The Effect Of Border Closure On Firm Performance By Using Manufacturing Industry As A Case Study

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The Effect Of Border Closure On Firm Performance By Using Manufacturing Industry As A Case Study


Abstract


The study was carried out to determine the effect of border closure on firm performance by using manufacturing industry as a case study.

Nigeria which shares borders with Benin, Niger, and Cameroon closed all its land boundaries in a bid to make sure that total control over what enters the nation in October 2019 (Olatunji, 2019), however that was not the first instance. The reason for this action in the view of the government was the smuggling of rice and various other illegal exports of cheaper, subsidised petrol from Nigeria to its neighbours, as 10 to 20 per cent of Nigerian fuel was smuggled abroad. Statistics reveal that there is most likely very little to stress over since the volume of intra-African trade is low and the majority of the trade by African nations is done with nations outside the continent.
The study was conducted among the staff and managers of Bigcel limited.

The study adopted quantitative pilot survey that will be conducted by the researcher among staff and managers of Bigcel limited. A quantitative research method through structured questionnaire will be employed for data collection and analysis.

The sample population for the effect of border closure on firm performance by using manufacturing industry as a case study was all the manufacturing companies in Nigeria.

This study covers the effect of border closure on firm performance by using manufacturing industry as a case study and as a result of large concentration of the industry, researcher to focused on the staff and managers of Bigcel limited.

Simple random sampling technique will be used to select 100 respondents for the study.

Data collected were presented in tables and the corresponding values expressed in percentages. Hypotheses were tested using regression statistical approach.

Findings revealed that there is a significant relationship between border closure and the performance of manufacturing industry The Economic Community of West African States (ECOWAS) has started declining Nigerian products possibly in retaliation to the country’s border closure.

The rationale for the border closure was that the Nigeria-Benin Republic border has been lately used for illegal activities.

The reason border closure is usually due to smuggling of rice and various other illegal exports of cheaper, subsidised petrol from Nigeria to its neighbours.


Chapter One


Introduction

1.1 Background to the Study

International deals are made between nations. International trade is typically for the purpose of providing a country with commodities it does not have or otherwise producing sufficient amount of them in exchange for those that it produces in abundance. Such trade, functioning with various other economic plans, have the tendency to improve a nation’s standard of living. Much of the modern history of international relations concern efforts to promote freer trade among countries. Nevertheless, no country leaves its boundary at the mercy of people of other nations to ensure that they can bring in goods without some steps of control. Therefore, nations enact laws or policy measure(s) to control trade between their citizens and citizens of other nations.

The concept of international trade and industrial plan therefore is just one of the earliest branches of economic idea. Government authorities, intellectuals, and economic experts have pondered the determinants of trade between nations, asked whether trade bring benefits or harms to a country, and more significantly, tried to identify what trade policy is ideal for any particular nation. There has likewise been a double view of international trade – recognition of the advantages of international exchange combined with a concern that certain domestic industries (or labours, or culture) would be harmed by foreign competitions. Relying on the weights place on the general gains from trade or on the losses of those harmed by imports, different verdicts regarding the desirability of having free trade was linked to technological development although some narrow interests might be harmed; the general advantages to society are substantial. Still, as confirmed by intense arguments over trade today, the tensions inherent in this double view of trade have never been overcome.

Nigeria which shares borders with Benin, Niger, and Cameroon closed all its land boundaries in a bid to make sure that total control over what enters the nation in October 2019 (Olatunji, 2019), however that was not the first instance. The reason for this action in the view of the government was the smuggling of rice and various other illegal exports of cheaper, subsidised petrol from Nigeria to its neighbours, as 10 to 20 per cent of Nigerian fuel was smuggled abroad. Statistics reveal that there is most likely very little to stress over since the volume of intra-African trade is low and the majority of the trade by African nations is done with nations outside the continent. Intra- African trade was about 16.6 per cent of total African exports in 2017 which was low compared with 68.1 per cent with European nations and 59.4 per cent with Asian nations (UNCTAD, 2019) (see Olatunji, 2019)

The nations that share boundary with Benin include Nigeria with a population of over 200 million, Togo with a population of about 7.8 million and Burkina Faso with a population of about 19 million as about 2017 (World Bank, 2019). Nigeria is a number of times the size of Benin as well as the other nations surrounding her, that makes Nigeria one of the most most likely destination for the rice imported by Benin. This nevertheless, does not show in Nigeria’s import figures which offer additional support to the fact that such import was mainly smuggled into the nation from Benin. The closure of Nigeria border therefore increased the government’s income as more duties were accumulated on the increased volume of goods that went into the nation lawfully with the ports, however the fall in the supply of rice resulted in food price inflation, which impacted strongly negatively on Nigerian consumers (Abia, 2019).

