Full Project – A critical analysis of the effect of Covid-19 lockdown on importation of goods in Nigeria

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CHAPTER ONE

INTRODUCTION

1.0 BACKGROUND OF THE STUDY

The World has been gripped by a pandemic over the first half of 2020. It was identified as a new coronavirus (severe acute respiratory syndrome coronavirus 2, or SARS-CoV-2), and later named as Coronavirus Disease-19 or COVID-19 (Qiu et al., 2020). While COVID-19 originated in the city of Wuhan in the Hubei province of China, it has spread rapidly across the world, resulting in a human tragedy and tremendous economic damage.

According to Fong et al. (2020), By mid-June, there had been over 8 million cases of COVID-19 globally, with over 436,000 deaths. Given the rapid spread of COVID-19, countries across the World have adopted several public health measures intended to prevent its spread, including social distancing. As part of social distancing, businesses, schools, community centres, and non-governmental organization (NGOs) have been required to close down, mass gatherings have been prohibited, and lockdown measures have been imposed in many countries, allowing travel only for essential needs.

The goal is that through social distancing, countries will be able to “flatten the curve”, i.e., reduce the number of new cases related to COVID-19 from one day to the next in order to halt exponential growth and hence reduce pressure on medical services (John Hopkins University, 2020). The spread of COVID-19 is expected to result in a considerable slowdown of economic activities. According to an early forecast of the International Monetary Fund (2020), the global economy contracted by about 3 percent in 2020.

The economic implications will be wide-ranging and uncertain, with different effects on the labor markets, production supply chains, financial markets, and the World economy. The negative economic effects may vary by the stringency of the social distancing measures (e.g., lockdowns and related policies), its length of implementation, and the degree of compliance. In addition, the pandemic and the government intervention may lead to mental health distress, increased economic inequality, and affect some socio-demographic groups particularly adversely (Madhav et al., 2017).

Importing raw materials and machines is one of the paths of increasing the profit margins. There are number of benefits in importing the goods, such as high quality, low prices, and benefits related to the international trade. The importer can have the much cheaper products from the foreign market due to low labour cost, low taxes etc. in terms of quality, the importer can have the higher quality goods and produce the finished goods with high quality and extend the business profit margins. The benefits of import include giving developing nations a chance to boost their economy, producing higher quality products, and increasing revenue by introducing a new product to a locale. Imports allow greater diversity in the market for shoppers and residents of specific countries, as they can obtain foreign products without traveling or paying additional fees. An importer can have the comparative advantage which means lower prices (Jones, 2006). Import benefits extend beyond individuals to businesses.

COVID-19 has disrupted global activities across all economic sectors and industries. The disruptions are largely due to the lockdown measures adopted and implemented by countries globally as a health strategy to mitigate the impact of the pandemic’s spread on the human population.

Due to the pandemic, productions halted, movement restrictions of people and goods, border closures, logistical constraints, as well as the slowdown of trade and business activities are fall-outs of the COVID-19 lockdown measures ( Daszak, 2012).

The COVID-19 pandemic, which began in Wuhan, China, was first reported to the World Health Organization (WHO) office in China on 31 December, 2019. As of August 17, 2020, there were over 22.1 million reported cases. Its emergence in China, which is one of the major manufacturing and distribution hubs globally, affected the supply of finished and semi-finished products to countries around the world that depend on China for trade (Ford et al., 2009).

Literally importation is important for the development and growth of national economies because not all countries have the resources and skills required to produce certain goods and services thus there is need for them to import products which is not manufactured within their country. These include machineries used for production, raw material and other economic profitable products. Therefore this implies that the lockdown policy that was birthed by the pandemic and with countries closing their borders would have a negative implication on economies.

