part of this system.

Ian Mcall Auchencrow
Berwickshire, Scotland July 2003

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CHAPTER 13