The closure likewise resulted in shortages of products imported from Nigeria in neighbouring nations thus, the worry about its effects for trade liberalisation in Africa. This closure remained in violation of the procedure on the free movement of products, services and people, established by the Economic Community of West African States (ECOWAS) to which Nigeria is a member and where it wields considerable political and economic weight. This action likewise came just two months after the nation signed the African Continental Free Trade Area (AfCFTA) (Unah, 2019) which aims to remove obstacles to trade and promote the free flow of goods, services and people throughout the continent. Therefore, Nigeria border closure was inconsistent with the country’s multilateral commitments, including ECOWAS and AfCFTA, and was viewed as a significant disruption to Nigeria and the whole Africa in terms of their international trade relations.


1.2 Statement of the Problem

As a prominent member of the Economic Community of West African States (ECOWAS) and having signed the African Continental Free Trade Area (AfCFTA) agreement in April 2019 (Proshare 2019), just four months before, Nigeria’s unilateral decision to shut her land borders in August came as a surprise. Over the years, the Nigerian government has made attempts to ban rice imports in order to foster domestic food sufficiency, including the ban on importation of rice during the Structural Adjustment Programme (SAP). Between 1985 and 1994 there was a complete ban on the importation of rice into Nigeria under the SAP, but this was a failed attempt and subsequently, there has not been any such policies (Abbas, Agada, and Kolade 2018).

Manufacturers in the nation expressed grief over the losses they recorded daily as a result of the indefinite boundary closure. Ede Dafinone, Chairman of MAN Export Promotion Group (MANEG), revealed that the border closure really placed business in serious problems. Businesses that depend exclusively on the West African market for extra sales, and manufacturers that export their goods were greatly affected as their warehouses still had a great deal of unsold goods that may ended up as a waste. Also, prior to the border closure, the Nigerian government had instituted some policies to encourage the production of rice, in terms of providing subsidies to farmers to purchase fertilisers (Cadoni and Angelucci 2013). However, these have obviously not been effective in curbing the importation of rice, as demand still exceeds domestic production. Hence, this study takes a look at the effect of border closure on firm performance by using the manufacturing industry as a case study.


1.3 Objectives of the Study

The main objective of the study is to examine the effect of border closure on firm performance by using manufacturing industry as a case study. However, the specific objectives are:

  1. To understand the economic relationship between Nigeria and the neighbouring countries before the border closure
  2. To explain the rationale for border closure by the Nigerian government
  3. To investigate the reaction of Africa member countries to Nigeria border-closure
  4. To highlight the advantages and disadvantages of Nigeria border closure
  5. To establish the economic effect of border closure on the performance of manufacturing industry

1.4 Research Questions

The following statements will be regarded as the research questions for this study:

  1. What is the economic relationship between Nigeria and the neighbouring countries before the border closure?
  2. What is the rationale for border closure by the Nigerian government?
  3. How did Africa member countries react to Nigeria border-closure?
  4. What are the advantages and disadvantages of Nigeria border closure?
  5. What is the economic effect of border closure on the performance of manufacturing industry?

1.5 Research Hypotheses

The following statements are considered to be the research hypotheses

  • Ho: There is a significant relationship between border closure and the performance of manufacturing industry.

1.6 Significance of the Study

The study shall analyze the effect of border closure on the on firm performance by using manufacturing industry. This study would help suggest ways of building a vibrant and sound economy by reducing the increase in importing activities. This work will investigate and appraise border closure and its effect on the economy of Nigeria as a whole. It shall provide a significant source of information for law enforcement professionals as well as the general public.


