Capitalism In The Colonies: African Merchants in Lagos, 1851 - 1931 [Chapters 15 - 16]

The Lokoyi of Ilesha

In the previous post, we discussed the rise of cocoa in Agege via Jacob Coker and the innovative efforts of the Agege Planters Union (APU). The story - for both Coker and the APU - did not have a happy ending. As we’ve discussed previously, the end of World War I came with a ‘fake’ boom that was then quickly followed by a depression: in the space of four months in the mid 1920s, cocoa prices went from a high of £90-£95 per tonne to £30 per tonne . This ruined many merchants and created so many other problems that would have a profound effect on what is today’s Nigeria. By 1933, Coker’s profit was ‘no more than £275’ and his funding of the African Church and involvement in Egba politics meant he was no longer a rich man. At the time of his death in 1945, he was indebted to the tune of almost £2,000. Ibadan and Ondo overtook Agege as the main cocoa producers by the mid 1920s and by the following decade, cocoa trees in Agege were being cut down to make room for other crops like kola. The APU went from having more than 200 members in 1918 to practically non-existent in the 1930s.

The losses suffered by the merchants altered their behaviour in other ways. As we have seen, the only businesses from that era that survived to independence were Josiah Doherty’s and Andrew Wilkinson Thomas, an Oyo born man who joined the Colonial civil service and rose to become the Deputy Registrar of the Colony by 1886 at the age of 30. He resigned from the service in 1899 and obtained an auctioneer’s licence. This proved to be a smart move: once the war began, the German firms were kicked out of Lagos and their properties seized by the British authorities. When it came time to auction those properties, Thomas was chosen to handle a large share of them from which he earned sizeable fees. His son, Jacob took over the business when Thomas died in 1924 and ran it into the 1960s. Many of the merchants who still had any money left used it to educate their children in the professions and discouraged them away from business (many Muslim merchants of the time also sent their children abroad to study or even to christian schools in Lagos). This shift from business to the professions would go on to play a big part in the economic and political future of Nigeria.

The war had a significant effect on Nigerian merchants, particularly in fostering cooperation. The introduction of submarines as a weapon during the final two years severely disrupted shipping, with many vessels requisitioned for the war effort being sunk by the new war technology. Before the war, German shipping companies had also played a major role in Nigerian exports, but this ended abruptly when the war began. As a result, shipping space became scarce after the war, leading to rationing: British firms received 60% of available space, while Nigerian merchants were left with 40%. This allocation formula caused tensions, as complaints came primarily from Nigerians, who felt the formula heavily favoured British companies. Crops reportedly rotted in Lagos due to the lack of shipping space, deepening frustrations. In response, Nigerian merchants began hiring their own ships and expanded export markets to the United States as an alternative to British-controlled routes. The key takeaway for many, however, was the realisation that economic control could only be achieved through political power.

The last big character study in the book is that of Peter John Claudius Thomas who was born in Sierra Leone in 1873 to freed slaves - and Ijesha father and an Egba mother. His parents died in Sierra Leone and never returned to Nigeria but having been educated by British missionaries in Freetown, Peter’s brother, Stephen, decided to return to Lagos to try his luck in civil service employment. He sent back favourable reports and Peter decided to join him in Lagos where he too joined the colonial administration in 1894. His career would take him to Calabar where he worked for Customs before he returned to Lagos in 1906 to become the Chief Clerk in the Financial Commissioner’s Office in the new Southern Nigeria Government. In 1908 he moved to the Treasury Department, also as Chief Clerk, and by 1911, he was earning £300 a year (perhaps £45,000 in today’s money). This was the highest level any African could expect to reach in the Colonial Service (he was effectively Number 2 in those departments as a Chief Clerk) and so in 1912, he retired from the civil service at the age of 39 in part due to ill health which affected his eyesight. The eye problems turned out to be temporary and so he soon found he needed something to do with his time as a retiree at such a young age.

While in the civil service, he and his brother (who later died at sea on his way from Freetown to get married) had run a side hustle selling fish, beef and biscuits (at the time Nigerian civil servants were allowed by the authorities to have part time businesses to supplement their incomes). Later on when he went into business full time on his own, he traded cocoa, palm, hides and various other products except spirits on account of his Wesleyan faith. By 1913, he had made enough money to buy a property in Marina from Herbert Macaulay for £2,300 which he later mortgaged to raise additional capital for this business and expanded his business to Abeokuta and Kano. In 1915, after the war had started, the Colonial government appointed him to prepare a report on all German (and other enemy countries) property in Lagos. This gave him valuable insight into the opportunities available there and in 1917 he was the only Nigerian to bid for the auction of enemy properties. These unique circumstances made him one of the very few Nigerian merchants to have prospered during the war.

