entrepreneurship and illegality

Entrepreneurship and Illegality:

Insights from the Nigerian cross-border Trade

Akin Fadahunsia,*, Peter Rosab,1

aCentre For Enterprise and Economic Development Research, Middlesex University Business School,

The Burroughs, Hendon, London NW4 4BT, UKbDepartment of Entrepreneurship, University of Stirling, Stirling FK9 4LA, Scotland, UK

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

0883-9026/02/$ – see front matter D 2002 Elsevier Science Inc. All rights reserved.

PII: S0883 -9026 (01 )00073 -8

* Corresponding author. Tel.: +44-20-84116417; fax: +44-20-84116607.

E-mail addresses: [email protected] (A. Fadahunsi), [email protected] (P. Rosa).1 Tel.: +44-1786-467350; fax: +44-1786-450201.

Journal of Business Venturing 17 (2002) 397–429

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. D 2002 Elsevier Science Inc. All rights reserved.

Keywords: Entrepreneurship; Illegality; Cross-border trading; Corruption; Nigeria

1. Introduction

The heart of the entrepreneurial process will be found in the ‘‘descriptive background’’. We

will not get to the heart of the entrepreneurial process until we observe it in the field.

(Bygrave, 1989, p. 25)

Illegal business activity is widespread and diverse (Baucus, 1994; McClennahen, 1998).

Particularly common is illegal trade, which exists in three basic forms: firstly, the trading of

goods or services that are normally forbidden by law (for example, narcotic drugs,

prostitution, certain categories of arms, rare wildlife); secondly, the trading of legal goods

and services made illegal by avoiding the payment of duties or taxes; and thirdly, using illegal

unfair practices to attain a competitive advantage (insider trading, organizing clandestine

cartels and monopolies, tax evasion, black market currency exchange). Lubricating these

practices in many countries are bribery and corruption, which are ancient methods of

avoiding law enforcement and judicial sanctions. They essentially reduce the risk of what

would otherwise be extremely hazardous activities.

Although there has been some research into illegal business activity, it is a comparatively

small literature, focused on the corporate sector (e.g., Conklin, 1977; Vaughan, 1983; Clinard,

1980, 1990; Baucus, 1994; Baucus and Near, 1991; Baucus and Baucus, 1997). The literature,

being mostly concerned with large organizations, is largely orientated towards management

issues (i.e., the application of organizational systems of good practice) rather than entrepre-

neurial issues (i.e., those concerned with processes of business creation and growth that are

opportunity-driven and involve creative resource mobilization; Timmons, 1999). It is even

more difficult to find any specialized research on entrepreneurship and illegal business activity.

It is a widespread omission in the main entrepreneurship and small business journals, despite

the popular image of the entrepreneur having much in common with the ‘‘criminal’’ (Chell,

1985). The ‘‘rogue’’ entrepreneur in particular is a popular stereotype, a person sailing close to

the wind, constantly testing the boundaries of what is permissible, bending the rules, and

A. Fadahunsi, P. Rosa / Journal of Business Venturing 17 (2002) 397–429398

exploiting any ambiguity in the law. They tend to be at the margins of what is acceptable and

experts at exploiting moral ambiguity (Hart, 1975; Stewart, 1990).

The need for greater understanding of illegal business practices is even greater today, as

they appear to be increasing globally. The economies of many parts of the world are

significantly influenced by the activities of illegal ‘entrepreneurs’ (for example, the drug trade

in South America, Europe, and the USA, the Russian Mafia).2 Illegal smuggling and

corruption is endemic in most developing countries. In some areas of the world, notably

Russia (Tomass, 1998) and sub-Saharan Africa (MacGaffey, 1987, 1991), illegal business

activity appears to be so prevalent as to be almost the norm. In a recent article, the Economist

(US) states that ‘‘in Russia free enterprise is almost synonymous with criminality’’ (The

Economist, 1999, p. 19).

Bribery and corruption, which accompanies this activity, is usually regarded as a ‘‘social

cancer’’ (Sardar, 1996, p. 51) sapping the entrepreneurial capacity of economies where it

is prevalent:

Corruption is more than a moral curse. Bribes and other payments for government goodies are

nothing more than unauthorized taxes. And as stated in the World Bank 1996 Development

Report, these taxes discourage honest entrepreneurs, inhibit private investment, and restrain

economic growth. (Hanke, 1996, p. 103)

Corruption and other illegal business activity, however, is proving frustratingly persistent,

successfully resisting major initiatives to stamp it out by the United Nations, World Bank,

International Monetary Fund, the European Union and the Organization of American States

(McClennahen, 1998, p. 16). The Economist (1999, p. 19) gloomily reports that ‘‘corruption

is too widespread and amorphous, too much like the wind, to be defeated by a treaty or two.’’

