Backwards integration of UK companies in nigeria Essay

Most UK companies in Nigeria during the colonial epoch were in the primary sectors of agribusiness and extractive industries and others in the service sectors such as finance and building. UK companies easy dominated the Nigerian economic system sing the colonial history of Nigeria. They enjoyed a major growing during the Nigerian oil roar of the mid 70s but the indigenization edict of the 70s saw the naturalization of many of the companies, for illustration British Petroleum was changed to African Petroleum etc. ( Faruquee, 1994 )

The history of UK companies started with the coming of Royal Niger Company in Nigeria. Harmonizing to US Library of Studies, it was a mercantile company that traded with the local people by purchasing their local green goodss which were exported to Britain. It was on this footing that modern Nigeria was established on whose wings colonialism strove which paved manner for the constitution of other UK companies such as First Bank, Lever Brothers – subsequently transformed to Unilever, United African Company, Cadbury, Barclays Bank- subsequently transformed to Union Bank, Shell Petroleum and PZ Cussons etc.

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However, the oil oversupply of early 1980s raised some inquiries about Nigerian economic system which led to the debut of Structural Adjustment Programme ( SAP ) and therefore, the focal point of public policy shifted to promoting the local use of natural stuffs in Nigeria. As a consequence of this, makers were encouraged to develop backward integrating plans ( Alos, 2000 ) .

The economic troubles in Nigeria in the 1980s forced the authorities to follow IMF divine Structural Adjustment Programme ( SAP ) ( Obansa, 2005 ) . One of the purposes of SAP was to see an economic system that is though liberalised but better, more dependent on local contents/inputs for its ingestion ( ibid ) . Firms were hence encouraged to beginning their inputs/raw stuffs from within Nigeria to ease Balance of Payment ( BOP ) jobs associated with inordinate importing.

This has been the philosophy of Nigerian economic system since the debut of SAP. This policy has led to the prostration and resettlement of many industries from Nigeria due to hapless operating environment and troubles in acquiring local inputs. For illustration, Michelin and Dunlop have left Nigeria ( ibid ) while Belford is out of production. Many production lines of Unilever and PZ Cussons that are perceived non competitory have been relocated to neighboring Ghana. For those houses still there has been long list of ailments.

Therefore, the nature of the Nigerian industrial sector and the status of Nigerian engineering show that there is a really low input of natural stuffs produced in Nigeria and with a somewhat greater usage of its services. Currently and soon, backward integrating in the context of linkages is most likely to be of fringy significance to the economic system of Nigeria.

Therefore, given these definition and jobs, together with informations that are deficient to back up the claim that Backward Integration has a great impact in the economic system of Nigeria, this proposal sets out as an empirical survey in order to deduce a decision to these jobs and do some recommendations on how to understate them.


The purposes and aims of this proposal are as follows:

To place the relationship between SAP and Backward integrating in Nigeria

To place and measure the local contents in Nigeria context

To analyze the effects of Backward integrating on the economic system of Nigeria

To measure backward linkages of UK companies with Nigerian houses

To analyze the cost-effectiveness of backward integrating in Nigerian economic system

To do recommendations as a consequence of findings that will be made in the class of the survey.

The research inquiries proposed for this survey are as follows:

What are the relationships between SAP and backward integrating in Nigeria?

Does backward integrating affect Nigerian economic system?

To what widen has backward integrating helped increase the gross of UK companies?

Are there incentives that promote the growing and development of fabricating companies to backward integrate in Nigeria?

Harmonizing to Lyson and Farrington ( 2006: 39 ) backward integrating looks for the best manner to guarantee that a concern gets a uninterrupted supply of resources by commanding or having providers. Macmillan et Al. ( 2009: 1 ) postulates that the soaking up of some of the activities carried out by a provider tends to impact the strategic way of the concern. Backward integrating is hence, the motion of house in the upstream way to geting beginnings of supply ( Krajewski et al. ; Slack et Al. ; Hanfield et al. , etc. ) . It is a scheme used by organisations in order to spread out on the supply side web.