Peter Thomas, alongside Jacob Coker, was one of the brains behind the idea of shipping cocoa to the United States that started in July 1916. He also helped sponsor one Mr. Duncan to England to find a ship which could help the APU and other Nigerian merchants export their produce once a month from Lagos. These were all responses to the now dominant British firms banding together to give themselves pricing and shipping advantages. In nearly every strategy Nigerian merchants devised to navigate these challenging times, Thomas played a central role, providing funding, expertise, and intelligence from his extensive global networks. Inspired by ventures like Marcus Garvey’s Black Star Line, they pursued bold plans, including Mr. Duncan’s mission. While these efforts faced varying degrees of failure, as Professor Hopkins notes, initial setbacks do not diminish their significance in shaping future developments.

By the end of the war, Peter Thomas had become a major figure in Nigerian commerce. He operated five stores in Lagos and 21 across the country, reaching as far as Kano. He also owned multiple factories and, by 1918, was spending £18,000 annually on salaries, wages, and rent—a significant sum at the time. Thomas employed 300 people, including eight Europeans. Among his staff was Amos Shackleford, a Jamaican who moved to Lagos in 1913 and later became a pioneer of Nigeria’s bread industry. Known as "The Bread King," Shackleford owned a property on the site where the Wheatbaker Hotel in Ikoyi now stands—a tribute, by the current owners, to his legacy.

By the end of 1920, Peter Thomas owned at least 37 properties in Lagos and 20 more in Ebute-Metta, with a combined value nearing £100,000. He also held property in Kano worth £8,000 and several houses in Freetown. Beyond real estate, Thomas diversified his ventures: he built a tannery, a corn flour mill, and acquired a printing press. He purchased land in Agege, where he hired an African-American manager to oversee the cultivation of corn, cassava, sugarcane, and livestock. In a vision that still resonates today, Thomas expressed in his will that his farm should be maintained by his estate trustees, believing that West African products should be ‘partly or wholly manufactured or dealt with in West Africa’ rather than exported raw. A timeless dream indeed, Mr. Thomas. Thomas always paid close attention to appearances, regularly ordering new suits from his English tailors every few months.

Thomas’s primary ambition was to foster ‘a better understanding between Africans and Europeans,’ recognising their mutual dependence. While a self-proclaimed loyal British subject, he didn’t shy away from criticising British policies, especially Lugard’s attempts to impose northern governance methods on the south. In a 1919 interview, he highlighted the hypocrisy of not being allowed to stay in his own properties during a visit to Kano because Europeans were occupying them, with "disease control" cited as a reason for segregating Africans and Europeans. Even in the 1940s, when he was no longer wealthy, he was still giving 7.5% of his income to charity. His philanthropy is best captured in a 1918 letter to his sister in Sierra Leone, urging her to share a few shillings with poor neighbours as ‘a message of God’s love through the agency of His creature, man.’

Why is Peter Thomas barely remembered by the average Nigerian today? Perhaps for the same reason Adunni Oluwole is rarely mentioned in Nigeria's history. Thomas sought to balance the worlds of Nigerians and Europeans at a time when the tide was turning toward radical demands and uncompromising nationalism. His gradualist approach was overshadowed by those promising bold, full-fledged independence. In 1926, when he ran against Herbert Macaulay for a seat on the Legislative Council, he lost decisively. Branded a "conservative," Thomas and others like him were swiftly sidelined and forgotten in the narrative of Nigeria’s struggle for self-determination.

Peter Thomas’s reversal of fortune began in 1919 when he secured a £150,000 line of credit from the British Bank of West Africa (BBWA), using the title deeds of all his properties as collateral to fund his produce business. Unfortunately, the timing could not have been worse. The post-war "fake boom" soon gave way to a depression, and by the following year, cocoa prices had plummeted to just a quarter of what they were when he signed the credit agreement. By 1921, Thomas’s finances were in chaos, and he was negotiating with BBWA to settle his debts. In 1923, the bank offered to accept £50,000 for the £100,000 he owed, reflecting the respect and goodwill creditors still had for him, but Thomas couldn’t raise the funds, and the offer was withdrawn. By early 1924, he had no choice but to surrender his 64 properties—including seven more added later to balance his accounts—which the bank began selling that year. Letters between Thomas and his English bankers, Arbuthnot Latham, up to 1928 reveal a man in despair, believing he had miscalculated by trusting Europeans who would not forgive his debts. He saw his failure as a reflection on Nigerians’ ability to manage their affairs, though he was far too harsh on himself.

