Religion & Liberty Online

Noodles in Nigeria: When private business breeds economic development

In the West’s various efforts to alleviate global poverty, we continue to see the promotion of top-down solutions at the expense of bottom-up enterprises and institutions. Yet despite the setbacks and slowdowns caused by various governments and foreign aid, the entrepreneurs and workers on the ground aren’t sitting idly by.

Across the developing world, people aren’t waiting for policies to change, conditions to improve, handouts to be given, or risks to evaporate. They are actively transforming their environments and creating value with creative vision—demonstrating the power of what William Easterly has called “searching” vs. “planning.”

In an excerpt from their new book, The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty, Clayton M. Christensen, Efosa Ojomo, and Karen Dillon point to a striking example of this, telling of the story of the rise of Indomie instant noodles in Nigeria.

In 1988, an Indonesian food company called Tolaram decided to bring the noodles to Nigeria, seeing an opportunity to bring a low-cost food item to a struggling nation. At the time, Nigeria was far from a stable economic environment, burdened under military rule after a recent coup. “Life expectancy for its 91 million people was 46 years,” the authors explain. “Annual per capita income was barely $257 (approximately $535 today)…a staggering 78 percent lived on less than $2 a day.”

But while some might have seen such a nation as “poor” and “not investable,” Tolaram spotted the ultimate economic resource: the Nigerian people. “Tolaram has shown that out of very little, a market can be created—and with the birth of a market comes the benefits that can lead to development,” the authors explain. “…The company’s growth track turns the conventional wisdom about development on its head in that, there was little attractive about investing in Nigeria when Tolaram decided to enter the country.”

Whereas Nigeria’s corrupt government and foreign powers had narrow vision, one business searched and saw an opportunity to build something new. Yet even Tolaram didn’t foresee how much “external impact” the business would have on Nigerian society and culture as a whole.

At the time of initial introduction, such noodles were not by any means part of Nigerian cuisine, but by 1995 they had become so popular that Tolaram began to move many of its manufacturing operations there, as well. Given the severe lack of basic infrastructure in the area, this meant taking a broad approach to local development.

“Tolaram has invested more than $350 million to create hundreds of thousands of jobs, developed a logistics company, and built infrastructure including electricity and sewage and water treatment facilities,” they explain. “Tolaram has also built educational institutions, funded community organization programs, and provided millions of dollars in tax revenues. Without overstating it, Indomie noodles is development.”

Similar to the companies that founded India’s infamous “private city,” Tolaram quickly became more than simply an employer. Not only were they providing jobs and delivering their product; they were also weaving basic community needs like “electricity, waste management, and water treatment” into their business model, making the fruits accessible to local residents, as well.

The results for Tolaram’s bottom line have been positive, to be sure, with more than 4.5 billion packs of their Indomie noodles sold annually in Nigeria. But in providing its product and services, Tolaram has also proven to be a substantial benefit for the Nigerian people as well, leading to new roads and power sources, job opportunities, education, and—of course—a beloved, inexpensive food.

The authors summarize the scope of these improvements as follows:

When Tolaram pulls a recent graduate from a local university into its operations and provides employment and training for the new employee, it first, increases the productivity of its own operations and, by extension, that of the region. Second, it reduces unemployment and, as a result, indirectly reduces crime since people with jobs are less likely to engage in criminal activities to try to meet their basic needs. Third, it contributes additional income taxes and consumer spending. All of these things might have been core regional development objectives, but for the executives at Tolaram, they were just the natural result of operating their growing business.

… Tolaram directly employs more than 8,500 people, has created a value chain with 1,000 exclusive distributors and 600,000 retailers, and has revenue of almost $1 billion a year, all the while contributing tens of millions of dollars in taxes to the Nigerian government. Tolaram also created a logistics company that owns and operates more than 1,000 vehicles. The logistics company now serves both Tolaram and other Nigerian companies, with 65 percent of its revenues coming from external clients.

Tolaram offers yet another example of how ordinary businesses—fueled by the risk-taking of their leaders and the diligent creative service of their workers—can have powerfully transformative social and economic effects, even amid government turmoil and constant barriers and distortions.

But while these investments may be possible despite local political turmoil and interventionist planners, and though they remind us of the resiliency of entrepreneurs and the power of basic value creation, such successes also indicates how much untapped creative potential remains. “It’s through this process of making one’s product available, affordable, and therefore accessible, that innovators create the right solutions for new markets,” the authors conclude. “A market-creating innovation then, isn’t simply a product or a service, it is the entire solution.”

That “entire solution” doesn’t rely on distant planners devising “efficient” schemes. It emerges when we further allow and empower the searchers to get to the searching.

If we were to set our focus on removing barriers and including others in circles of exchange, whether through freer trade or the improvement of property rights, we would not only see new enterprises. We would also see new public, common-good improvements, flowing from the resources, virtues, and innovative attitudes that are cultivated and reinforced therein.

Image: Indomie Mie Goreng Iga Penyet, (CC BY-SA 3.0)

Joseph Sunde

Joseph Sunde's work has appeared in venues such as the Foundation for Economic Education, First Things, The Christian Post, The Stream, Intellectual Takeout, Patheos, LifeSiteNews, The City, Charisma News, The Green Room, Juicy Ecumenism, Ethika Politika, Made to Flourish, and the Center for Faith and Work, as well as on PowerBlog. He resides in Minneapolis, Minnesota, with his wife and four children.