Chapter one
Introduction
1.1 BACKGROUND TO THE STUDY
Over the past several decades, the economies of the world have become greatly connected through international trade and globalization. Foreign trade has been identified as the oldest and most important part of a country’s economic relationship. The basis for foreign trade rests on the fact that nations do differ in their resource endowment, preferences, technology, scale of production and capacity for growth and development. Over the past decades the volume of trade between nations of the world has increased considerably. Particularly, Nigeria has witnessed a sharp rise in the volume of trade and investment with other nations of the world. The relations between Nigeria and China which cut across political, trade, investment, aid and military spheres have grown so much in recent years (Omoju & Adesanya, 2012). Okolie & Chime (2013:126) underscored the inevitability of inter-state relations emanating from the inherent tendency of man for social relations, when they wrote: The world of a man is in a flux. The fluidity of social relations conduces into the search for social coalescence, partnership and cooperation. Naturally, man is created with inbuilt and ever elastic gregarious instincts which propel man to enter into social relations with other men basically to eke out a living. These gregarious instincts combine with differential natural resource endowments to induce man to develop the propensity to partner with others to address the needs of the community. Fundamentally, the scenario opens new vistas of relations between and among states in a world of change.
International trade is recognized as the most significant determinant of economic development of a country, all over the world. The foreign trade of a country consists of inward (import) and outward (export) movement of goods and services, which results into: outflow and inflow of foreign exchange. Thus it is also called EXIM Trade. For providing, regulating and creating necessary environment for its orderly growth, several bilateral trade agreements have been entered into between and among countries of the world (Chand, 2009).
Trade is a key factor for socio-economic growth, poverty reduction and regional integration (Purakayo and Soon, 2014).Furthermore, trade facilitation procedures and a reliable transport network play an important role in ensuring a dependable and transparent backdrop for the successful movement of goods and services across borders.
Trade facilitation includes a variety of activities ranging from institutional and regulatory reforms to the improvement of trade-related infrastructure. The Economic Community of West African States (ECOWAS) sub-region including Niger and Nigeria has since its inception in 1975 recorded poor regional trade of 10-14% compared to other regional economic blocs like the European Union, North America Free Trade Agreement and the South American economic organization, Mercosur, who have recorded intra-regional trade ranging from 65% to 70% (Ghana Business News, 2017).
Intra-regional trade has greatly boosted the economies of the aforementioned economic blocs hence the need for Nigeria and her closest Northern Neighbor, the Republic of Niger, to strengthen bilateral ties and develop structures for an effective transit trade agreement in which Nigeria opens her trade corridor to Niger-bound merchandise and vice-versa.
For land-locked Countries like the Republic of Niger, the transit of export and import goods has to be done through at least one neighboring Country with access to a sea port. Unfortunately, this has greatly increased its transaction costs and reduced its international competitiveness. Consequently, Nigeria, being a signatory to the World Trade Organization’s (WTO) agreement on transit trade facilitation, has opened up its seaports for access to Niger thereby alleviating some of the problems faced. Conversely, in 2006, as a result of the privatization of Ports, no special considerations were given to transit goods as was done under public operations of the Ports which has led to even more astronomical costs for Countries like Niger.
1.2 STATEMENT OF THE PROBLEM
The thrust of this study is to examine the impact of Nigeria-Ghana trade relations within the period, 2011-2017. Nigeria-Ghana trade relations has grown from the limited and intermittent contact that marked the immediate post-independent era to an increasingly complex and expansive engagement. From a less than $ 2 billion in 2002, the volume of bilateral trade between Nigeria and Ghana grew to a yearly $13 billion last year (2013) with bright prospects of its further growth in 2014 (Egbula & Zheng, 2012). This bilateral trade volume represents over 30% of Ghana’s total trade transactions with the whole of West Africa indicating the importance of Nigeria to Ghana in the regional market. Presently, more than 40 Ghana companies are currently operating in Nigeria (Olumide, 2013). Hitherto, traditional development partners mainly from Europe and the Americas (U.S.A and Canada) have dominated trade, investment (in terms of Foreign Direct Investment, FDI) and grants and financial as well as technical aid to the country.
In addition, the Nigeria-Ghana relation was initially dictated by ideology and political issues. Subsequently, it shifted course and tilted towards economic considerations and development needs in Nigeria-Ghana. Undeniably, Ghana’s engagement in Africa and Nigeria in particular is not a sudden and recent event. In fact, Nigeria-Ghana relationship was officially established on 10th February, 1971. However, the eye-catching event is the rapid and large expansion of trade and investment relations that has occurred between the two countries in the past few years (Yin-Wong, 2010). However, what accounts for the increase in the volume of Ghana trade with Nigeria on one hand and the impact of the Nigeria-Ghana trade relations on economic development in Nigeria on the other hand, remain a subject of debate among scholars.