Peter Thomas never recovered from his setbacks. The global economy continued to deteriorate through the 1930s, leaving him clinging to his Marina property, purchased from Herbert Macaulay, as his sole remaining asset. His staff gradually abandoned him, and in 1936, even his European chief cashier returned to England. Most of his stores across Nigeria were shuttered, and by the 1930s, he resorted to selling alcoholic spirits—a trade he had previously avoided. Another war broke out in 1939, and by the time of his death in December 1947 at the age of 74, Thomas had ceased all business operations, relying solely on rental income. Reflecting on his life in 1962, the Oba of Isara, Samuel Akinsanya, who knew him well, encapsulated his story with poignant words: ‘He saw too much and attempted to do too much.’

It is worth quoting the words from his will in closing this piece:

[I look forward to the time] when my country will be a great manufacturing, a great producing centre. Its wealth made and possessed by Africans - governed by African statesmen - the people prosperous, honourable, God-fearing - then shall the African hold up his head throughout the world, honouring his superiors and being honoured. He shall have his literature - his art - such is my vision and to this end I wish to make my humble effort asking that it may please God to further it.

Though history may cast a bittersweet shadow over his story, Peter Thomas, the Lokoyi of Ilesha, stands as a towering figure whose contributions deserve far greater recognition in contemporary Nigeria. His setbacks do not overshadow the boldness of his vision or the enduring impact of his efforts in shaping our collective destiny. He dreamed big, worked tirelessly, and helped lay the groundwork for a nation still striving to fulfill its potential. May his legacy ignite inspiration, and may his memory forever be a blessing.

- Feyi

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We have arrived at the end of this enthralling and sprawling history of Lagos at a critical juncture, where the foundations of Nigeria's economic fate were laid. This history was told through the lives of indigenous capitalist merchants and the evolving institutional environment in which they had to survive. Professor A.G. Hopkins believes this period in history debunks the notion that West African entrepreneurs lacked initiative, showcasing instead a vibrant culture of commercial activity.

African entrepreneurs developed and spread key capitalist institutions such as freehold property rights, wage labour systems, and financial markets. These innovations were particularly significant in cocoa farming, which embodied a long-term investment approach. Entrepreneurship is at the centre of this history, which makes it a refreshing departure from the common practice of favouring political and institutional actors in economic history. Entrepreneurs are essential (if neglected) agents of economic development - and any fruitful approach to understanding development through history has to study how they co-evolved with institutions.

The Merchants of Lagos

The British did not invent entrepreneurship in Lagos. However, after the military suppression of the slave trade in 1851, they invested in creating a new commercial environment, with the Palm oil trade central to economic exchange. Most of the merchants and entrepreneurs covered by Hopkins made their names and fortunes in this new commercial environment. This is a story of capitalism because creating a new commercial environment also came with institutional innovations that created new land, property, and credit markets. It also demonstrates the powerful effect of top-down incentives in development. It would simply have been difficult to sustain (as it was in many parts of the hinterlands) the suppression of the slave trade economy without strong incentives for profit in a new kind of economy. The new economy attracted and rewarded characters as contrasting as the slave trade profiteer Chief Daniel Taiwo and the African Victorian gentleman James Davies - proving that incentive is a powerful force for coordination.

The Power of Incentives

The brilliant late economist William Baumol defines entrepreneurs as individuals who are ingenious and creative in their pursuit of wealth, power, and prestige, emphasising their ability to identify and exploit opportunities within the boundaries of societal incentives¹. According to Baumol, entrepreneurs are primarily motivated by personal rewards such as financial gain, political influence, or social prestige. Their efforts are guided not by an inherent drive for innovation but by the relative payoffs offered by their environment. Using examples from ancient Rome, medieval China, and Renaissance Europe, Baumol persuasively argued that incentives in the form of "rules of the game" dictate whether entrepreneurship benefits society by encouraging innovation or harms it through rent-seeking and destructive behaviour. And that societal progress depends on aligning entrepreneurial incentives with productive outcomes.

