THE EFFECT OF BORDER CLOSURE ON FIRM PERFORMANCE BY USING MANUFACTURING INDUSTRY AS A CASE STUDY
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1.1 Background to the Study
Nations negotiate arrangements on a global scale. International trade often serves the objective of giving a country access to resources it does not already have or of creating enough of them to exchange for those that it already generates in large quantities. Such trade generally tends to raise a country’s level of life when combined with other economic plans. The promotion of freer trade among nations has occupied a significant portion of contemporary history of international relations. However, no nation leaves its borders completely open to foreigners so that they can import commodities without any sort of restriction. Therefore, nations enact laws or policy measure(s) to control trade between their citizens and citizens of other nations.
Thus, the concept of international trade and industrial planning is one of the earliest fields of economic thought. Government officials, academics, and economic experts have debated the factors that influence international trade, whether trade benefits or harms a country, and, more importantly, what trade policy is best for any given country. There has also been a dual perspective of international trade: acceptance of the benefits of international exchange paired with fear that foreign competition would destroy specific native industries (or labors, or cultures). 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, blocked all land borders in October 2019 to ensure ultimate control over what enters the country (Olatunji, 2019), though this was not the first time. According to the government, the basis for this measure was rice smuggling and other illegal exports of cheaper, subsidized petrol from Nigeria to its neighbors, as 10 to 20% of Nigerian gasoline was smuggled overseas. Statistics show that there is likely very little to worry about because intra-African trade is limited and the majority of African trade 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:
- To understand the economic relationship between Nigeria and the neighbouring countries before the border closure
- To explain the rationale for border closure by the Nigerian government
- To investigate the reaction of Africa member countries to Nigeria border-closure
- To highlight the advantages and disadvantages of Nigeria border closure
- 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:
- What is the economic relationship between Nigeria and the neighbouring countries before the border closure?
- What is the rationale for border closure by the Nigerian government?
- How did Africa member countries react to Nigeria border-closure?
- What are the advantages and disadvantages of Nigeria border closure?
- 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
- 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.
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