ABSTRACT
This
research work is focused on the effect of government regulations on export
business in Enugu Metropolis.
Microfinance
provides people with capital to start and or expand their businesses as small
businesses with microfinance support have grown into Medium Enterprises
creating employment opportunities for others.
The
general conceptual framework, theoretical framework, empirical literature
methods were used by the researcher during the course of gathering data. Research design, sources for data collection,
tools for data collection, population of the study, sample and sampling
technique, instrumentations, reliability and validity of data and test
instruments, data analysis, and percentage were the research methods adopted by
the researcher.
This
research finds out that there are different types of export
products that are exported by organizations in Enugu metropolis; also they are
various forms of government regulations on export business in Enugu Metropolis.
The study also found out that there are many reasons for government regulations
on export business in Enugu metropolis. Also from the findings, it was discovered that Government regulations
affect export business in Enugu Metropolis. It was concluded that Government
regulation has a positive effect on the export business Even though there are
some negative effect of government regulation on export business but the
benefit outweigh the negative effect by far, therefore it is recommended that
Governments should encourage exports business and try to amend those
regulations that have negative effect on export business since exporting increases jobs opportunities and brings in
higher wages and raises the standard of living for residents.
CHAPTER ONE
INTRODUCTION
1.1 Background
of the study
The continuous
agitations and frequent debate by World Trade Organization (WTO) and other
economic experts, that free trade among the countries in the world would be an
engine for growth and development is still an on-going debate in the field of
management sciences. Prior to this, Nigeria went through a series of trade
reforms in order to grow her economy and be self-reliant in industrialization
strategies that can encourage development and growth. Shortly after the
independence in 1960, Import Substitution Industrialization (ISI) strategies
were the most prevailing strategies during these periods. The idea was to
imitate some countries in Latin America such as Brazil, Mexico, who observed
import substitution industrialization strategies during the 1950s. Nigerian
government embarked on these strategies on a real large scale with the hope of
gaining an autonomous power in terms of manufacturing, production of consumable
imported goods and improves the development status of the country. In order to
achieve a huge success in terms of Import Substitution Industrialization (ISI)
strategies, according to Ogujiuba (2011), protective tariffs such as; high
import quotas, special preferential licensing for capital goods imports,
subsidized loans to local infant industries, and so forth were introduced. This
is a calculated effort to replace major consumer imported goods with domestic
production. However, this ISI strategy of industrial development policy failed
generally in Africa region including Nigeria because of the stronger structural
domestic constraints and external limitations (Mendes, 2014). In the light of
the failure of Import Substitution Industrialization Strategy, a further step
was taken by Nigeria to adopt outward-oriented development strategy in the mid-1980s
which was also termed as structural adjustment programs (SAP) or economic
recovery programs (ERP). The effect of these plans was to abolish direct state
control in the production, distributive sectors and achieve overall trade
liberalization of the country’s economy, especially the external sector.
Trade liberalization is
the process of reducing or removing restrictions on international trade. This
may include the reduction or removal of tariffs, abolition or enlargement of
import quotas, abolition of multiple exchange rates, and removal of
requirements for administrative permits for imports or allocations of foreign exchange.
In Nigeria, the term “trade liberalization” became pronounced through the
adoption of the IMF Structural Adjustment Programme (SAP) in 1986, which its
primary aim was to restructure and diversify the productive base of the
economy. In addition, the SAP was also designed to establish a realistic and
sustainable exchange rate for the Naira through trade and payment
liberalization, tariff reforms, commercialization and privatization of public
enterprises (Oyejide, 1990).
Trade policy reform
especially trade liberalization has been a regular feature of developing
economies since the mid 1980s. The general belief was that trade reforms, especially
when combined with exchange rate reforms, and better domestic macroeconomic
policies, could enhance trade-induced economic expansion and consequently
reverse the downward trend of developing African economies (Ekpo,2005). Prior
to this time, particularly between the early 1960s and the early 1980s, many
African countries operated highly interventionist and protectionist trade
regimes on both the import and export sides. On the import side trade regime
was characterized by restrictive import licensing systems, and tight foreign
exchange controls. For the export side, substantial implicit and explicit
taxes, as well as the prohibition of certain export items and other non-tariff
barriers were common features of the trade regimes.