Though the definitions above have a common land, which are acquisition or control of a provider in order to hold entree to uninterrupted supplies, but they can be considered excessively narrow. A broader or a more across-the-board definition is provided by Obansa ( 2005 ) which defines Backward Integration as the grade to which an economic system utilizes her locally available natural stuffs in order to conserve foreign exchange. It is the manner by which an economic system encourages her makers to put in local inputs for which they have no specializer cognition.

Fukao ( 2000 ) , while mentioning to backward integrating in the context of local content, related it with back ward perpendicular linkages. He wrote that an Increase in backward linkages as measured by the local contents of fabrication activities can be achieved by the extent to which organisations beginning stuffs from local providers or manufacturers. Therefore, backward integrating can be seen as the procedure by which an economic system integrate its agricultural and mineral sectors by doing usage of the resources generated for the production of secondary or third merchandises.

The benefits accrued to an organisation that decides to backward integrate can non be overemphasised. Harmonizing to Hill ( 2005 ) , backward integrating eliminates or reduces transactional cost and improves operational efficiency.

However, backward integrating can non be in a vacuity. It is predicated on the state of affairs of an economic system at a point in clip. The infrastructural development of an economic system is an of import factor to see when an economic system is promoting the execution of backward integrating ( Cho, 2008 ) . Presently, the jobs of makers have been complicated by the cost of making concern in Nigeria ( NES, 1997 ; Alos, 2000 ) . This ranges from the hapless province of substructures to scarceness of crude oil. Even, in the thick of this, the Government is still encouraging Backward Integration.

Harmonizing to Business twenty-four hours News ( 2009 ) , the industries in Nigeria became dead shortly after Nigeria as an independent state in 1960s adopted an industrial policy of import permutation. Therefore, the local makers became assembly workss by seting trim parts and natural stuffs together to bring forth some merchandises ( ibid )

However, Nigeria in order to turn to its job of oil roar and accordingly import-dependent economic system, backward integrating and infrastructural decay, instituted SAP to open the economic system to exports which brought about paradigm displacement in the public policy for fabricating industry in Nigeria and this enshrined Backward Integration in the system of Nigeria to better the economic state of affairss of the state ( ibid ) .

Backward Integration as it was being implemented is the use of locally available natural stuffs in order to salvage foreign exchange. Therefore, makers were required to backward integrate by originating some programmes on which import licensing allotment is dependent and therefore, they were forced to backward integrate by puting in the production of local merchandises on which they had no much expertness ( ibid ) . By and big, this programme could non digest for long. Harmonizing to Obasa ( 2005 ) , some organisations were able to pull off it as a consequence of the proficient supports they had, others failed and therefore, became excess.

Faruquee ( 1994 ) in measuring the consequence of oil roar in Nigeria wrote that

”assembly-type activities that relied to a great extent on imports predominated in the fabrication sector and contributed small to local value added or employment. Domestic valued added amounted to merely 14 per centum of the value of gross end product, and more than two-thirds of natural stuff was improved. The export of manufactured goods was virtually non-existent. As foreign exchange became scarce, capacity use declined. ”

The consequence of SAP after its debut was nevertheless positive though faced with so many challenges and uncomplete. There was an addition in fabricating end product from 5.1percent in 1987 to 12.9 per centum in 1988 as compared to a diminution of 3.9 per centum in fabricating end product in 1986 as a consequence of the important growing given to local sourcing of domestic stuffs for the fabrication of nutrient and drinks, fabric and vesture, soaps and detergent though other sub- sectors such as electronics and assembly did non execute good, nevertheless, this growing was short-lived. ( Faruquee, 1994 ) .

However, the current economic environment of Nigeria has been characterised by low consumer buying power. While in 2006, the rising prices rate was 17 % at the terminal of the twelvemonth, it fell back to individual digits- 5 % in 2008 ( CIA World Book, 2010 ) . Therefore since 2008, there has been a little addition in the rising prices.

Harmonizing to the CIA World Fact figure for twelvemonth 2010, Nigeria ‘s rising prices rate bases at 11 % with more stable involvement and foreign exchange which have had a stabilizing consequence on the economic system. However, the macroeconomic foundation achieved therefore far, has non given rise to the induction of economic growing in Nigeria. By the terminal 2009, non merely has capital use go comparatively dead, but it has reduced drastically as a consequence of deficiency of political will and economic thrust of the Government to develop substructures responsible for bettering economic growing.