This implies that illegal business activity, in all its forms, when deeply rooted, is a complex

phenomenon. As Sardar puts it, there is ‘‘a sociology of corruption’’ (Sardar, 1998, p. 5), that

needs to be understood before real solutions can be found. He argues that illegal business

practices are deeply interwoven within the political, social, and economic fabric of many

developing countries, where ‘‘social stigma’’ for these types of wrong doing has disappeared,

and a ‘‘parallel economy’’ has emerged (Sardar, 1996, p. 51).

Given the strong apparent links with illegal business activities and entrepreneurship, and

the paucity of studies in this area, there is a pressing need to understand this relationship

better, and to explore its potential complexity. This suggests that studies should be

exploratory and qualitative until a fuller understanding is achieved to guide more positivist

approaches. It requires, as Bygrave (1989) states, a commitment to fieldwork. The need for a

qualitative approach is also indicated by the difficulties of obtaining suitable data. There are

formidable problems of identifying suitable cases, getting access to them, protecting

researchers from possible personal danger, and evaluating the usefulness of responses from

people whose profession is popularly associated with covertness and deceit. Only through

patient ethnographic techniques, such as participant observation over many months, can the

2 See, for example, Das (1997) for an overview of the nature and extent of organised crime around the world.

A. Fadahunsi, P. Rosa / Journal of Business Venturing 17 (2002) 397–429 399

necessary trust be established, and a more sophisticated understanding achieved. This paper

aims to further understanding of illegal entrepreneurship through a study of cross-border

trading in Nigeria, an activity which is conducted in an environment of prevalent illegality

and corruption. It draws upon data collected through participant observation in 1994

(Fadahunsi, 1997), of the cross-border trade in Western Nigeria. Though focused on Nigeria,

the issues surrounding the reasons for the prevalence and success of illegal cross-border

trading are of much wider relevance, as illegal cross-border trading is prevalent in large parts

of the world, particularly Africa, Asia, and Eastern Europe (McClennahen, 1998). Even

though such illegal trade is proportionally small in terms of the total volume of trade in the

richest countries, it is by no means absent even there.

1.1. Theoretical perspectives on the entrepreneurship of illegal cross-border trading

If entrepreneurship is seen as the ‘creative extraction of value from environments’, then its

elements that we have been discussing such as vision, opportunity spotting, risk and profit

taking, resource mobilisation and network development, may take a different (and some-

times invisible) form in different environments, but they are always present. (Scott et al.,

1997, p. 191)

1.1.1. Entrepreneurship and legal international businesses

The internationalization business literature tends to be firm-focused. The firm produces

goods or services, which in smaller firms tend to be in a single location in the owner’s home

country. Once the home market is established, the entrepreneurial owner–manager seeks

opportunities abroad and gradually and incrementally acquires the knowledge and capability

to develop export sales. In some uncommon cases, a small firm may be established from the

outset to service overseas markets, but the firm is established and operates from the home

country. As internationalizing firms grow in size, there is a tendency to locate production and

other functions abroad to optimise operational efficiency. Eventually, a complex global

organization results. Entrepreneurship can play an important role to the success of the

internationalization process. The internationalization process can be opportunity-driven, in

which the owner–manager of the firm creatively seeks new markets and creatively mobilizes

resources to service the expansion and manage risk. In this sense, internationalization is but a

specialized context for the operation of much debated entrepreneurial processes (Timmons,

1999) and underpinned by a diversity of psychosociological (Chell, 1985) and economic

entrepreneurship theories (Casson, 1982).

The prevalence of the firm-focused view of internationalization in the business literature

obscures the fact that, in many parts of the world, there is separation in the export process

between production and selling. The firm that produces the goods is not usually the one that

sells them abroad. The smaller the producer, the more likely it is that others (usually traders)

sell his or her goods or produce. Traders are thus a form of intermediaries that link producers

and customers. They essentially are an entrepreneurial class whomanage uncertainty for higher

rewards on behalf of the mass of apparently unenterprising producers. The producers furnish

the traders with a long-term supply of replicable goods and services for a predictable and


relatively stable price, and the traders add considerable value to these prices through the

creative exploration of uncertain markets (Knight, 1921; Keasey and Watson, 1993). The

traders, like all businesses, have the capacity to develop their businesses through practising

entrepreneurial behaviour (Timmons, 1999); by being motivated and creative in seeking out

profitable opportunities and in mobilizing resources; by having the vision to successfully and

creatively extract value from their environment (Scott et al., 1997). They, like entrepreneurs in

other business contexts, specialize in making judgmental decisions about the coordination of

scarce resources (Casson, 1990), and succeed if they have the necessary negotiation,

monitoring, and management skills to successfully overcome risk and uncertainty (Keasey

and Watson, 1993).

