Case Study: Merchandite

Dealing with crisis and uncertainty in Niger Delta

By Dr Ignatius Ekanem

Introduction

This case study is about the effect of crisis and uncertainty on entrepreneurship in the

Niger Delta region of Nigeria. The case study concerns a Nigerian entrepreneur and owner

of a trading and merchandise company in the region. The case study shows how the

entrepreneur responded and adapted to the crisis and uncertainty. The entrepreneur is

hereafter referred to as ‘Ada’, while the trading company is referred to as ‘Merchandite’.

The profile of the company

Merchandite is based in Sapele, Delta State in the Niger Delta region of Nigeria. At the

time of the outbreak of conflict in 2015, the company was 22 years old with 60 employees

and had a turnover of £25 thousand. Ada is a female entrepreneur who was 40 years of age

at the time of the interview with an HND and with considerable experience in the trading

business. The nature of the business and core activities of Merchandite is the retail of general

products.

Case study context

The Niger Delta is a region that is richly endowed with oil mineral resources that should

benefit those who have a stake in the natural endowment. Stakeholders include the oil-

producing communities, the Nigerian Government and the multinational oil companies

which have the expertise necessary exploit the crude oil in the region. However, the oil

resources have only benefited the Government and the multinational corporations (MNCs)
to the exclusion of the local communities who suffer years of environmental pollution and

degradation year after year. This deprivation has led to militancy, crisis and uncertainty in

the region with serious consequences including threats, attacks and extortion payments,

corruption, lack of infrastructure, closure of businesses; lack of finance and loss of

business opportunities.

Threats, attacks and extortion payments

The costs of the militancy in the Niger Delta have varied according to the size of company.

The larger the company, the greater the costs of the militancy and uncertainty. In

Merchandite, the effect of the crisis and uncertainty was in the form of threats, attacks and

extortion payments. This appalling situation has had a tremendous adverse impact on

businesses in the area including Merchandite. Due to the attacks by militants, business

activities in the area has been badly affected. Consequently, their income and operations

have been severely curtailed by the conflict, crisis and uncertainty.

The effect of the crisis and uncertainty also depended on the locations of the business.

Businesses in the core Niger Delta states such as Bayelsa, Delta and Rivers’ were affected

by the threats, attacks and extortion payments more than businesses outside the core

region. Therefore, Merchandite being located in Sapele, Delta State, was severely affected

by the crisis.

Corruption and corrupt business practices

The militancy in the Niger Delta has also resulted in corruption and corrupt business

practices in the region. Ada intimated that the multinational corporations encourage corrupt

business practices by making payments to the wrong people built on blackmail and
violence.

She explained that the more powerful and well connected a person is, the greater their

capacity to blackmail the MNCs and therefore the greater their payoff. She observed that

making payment to powerful and well-connected people is hardly the approach to lead to a

conducive environment for entrepreneurship.

Closure of businesses

Although Merchandite has remarkably survived, other small enterprises in the sector have

been forced to close down. The closures have rendered people in the region jobless, with

severe unemployment and a lack of growth in entrepreneurship in the region. However, it

is likely that some of these closures were not due to the crisis, but because of the lack of

statistics it is difficult to know how many of the closures were due to an inability to

manage the businesses properly rather than militancy.

Lack of infrastructure

The militancy in the Niger Delta has contributed significantly to the lack of basic

infrastructure such as good roads, water, electricity, educational infrastructures and

vocational training opportunity aimed at engaging people in economic activities and self-

generating revenues. The lack of infrastructure has an adverse effect on the way business is

conducted in the region. Ada explained that the lack of infrastructure stifles business

development in this area. She pondered: “How can you do good business with no road

network, water and electricity?”

Lack of finance
Ada commented on the lack of start-up and development finance in the region, linking it to

the unfairness of the resource derivation principle which Ada believed was too small at

13% She believed that they could use the money from the resource derivation to do

business in the area which would result in affluence in the region with new businesses

developing.

Loss of business opportunities and opportunity costs

The effect of the militancy in the Niger Delta has also led to the diminishing foreign direct

investment (FDI) in the region, which reduces further opportunities for entrepreneurs. FDI

investors are no longer interested in the region because of the kidnapping and wanton

destruction taking place in the region. In the interview, Ada reflected that foreign investors

were no longer coming to the region because they are scared of violence. She also reflected

that their coming to the region used to create opportunities for small businesses in the area .

The insecurity in the region has seriously affected entrepreneurship and entrepreneurial

activities in the region.

The strategies adopted by Merchadite to overcome uncertainty

Despite the crisis and uncertainty, Merchandite, in corroboration with other enterprises in

the region, has devised not only coping mechanisms but strategies to overcome the

uncertainty in order to adapt and survive. These strategies include:

(i) Providing employment

Ada indicated that they are trying as much as possible to provide employment to local

people, hoping it will help in putting food on the table and roof over their head. This keeps

them off the streets and provides them with a means of livelihood. It caters particularly for
the youths who are the most vulnerable as far as militancy is concerned. Ada explained that

by engaging local labour, they are reducing the severity of the effects of militancy.

(ii) Publicly condemning the violence

The strategy adopted by Merchandite to deal with the uncertainty included condemning the

violence and the militancy publicly and unequivocally. The condemnation is often

demonstrated by ignoring the militants and carrying on our business regardless. Ada

described it as a survival strategy.