Trade liberalization
policy is one of the policies adopted by the developing countries in the late
1980’s following the World Bank Report (1987) which argues that“ outward oriented
countries performed better than inward oriented countries even under unfavorable
market condition, as a solution to their economic crisis. The policy is also part
of contemporary globalization policies pursued by both the developed and developing
countries to promote world economic integration. Free trade is considered by
some economist as most relevant for economic development.
According to Haberler
(1961)“free trade is economically advantageous because it maximizes the output
of social products”. However a counter argument holds that although the
derivable benefits of free trade are laudable, they are to some extent hypothetical,
effective only under the conditions of full employment, full allocation of resources
and free competition in the economy. For instance, Singh (1985) argued that“ the
applicability of free trade is limited in the case of a developing economy,
where a vast segment of the productive resources are still unexploited, with
acute problem of unemployment. A free trade regime will further compound these
problems by weakening the domestic industries, especially those that lack sufficient
competitive power.
Interestingly, these
arguments do not in any way negate the fact that international trade plays a
vital role in the economic development of any country. Perhaps the conclusion one
could draw from the two schools of thoughts is that for a developing economy,
trade intervention policy is preferable. When the economy has attained full
capacity, then the idea of adopting free trade option could be considered.
Trade intervention is practiced in every country, except that the degree of
intervention varies from country to country. Official intervention in trade
processes is made possible through the implementation of trade policies. For
Developing Countries that have adopted National Development Plan as a
development strategy, trade policies are the instruments used for effective
channeling of resources to appropriate sectors of the economy towards meeting
plan objectives.
Trade liberalization is
one of the major conditions adopted by the international lending agencies such
as World Bank and international monetary fund (IMF) for granting aid and other
kinds of external economic assistance to Developing African countries,
Onafowora and Owoye (1997).
The impact of trade on
the economic performance of a country is a highly discussed issue in the
political debate of both developing and advanced economies. And for the last
two decades, trade liberalization has been a prominent component of policy
advice to developing countries. Economic growth has been the most important
claim that springs from it, advocates of trade liberalization state several
chains like higher foreign direct investment (FDI) through which trade promotes
the growth of income per capita. In general, they back up their hypothesis by
referring to the high growth rates of south Asian Tiger states and China, which
aggressively implement outward oriented strategies.
On the other hand,
skeptics doubt that trade liberalization promotes long and sustainable growth.
They assume that there are economic situations in which things get even worse
if a country liberalizes trade. They often refer to the negative growth rates
of some countries in Eastern Europe and Africa, which followed the advices of
the World Bank and the International Monetary Funds to open up their markets,
Stiglitz (2002).
The Nigerian main trade
policy instrument shifted remarkably away from tariffs to quantitative import
restrictions, particularly import prohibition and import licensing from the mid
1970s. This gave rise to the Nigerian customs legislature establishing an
import prohibition list for trade item and an absolute import prohibition list
for non-trade items, Oyejide (1975). The custom legislation empowered the
government to modify this list at its discretion by adding or subtracting items
through customs and excise notices and government announcement. And over the
years there have been several modifications on the list targeted to protect
existing domestic industries and reducing the country’s dependence on imports.
There are three
international organizations that have expressed views on Nigerian’s import
prohibition policy, these are the World Trade Organization, the World Bank and
the International Monetary Fund. They have advisory role with respect to trade
and other policy matters in Nigeria and had advised a more liberal trade policy
regime in Nigeria which was initiated in the 1980s. The World Bank and the
International Monetary Funds did support this via its lending programme prior
to the introduction of the structural adjustment programme (SAP) in 1986 in
Nigeria, imports were subjected to quantitative controls implemented through a
combination of ban on agricultural and some manufactured goods and a licensing
system. But under the SAP, import and export licensing was abolished, price and
distribution control on agricultural exports was removed and the prohibited
list of imports was reduced.
This issues of whether
trade liberalization would lead to economic growth has become a debate for both
pro-traders and protectionists. This has led to a growing change in the trend
of world trade. Mostly, African countries have become more careful in embarking
on liberalization of policies.
1.2 Statement of the problem
After the World War II, many less developed
countries (LDCs) followed the path of Import Substituting Industrialization
(ISI).In the process of rapid domestic cindustrialization under the ISI strategy
African countries required increased imports of machines and technology and
devoted most new resources to import-competing activities. These resulted into
more rapid growth in the demand for foreign exchange that surpassed the growth
in export earnings. In the process they were faced with balance of payments
problems. This situation demanded increased export drive to pay for imports.