Overtime, researchers such as Gregory (2009), Ogunkola et al. (2006), Okolie (2009), Onuoha (2008), Taylor (2007), Egbula & Zheng (2012), Manroe (1975), Bukarambe (2005) and several others, have variously contributed in the area of international trade, volume of trade, foreign aids, economic relations, trade and economic growth between Nigeria and Ghana. Most of them centered their explanation on the adverse effects of Ghana trade on the Nigerian economy, unraveling the trade imbalance between the two countries.
Consequently, Manroe (1975) noted that the inevitability of international trade led to the complete or partial removal of arbitrary trade barriers in form of tariffs, embargoes by virtually all countries of the world. Utomi (2008) was apprehensive over Nigeria’s continued dependence on Ghana for manufactured goods; he focused on key economic issues that were left untouched by several writers on Nigeria-Ghana relations, especially the role of the non-state actors in Nigeria’s economic relations with China. Onuoha (2008) emphasized the security implications of Nigeria-Ghana trade relations. He noted that Ghana’s arms trade with Africa has the tendency of making Africa the bedrock of conflicts and wars which might fuel political instability and militancy in continent. Gregory (2009) in his analysis of Nigeria-Ghana trade relations starting with the critical oil and gas sector and followed by power, rail transport, construction, manufacturing and service sectors, argued that a study on Nigeria-China trade relations should focus on the manufacturing sector.
Nevertheless, Cole and Helpman (1995) show that trade affect economic development positively through technology transfer. Again, the results of Moghadam and Coe (1993) suggest that trade and capital have positive influence on economic development in France. Maddison (1998) showed that the gradual liberalization and capital flows in the Organization for Economic Cooperation and Development (OECD) countries stimulated West European reconstruction, recovery and catch up growth. In the same vein, Appleyard., (2006) argued that Ghana’s economy is not taking place at the expense of its many trading partners.
From the foregoing views of these scholars, such as Onuoha (2008), Okolie (2009), Ogunkola et al., (2006), Cole and Helpman (1995), Maddison (1998), Manroe (1975), Utomi (2008), Gregory (2009) and among several others, it is evident that they tended to have paid less attention on the impact of Nigeria-Ghana bilateral trade agreements on the volume of Ghana trade with Nigeria; and more so, the impact of the increase in the volume of Nigeria-Ghana trade on the Nigeria’s economic development within the period of study necessitates further research.
It is again this background that this research work is conducted to examine Nigeria and her neighbours: a comparison of trade relations between Nigeria and Ghana (2011-2017)
1.3 RESEARCH QUESTIONS
2 What is the relationship between the nature of trade activities and Nigeria-Ghana trade relations?
3 What is the relationship between Nigeria-Ghana trade relations and intra investment?
4 What is the relationship between barriers hampering intra-trade relations between Ghana and Nigeria?
1.4 OBJECTIVES OF STUDY
2. To examine the relationship between the trade promotion and Nigeria-Ghana trade relations.
3. To examine between relationship between Nigeria-Ghana trade relations and intra investment.
4. To examine the relationship between barriers hampering intra-trade relations between Ghana and Nigeria.
1.5 HYPOTHESES
2. There is no significant relationship between the trade promotion and Nigeria-Ghana trade relations.
3. There is no significant relationship between Nigeria-Ghana trade relations on intra investment.
4. There is no significant relationship between barriers hampering intra-trade relations between Ghana and Nigeria.
1.6 SIGNIFICANCE
This study has two levels of significance: Theoretical and practical. Theoretically, the study will add to the existing literature or knowledge on Nigeria-Ghana trade relations. Students of International Relations (IR) will find the research handy in their study of Nigeria-Ghana relations, especially now that Ghana has emerged as an important actor in international trade in the African market. It will be useful to scholars, especially diplomatic historians, political scientists, economists and international relations experts in their research. The study promises to extend the frontiers of knowledge in the area of complex interdependence theory, which argues that states and their fortunes are inextricably tied together. Industrialization, advanced transportation, globalization and outsourcing are all having a major impact on the international trade system. The complex interdependence theorists recognized that the various and complex transitional connections and interdependencies between states and societies were increasing, while the use of military force and power balancing are decreasing but remain important.
At the practical level, the study will aid governance and foreign policy making in Nigeria. In other words, the Nigerian government will be better informed on how to go about its bilateral and multilateral engagements with the outside world in general and Ghana in particular. Diplomats like ambassadors, high commissioners and staffers of foreign ministries will benefit from this work; it will help them examine critically the implications of policy formulation and execution in relation to Ghana.
1.7 SCOPE OF THE STUDY
The scope of this work was delimited to Nigeria and her neighbours: a comparison of trade relations between Nigeria and Ghana (2011-2017)
1.8 DEFINITION OF CONCEPTS
Trade: with regards to the contents of the study, this is involves the transfer of goods or services from one person or entity to another, often in exchange for money.
Trade relations: with regards to the contents of the study, this is the trading partner who is eligible to receive low tariffs and other concessions in exchange for similar benefits
Trade agreement: with regards to the contents of the study, this is the
Investment: with regards to the contents of the study, this is an asset or item that is purchased with the hope that it will generate income or appreciate in the future
.