(iii) Supporting enterprise development through training and mentoring initiatives

Merchandite supported enterprise development by providing training and mentoring

initiatives to the militants and thereafter employs them in their business, which helps to

address the issue that fuels militancy in the region in the first place.

(iv) Creating an opportunity to get young people positively engaged

Creating an opportunity to get young people positively engaged involved a strategy

designed to take their attention away from militancy. This included skill development and

training. The pulling of resources together involved providing microfinance and setting up

a mentoring initiative which successfully transferred management skills to the youth. The

microcredit helped in supporting enterprise initiatives such as agriculture with the potential

to develop into a sustainable venture.

(v) Pulling together of resources

Ada explained that they have jointly put resources together to provide microcredit,

enlightenment and most importantly mentoring initiatives aimed at transferring small

microcredit helps in supporting grass-root enterprise activities such as agriculture with the

potential to develop into a sustainable livelihood.

(vi) Promoting social networking events

Merchandite also created social networking events which promoted network ties. These

events allowed sharing of information among local entrepreneurs and sourcing of suppliers

from local sources. They also created opportunities for entrepreneurs to overcome

uncertainty and for entrepreneurship to survive the crisis.

The networking events sometimes involved inviting speakers from Enterprise Agencies to

encourage small business owners and potential entrepreneurs to “dream big” and build

scalable enterprises. The networking events also provide opportunity to hear about other

people’s experiences for inspiration and motivation to continue unintimidated and

unhindered by the violence.

(vii) Supporting community projects

The strategy adopted by Merchandite also included supporting and contributing to local

community projects or events as much as possible. Thus, they are putting something back

to the community and so doing, mitigating the effect of violence in the community.

(viii) Engaging in Philanthropy

Ada also indicated that they engage in some acts of philanthropy by donating money to

victims of the violence. They also support other institutions which are set up to provide aid

to victims of the conflict.

The case study has identified the direct costs of the militancy, crisis and uncertainty to

include threats, direct attacks on companies and decrease in sales and closures, whilst the

indirect costs include loss of business opportunities, changes in demand and disruptions in

transport networks. The case study illustrates that company-specific characteristics such as

company size, sector and location were important in how entrepreneurial activities were

affected in the Niger Delta. It suggests that larger enterprises were more like to report

severe impact of the crisis, while small businesses were more prone to becoming victims of

extortion and other forms of attack. These actions led to closure of some business units and

in some cases the closure of the entire enterprises.

The impact of the crisis and uncertainty also depended on the sector in which the business

operated. Small companies in the oil and gas sector were more severely affected by

militancy in the Niger Delta than businesses in the non-oil sectors which suffered milder

effects of militancy or indirect costs. Ada indicated that the location of the businesses was

also an important determinant of the costs of the crisis in relation to the ‘core’ Niger Delta

region which included, Bayelsa, Delta and Rivers states. Therefore, businesses which were

located outside these core areas were not directly affected by the costs of the conflict.

Apart from the actions of the militants, the actions of the Nigerian State were also

responsible to the indirect costs of the conflict which included delays in delivery of goods,

increase in security and insurance expenses, disruptions of distribution and of transport

networks. Therefore, entrepreneurship development and sustainability in conflict regions

can be influenced by the stance the national government takes with respect to encouraging
people to start and develop their own businesses and through the behaviour of politicians

and government officials in their dealing with entrepreneurs and aspiring entrepreneurs.

This is important for businesses in conflict areas because such policies can be either

enabling or constraining.

Although the MNCs have tried in some ways to alleviate the impact of the conflict, in

order to create a safer and more peaceful environment for business, the approach hardly

achieves their intended purpose as demonstrated by the case study. The difficulties of

gaining access to these benefits have resulted in a deadly struggle among various

stakeholder groups as each group struggles to prove their relevance and capacity to disrupt

the local economy. The struggles have undoubtedly resulted in greed and corruption, which

do not help in empowering youths, entrepreneurs and aspiring entrepreneurs for sustainable

entrepreneurship in the Niger Delta region. Thus, the actions of MNCs have resulted in

indirect costs of the conflicts such as increase in security and insurance expenses, changes

in demand and in the market and opportunity costs.

The actions of the militants also had implications for entrepreneurial activities in the Niger

Delta region with respect to FDI. The kidnapping of foreign workers and other forms of

destruction and attack have completely driven away FDI investors and have deprived the

region of the benefits of such investments and business opportunities for small businesses

and entrepreneurs. The case study has suggested that there is a complementarity

relationship between FDI and entrepreneurship in developing countries.

Conclusion

The key themes emerging in the case study are the forms of militants’ attacks against
entrepreneurship in the Niger Delta, and the ways entrepreneuship development has been

affected by these activities.

The case study provides an example of how an entrepreneur responded to the effect of the

militancy in Niger Delta and on entrepreneurship in the region, and the implictions for

developing countries. The findings suggest that entrepreneurship in the Niger Delta, have

suffered from both direct and indirect costs of the conflict such as threats, extortion

payments, attacks on businesses and employees, loss of business opportunities, security

and insurance issues and general disruptions. The case study has demonstrated how the

company has responded to the problems of militancy, crisis and uncertainty in the region as

a coping and resilient strategy.

Discussion questions

1. List and discuss both the direct and indirect costs of the crisis of militancy to
entrepreneurship in the Niger Delta as experienced by Merchandite.

2. Discuss how Merchandite responded to the crisis and uncertainty in the Niger Delta
in an attempt to overcome them.