Moreover, to finance the balance of payments deficit
these countries became dependent on the richly industrialized countries and
International Institutions such as, the IMF/World Bank, dominated by the rich
countries. When seeking their help they were often advised to open up their
economies not only to tide their crises but also to experience high rate of
growth. The policy response was that most African countries left the course of
inward-looking growth as ISI and started following Outward-Oriented Development
Strategy. Since then the importance of foreign trade in the level of economic
activities of the countries has been rising. The increased openness was hailed
in IMF/World Bank Development Reports (World Bank,1987,1991,1999-2000)
tried to show that outward-oriented trade policies have been more successful in
promoting growth than inward-oriented trade policies. In particular, the World
Development Report (1987) which argued that “outward-oriented countries performed
better than inward-oriented countries even under unfavorable market conditions”
However, trade reforms, even if beneficial for a
country overall, may negatively affect some industries or some jobs and many
commentators worry about negative effects on the environment. For developing
countries the first possible effect of trade liberalization is the reduction in
revenue accrued to tariffs which is a major source of income in most developing
countries. It is also perceived to deteriorate primary export, lead to
excessive dependency and will be detrimental to less developed countries (LDCs)
industrialization. But to most international organization like IMF it is the
condition for granting aid to LDCs. However, it should not be viewed as
flooding the market with imported goods rather, it should be understood as the
procedure of removal of import licenses, rationalization of export control
exchange rate and provision of revenue.
1.3 Objective of the study
The main objective of this research is to
investigate the effect of government regulation on export trade in Nigeria
businesses with reference to Enugu Metropolis. To achieve this, the following
specific objectives were formulated as follows:
1.
To identify export products that is
exported by organizations in Enugu metropolis.
2.
To identify various forms of
government regulations on export businesses in Enugu metropolis.
3.
To examine the reasons for
government regulations on export business in Enugu metropolis.
4.
To ascertain the extent to which
government regulations affect the export business in Enugu metropolis.
5.
To determine whether government
regulations are beneficial to export businesses in Enugu metropolis.
1.4 Research Questions
This study seeks to answer the following research
questions:
1.
What are the types of export
products that are exported by organizations in Enugu metropolis are involved?
2.
What are the various forms of
government regulations on export business in Enugu metropolis?
3.
What are the reasons for government
regulations on export business in Enugu metropolis?
4.
To what extent does government
regulation affect export business in Enugu metropolis?
5.
How have government regulations
benefited export business in Enugu metropolis?
1.5 Hypothesis of the study
In carrying out this study, the
following hypotheses would be tested.
1. Ho:
There are no export product that are exported by organization in Enugu metropolis.
2. Ho:
government regulations have no effect on export business in Enugu metropolis.
3. Ho:
The various forms of government regulations on export business in Enugu
metropolis are insignificant.
4. H0:
Government regulations have not benefited export business in Enugu metropolis.
1.6 Significance of the study
First, government and its agencies:
The Nigeria Export Promotion Commission (NEPC), Small and Medium Enterprises
(SMEDAN) Agency of Nigeria would benefit from the findings of this research. It
would bring to the fore the impact of policies/regulations on export business
promoters in Nigeria, as it will enable them to identify the effect their
various policies have on export business.
Second, the students in Business
Management and Economics, it will benefit future researchers
as it will serve as a reference point to their research.
Lastly,
it will benefit various business organization that are into exportation as it
will enable them to understand the effect government regulation has on their
business.
1.7 Scope of the Study
The scope of this study covers the effect of
government regulations on export business in Enugu metropolis.
1.8
Definition of terms
Government
regulation: Government regulation is a rule of order
having the force of law, prescribed by a superior or competent authority
relating to the actions of those under the authority’s control.
Export:
Export
means the sending of goods or services produced in one country to another
country.
Export
Promotion: Export promotion is the incentive
programs designed to attract more firms into exporting by offering help in
product and market identification and development, pre-shipment and post
shiptment financing, payment guaranty schemes, trade fairs, trade visits,
foreign representation, e.t.c
Business:
Business
is an organization or economic system where goods and services are exchanged
for one another or for money.
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