Restriction OF THE STUDY

The overall purpose of this proposed survey is to accomplish the set aims. This survey will nevertheless be limited by the unavailability of research stuffs as related to bing literature on backward integrating of UK companies in Nigeria. The restriction of fund for effectual informations aggregation may besides lend to this consequence.

This survey will besides be limited as a consequence of the jobs encountered during the proposed research. These may include the uncooperative attitudes of some respondents who may desire to conceal information for fright that it may be revealed to their rivals.

Though, this survey focuses on Backward Integration of UK companies in Nigeria, it is non operable to analyze all the UK companies in Nigeria. Any generalization from the findings will merely be limited to the specified companies.


This research work will be carried out based on the methods and processs that will be used by the research worker and the specific model on which it will trust on. This will guarantee the cogency and dependability of the informations collected and analysed.

Given that this research is traveling to be carried out in two UK companies in Nigeria which are Unilever and PZ Cussons, there is a demand to understand the right significance of their civilization and ethical values.

Therefore, the end of this research is to present methods and techniques used in garnering informations seting into use the usage of quantitative and qualitative research techniques. Both qualitative and quantitative methods will be used in order to give credibleness to the decision of this research work.


This survey will research the effects of Backward Integration of UK Companies in Nigeria utilizing Unilever and PZ Cussons as a instance survey. There are a batch of UK companies which have had a great trade of influence on Nigerian economic system during and after the colonial period of the British in Nigeria of which Unilever and PZ are being chosen as a instance survey.

But most of these fabrication organisations are into production of merchandises which raw stuffs or resources may non be sourced from Nigeria due to its technological retardation. Unilever and PZ Cussons are majorly manufacturers of family merchandises in Nigeria. Greater parts of their natural stuff are or should be sourced locally. Therefore, the range of this survey will be limited to Unilever and PZ Cussons.


The research design that will be used for the intent of this proposed survey is quantitative and qualitative research design. The kernel of this is to look into research inquiries which have been outlined earlier in this proposal. The research inquiries which can be referred to as indexs are traveling to be used to fix questionnaires on which footing presentation and analysis will be made. A signifier of qualitative research design will besides be used to corroborate the dependability of the informations collected through quantitative design.

Beginnings OF DATA

Data will be collected from both primary and secondary beginnings. The major purpose of the research worker is to roll up primary informations to research the countries where backward integrating has affected Nigerian Economy positively and negatively. However, pretermiting the secondary informations will be impossible owing to its great relevancy and its rich resources. The profusion of secondary informations in this proposed research work will do it easier to analyze the past development policies as respects backward integrating and analyze them in dealingss to show and future policies. Therefore, the secondary informations will include published and unpublished books, diaries, authorities and non- governmental organisational paperss etc.

Owing to the importance of the primary informations, quantitative method will be used to roll up informations. These will include questionnaire and semi-structured interview. Therefore, questionnaires will be distributed through electronic mails to directors busying sensitive places that have direct or indirect contacts with backward integrating. Therefore, the following cardinal directors of the Organizations in which the survey will be done will be contacted:

Senior Buying Directors: Senior buying directors are in charge of sourcing resources from providers thereby holding direct contacts with them. Therefore, they have information that may assist analyze informations in the class of this survey

Senior Selling Directors: They have small or no contact with providers but work manus in manus with senior buying directors and may lend to determinations as respects to making understandings with providers or to get providers

Senior Accountant: They participate in determination devising to backward integrate and pay money for acquisition of providers or buying supplies from providers.


Quantitative method of analysis will be used to turn to the inquiries raised methodologically as a consequence of the fact that most of the informations will be gathered through questionnaire. The acceptance of this method of analysis is due to the benefits of using every brief reply given by would be respondents.


To give acceptance to this research, semi construction interview will be administered to assist corroborate the dependability and cogency of the information that will be gathered through questionnaire. Therefore, information will be sourced from representatives of organisations that are non major participants of this research work but as a consequence of the fact that their organisations straight or indirectly have bets in the backward integrating of Nigeria.