1.7 Scope of the Study

The study covers the effect of border closure on firm performance by using manufacturing industry, using Nigeria as a case study.


Chapter Five


Summary, Conclusion and Recommendations

5.1 Preamble

This chapter presents the summary and conclusion that can be drawn from the study. It also presents the researchers recommendations with regards to the findings of the study and proposed areas for further studies by other researcher.


5.2 Summary

The main objective of the study is to examine the effect of border closure on firm performance by using manufacturing industry as a case study. However, the specific objectives are:

  1. To understand the economic relationship between Nigeria and the neighbouring countries before the border closure
  2. To explain the rationale for border closure by the Nigerian government
  3. To investigate the reaction of Africa member countries to Nigeria border-closure
  4. To highlight the advantages and disadvantages of Nigeria border closure
  5. To establish the economic effect of border closure on the performance of manufacturing industry

5.3 Summary of Findings

The summary of findings was as follows:

  1. The Economic Community of West African States (ECOWAS) has started declining Nigerian products possibly in retaliation to the country’s border closure.
  2. The rationale for the border closure was that the Nigeria-Benin Republic border has been lately used for illegal activities.
  3. The reason border closure is usually due to smuggling of rice and various other illegal exports of cheaper, subsidised petrol from Nigeria to its neighbours.
  4. Before the border closure, Oil exports have improved, driving up foreign exchange reserves and creating an impetus for the central bank to intervene in the foreign exchange market.
  5. Prolonged closure of borders by Nigeria to curb smuggling thus affected trade with other countries in West Africa and raised the prices of imported products.
  6. Nigeria-Benin Republic border closure is to curb the illegal medical drugs like Tramadol and illegal arms and ammunition smuggled into Nigeria from Benin Republic.
  7. The value of textile products smuggled into Nigeria partly contributing to the collapse of most textile mills in the country.
  8. Nigerian exports within the ECOWAS region decreased due to retaliation to its border closure.
  9. Since the border closure, locally-milled rice has started selling, and the entire rice value chain has been positively impacted by the closure.

5.4 Conclusion

The study was carried out to determine the effect of border closure on firm performance by using manufacturing industry as a case study.

The study was conducted among the staff and managers of Bigcel limited.

The study adopted quantitative pilot survey that will be conducted by the researcher among staff and managers of Bigcel limited. A quantitative research method through structured questionnaire will be employed for data collection and analysis.

The sample population for the effect of border closure on firm performance by using manufacturing industry as a case study was all the manufacturing companies in Nigeria.

This study covers the effect of border closure on firm performance by using manufacturing industry as a case study and as a result of large concentration of the industry, researcher to focused on the staff and managers of Bigcel limited.

Simple random sampling technique will be used to select 100 respondents for the study.

Data collected were presented in tables and the corresponding values expressed in percentages. Hypotheses were tested using regression statistical approach.

Findings revealed that there is a significant relationship between border closure and the performance of manufacturing industry The Economic Community of West African States (ECOWAS) has started declining Nigerian products possibly in retaliation to the country’s border closure.

The rationale for the border closure was that the Nigeria-Benin Republic border has been lately used for illegal activities.

The reason border closure is usually due to smuggling of rice and various other illegal exports of cheaper, subsidised petrol from Nigeria to its neighbours.


5.5 Recommendation

Based on the findings from this study, the following recommendations are made:

It should be noted that the land border closure has proved effective for the growth of Nigeria’s rice economy. However, the Nigerian government, the Nigerian customs service, and other stakeholders must be proactive in implementing a sustainable solution to resolve this debacle. Following our observations, we recommend that first, the government must understand that closing all trading activities through the land borders is not sustainable. We voluntarily accented to several regional, continental, and even global trade regimes and this requires our compliance if we the country is to avoid retaliation of any form and maintain her reputation in international trade relations. It is in the light of this that we urge the federal government of Nigeria to introduce and enforce national and even regional institutional mechanisms that provide for effective verification, certification, and monitoring of the rules or agreements in line with ECOWAS and ACFTA agreements. Also, the Nigerian government must increase its war on corruption, custom officials or government officials who aid informal trade through the land borders be prosecuted fully


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