1.2 STATEMENT OF THE PROBLEM

With the implementation of the lockdown, the transportation sector upon which global importation activities are dependent has remained partially closed. Statistics show that no less than 90 countries had imposed lockdowns since March 2020 and at the peak in April 2020, about 3.9 billion people were under lockdown (http/Wikipedia/lockdown2020). Consequently, there were constraints to the smooth functioning of the global supply-chains, and this has had an adverse impact on global business and industrial activities. The shipping industry, which accounts for about 90% of global trade activities estimated at about $12 trillion, has been impacted by the pandemic(WTO 2020). By implication, the World Trade Organization (WTO) estimated that global trade will fall by between 13% to 32%, in terms of volume, by year-end 2020. The disruption in importation have also impacted other sectors including manufacturing, retail, construction, supply chains among others. According to the WTO (2020), nearly all regions have experienced double-digit decline in trade volumes in 2020, with the most dips in imports coming from Asia and North America. The electronics and automotive segments will be the hardest hit due to the complexity of their value and supply-chains. However there is no doubt that Nigeria, as one of the countries that depends on importation of certain machines, automotive and electronics would also be hit hard by the covid-19 lockdown. Thus, it is against this backdrop that this study is set to do a critical analysis of the effect of lockdown on importation.

1.3 OBJECTIVE OF THE STUDY

This study is set to analyse the effect of lockdown on importation of good in Nigeria. It is therefore geared at providing answers to the following:

1. To examine the benefits of importation to industries
2. To access the effect of covid-19 lockdown on supply-chain of products
3. To investigate the rate at which covid-19 lockdown affected trade activities
4. To analyse the dependency of Nigeria on importation.
5. To analyse the effects of Covid-19 lockdown on production in Nigeria.

1.4 RESEARCH QUESTIONS

The following research questions were formulated in order to provide answers to the listed objectives above. They are:

1. What are the benefits of importation to industries?
2. To what extent did covid-19 lockdown affect the supply-chain of products?
3. What is the impact covid-19 lockdown on trade activities?
4. How much does Nigeria depend on importation?
5. What are the effects of Covid-19 lockdown on production in Nigeria?

1.5 SIGNIFICANCE OF THE STUDY

This study contributes to the existing knowledge body. More so it will enable business owners to diversify other local means of sourcing for raw material. It would aid manufacturing industries to improvise for local made machines in the absence of imported automotive and machines. It will heighten the awareness among policy makers and government on the need to support manufacturers of locally-made raw materials, machines and automobiles with loans in other to encourage them.it would also lay emphasis to general consumers on the need to patronize made in Nigeria product rather than depending on imported goods.

1.6 SCOPE OF THE STUDY

This study is set to observe a critical analysis on the effect of lockdown on importation of goods in Nigeria. Specifically it is set to examine the benefit of importation to industries. It will also access the effect of covid-19 lockdown on supply-chain of products. Furthermore, it will investigate the rate at which covid-19 lockdown affected trade activities. However the study is delimited to Delta State, Nigeria as the sampled participant.

1.7 LIMITATION OF THE STUDY

During the course of the study challenges encountered were exclusively but not delimited to the following numerous. These are

• Inadequate finance: the research was face with problem of inadequate fund which hinder the researcher from shuttering to Access Banks within Lagos more so in printing and collation of questionnaires
• Time constrain: time factor pose another constraint since having to cope in this research which went simultaneously within the time schedule of other academic work making it impossible to undertake this study in large more representative skill.

1.8 DEFINITION OF TERMS:

COVID-19: Corona virus disease 2019 (COVID-19) is defined as illness caused by a novel corona virus called severe acute respiratory syndrome corona virus.

Lockdown: A lockdown is a restriction policy for people or community to stay where they are, usually due to specific risks to themselves or to others if they can move and interact freely.

Importation: importation is the action of buying or acquiring products or services from another country or another market other than own.

Supply-chain: A supply chain is defined as the entire process of making and selling commercial goods, including every stage from the supply of materials and the manufacture of the goods through to their distribution and sale.

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Full Project – A critical analysis of the effect of Covid-19 lockdown on importation of goods in Nigeria