Entrepreneurship and Illegality: Insights from the Nigerian cross-border Trade

Abstract

Illegal business activity is common throughout the world, occurs in a diversity of forms, and is often viewed as the darker side of entrepreneurship. Of particular interest is illegal cross-border trade, which occurs at low levels between developed countries, but is often widespread between developing countries. It is on the increase, despite many attempts by governments to eradicate it. Yet illegal trading is poorly studied both theoretically and empirically from an entrepreneurial perspective. The paper outlines a working model exploring the relationships between key entrepreneurial factors and illegal trading, and explores the model using fieldwork data collected by the first author in Nigeria during an 8-month ethnographic study of cross-border trading. The Nigerian cross-border trade is particularly interesting, as it takes place in an environment of long-standing illegality and corruption. The findings reveal that illegal practices are so widespread that they are a norm, an almost parallel economy with its own traditions and values. In this context, entrepreneurial advantage in trading illegally is quite different from that which would be expected in more familiar Western contexts. The entrepreneurial advantages of trading in illegal goods and evading duties appear overwhelming at first, as bribery of officials is widely accepted, which reduces risk of law enforcement to negligible levels, and most traders do not view illegal trading as immoral. Closer analysis reveals, however, that traders need to bribe to trade any goods, legal as well as illegal. Bribery is part of a system of harassment by officials that pervades all aspects of the trade. In this climate, there are no special advantages in targeting illegal goods to trade in. The distinction between what is legal and illegal becomes blurred and irrelevant. Traders target any goods irrespective of their legal status if potential profit margins are high. Entrepreneurial advantage thus lies in the trade itself and making it work, not in its illegality. Most entrepreneurial energy is devoted to creatively circumvent the harassment of corrupt officials, not to exploit illegal business opportunities. The paper concludes by demonstrating that certain factors are crucial to our understanding of the relationship between entrepreneurship and illegal trading, in both Western and Nigerian contexts, but that the relationships between the factors differ widely in the two contexts. The model constructed provides a basis for further comparative research in other regional contexts. In terms of policy implications, the illegality of the trade is of some benefit in that it has created hundreds of associated jobs and businesses, which enable traders to operate more securely and efficiently in the climate of corruption, harassment, and uncertainty. Most traders, however, have learnt to profitably live with illegality, but nonetheless, would still prefer to trade in a less stressful and impartial legal system. Illegality on balance is more harmful than beneficial for economic development. Removing illegality once institutionalised, however, is not a simple matter and no solution can be found without fuller understanding of the sociology and the entrepreneurial processes of illegal trading.