The incompleteness of Baumol's thesis was evident in colonial Lagos. Entrepreneurs are not the only sociopolitical actors subject to the power of incentives. The best years for entrepreneurial fortunes in early Lagos were when the incentive favoured suppressing the slave trade and promoting new commerce. However, as the interests and motivations of the British changed due to colonial competition with the French, the Lagos economy came under the influence of new incentives. Colonisation rather than commerce became an overriding purpose - which had negative implications for the entrepreneurs, trade and economic development in the long run.

Professor Hopkins was emphatic that the lives of entrepreneurs in this book dispel the notion of Africans as passive observers in this period of history. But I want to close my thoughts here with a curious question. Feyi has a saying I first heard from him about a decade ago, which I will paraphrase as ‘The Nigerian business class is commercial but not entrepreneurial’. At first, this might not seem like a huge distinction - but I have always interpreted him to mean that there is a difference between facilitating trade or other economic exchanges versus creating new markets. Some entrepreneurs supply the wants and needs of existing markets, while some create new markets. Henry Ford reportedly said, ‘If I had asked people what they wanted, they would have said faster horses’. Instead, he created a new market for automobile vehicles. For all the innovative and adaptive business strategies of Lagos merchants documented by Hopkins, why did industrial entrepreneurship fail to emerge or stick? Do incentives alone explain the variations in entrepreneurship, as Baumol argued? Or is there an influence of other factors like the total number of people with certain types of skills, knowledge, and creativity - or what we call human capital? I am still looking for a simple answer.

Trade and Long-Run Development - A View from Lagos

Professor Hopkins speculated about how the economic history of Lagos in the period covered shaped its economic development trajectory in the long run. Of peculiar interest to me is trade policy. Colonial trade policy in this era provided minimal support for African entrepreneurs, leading to uneven development. Another way of reframing this point is that trade policy was more biased towards free trade in colonial Lagos, and some form of industrial policy would have had long-term benefits. It is always difficult to tell how far into the present we can stretch the hand of history, but this view has some merits. The evolution of colonial policy did not value the industrial development of the colonies, and African entrepreneurs needed more resources to go it alone. Perhaps this answers my earlier question. Industrial entrepreneurship did not emerge because the incentives did not favour or reward it. We may not be able to tell what the net economic benefits would be, but the industrial revolution spreading early to Lagos (and the rest of the colony by extension) would have created a more diversified and, thus, more resilient and productive economy.

The economy of Lagos was built for trade, and there was investment in the port to reflect that. However, the export trade was concentrated in primary commodities and not industrial goods. Economic historian Jefferey Williamson has argued that many developing countries fell into poverty because the terms of trade boom due to high international prices from exporting primary goods (raw agricultural produce and materials) made them specialise in these sectors and encouraged "de-industrialisation"². The economies of colonies like Lagos did not start with a strong industrial base, but I believe the failure to promote and invest in industrialisation created institutional incentives for continuous dependence on the export of natural resources and hollowing out manufacturing.

There is nothing wrong with exporting primary goods, but in the spirit of Hopkins' speculation about the influence of history on economic development in the long run, some exports are better than others. Development economists Dani Rodrik and Ricardo Hausmann first theorised this twenty years ago³. They argued that while it is true that countries produce and export based on their natural advantages, it does not fully explain why some countries grow faster than others. They conclude that goods vary in their potential to boost economic performance. Exporting sophisticated, higher-value goods (like electronics or machinery) brings more benefits than exporting low-value goods (like raw materials). Economic historian Isabella Weber (and co-authors) investigated this thesis in historical light⁴. They found that countries with more diversified and complex export profiles in the late 19th and early 20th centuries are more likely to be wealthier today.

The hand of history can still be seen in how we make trade policy today and the reality of a diversified and productive economy remains elusive. We cannot change the past, but it is time to learn from it. There is so much more that can be picked and unpacked from this brilliant book by Professor Hopkins. I will have more to say in a future essay or podcast with Feyi. We still have so much to discover about our history. This excellent offering by Professor Hopkins will inspire more surprising, inspiring, and insightful discoveries about the past.

More importantly, I wish Nigeria realised that no country can lay a concrete path to a great future by burying the past.

-Tobi

1. Entrepreneurship: Productive, Unproductive, and Destructive - William J. Baumol

2. Trade and Poverty: When the Third World Fell Behind - Jeffrey G. Williamson

3. What You Export Matters - Ricardo Hausmann, Dani Rodrik, and Jason Hwang

4. What You Exported Matters: Persistence in Productive Capabilities Across Two Eras of Globalization - Isabella Weber, Semieniuk Gregor, Tom Westland, and Junshang Liang