Traders, however, have a greater potential to act entrepreneurially through cross-border

trading than exporting producers and manufacturers. They are not tied down by long

investments in plant, machinery, and labour as exporting manufacturers and producers are.

Traders have much greater flexibility in selecting which goods to trade, when to trade them,

and how to trade them. They are much closer to the pulse of the free market.

1.1.2. Entrepreneurship and illegal trading

We have yet to find any systematic entrepreneurial theoretical model of illegality in general

and illegal trading in particular. There are, however, some key concepts that can be explored

further to help construct a working model of the relationship between entrepreneurial

processes and illegal trading (Fig. 1). Firstly, illegal trade opens up increased opportunities,

and potentially very profitable opportunities for opportunity-seeking entrepreneurs. This is

through either trading in prohibited/restricted goods or services, or in evading custom duties.

Fig. 1. Entrepreneurial model of illegal trading.


Translating these opportunities into reality depends on the motivation to engage in illegal

practices, which in turn depends on three factors:

(a) Risk: the willingness to accept the risk of discovery and law enforcement

(b) Hassle: willingness to face the additional hassle involved in trading illegally

(c) Morality: willingness to overcome moral scruples of engaging in such activities.

Finally, success in illegal trading depends on acquiring the specialist knowledge and

resources to overcome hassle and risk in practice. These may be acquired through learning

‘‘the ropes,’’ or through creative improvisation and experimentation. All these factors are in

turn affected by the efficiency and strictness of law enforcement.

1.1.3. Opportunities of illegal trading

Classical economic theory states that when goods are scarce, demand increases and the

prices rise. Illegal goods become scarce by virtue of effective law enforcement commanding

potentially high prices. Certain goods may be almost universally prohibited or restricted by

law (such as plutonium; weapons, hard drugs) or be locally restricted due to protectionism or

cultural values (for example, where some countries prohibit the import of many commodities

to protect nascent manufacturing industries, or prohibit goods that offend religious

sensitivities such as alcohol). Some goods are freely available but carry high duties relative

to those in other countries and produce price differentials that make smuggling particularly

attractive. The smuggling of alcoholic drinks and cigarettes, for example, is currently on the

increase in the UK as duties are much higher than in France. The greater the range of goods

that are prohibited, restricted, or which carry high duties, the greater the opportunities for

illegal trading.

1.1.4. Motivation and factors in illegal trading

1.1.4.1. Risk and morality. The decision to trade illegally carries greater risks than trading

conventionally, though the risk can vary appreciably according to the nature of the illegal

goods being traded or the illegal practice accompanying the trade. The risk from illegal

activity can involve heavy penalties, including imprisonment and, in many countries, even

capital punishment for the trading of some substances. A trader willing to risk such penalties

is either a reckless gambler or he or she must be extremely confident that his or her

knowledge and methods are highly effective, and unlikely to result in discovery. Studies of

the risk-taking propensity of entrepreneurs have shown that ‘‘the perceived context (know-

ledge and situational characteristics) is a more important determinant of risk-taking than

personality’’ (Delmar, 2000, p. 141). An entrepreneur may appear to outsiders to be taking

greater risks, but from his or her perspective and knowledge, the risk may be small. In

managing uncertainty, entrepreneurs will thus tend to minimise risks, and through superior

knowledge and judgement, will gain the confidence to reap greater rewards (Casson, 1990).

The propensity to risk, its perception, and knowledge context become vital issues when

considering why entrepreneurs may seek to act illegally in their pursuit of trade and profit.


The creative reduction of risk is an especially interesting aspect of the entrepreneurial process

of illegal trading.

To trade illegally, however, is not just a function of the willingness to accept and manage

risk. There is an implication that the person finds the illegal process ethically and morally

acceptable. Morality tends to differ between individuals as well as societies, and there are

many different grades of acceptability for different actions. Many people, for example, find

little to stir their conscience in smuggling a bottle of spirits, but would never contemplate

trading hard drugs. The variability in moral acceptance between individuals ensures that there

will always be a potential supply of illegal traders in any society. These will tend to be a small

minority where the social norms morally condemn certain illegal practices.

There are countries, however, where illegal actions appear to be widespread, and thus

socially acceptable to the social majority. In these, what is legal and what is moral do not

necessarily coincide in large subsets of the population. Moral acceptability of illegal action

can occur especially where a minority considers themselves oppressed by the rules of others.

Blok’s (1974) study of the Sicilian Mafia, demonstrated that the Mafia, though illegal and

widely condemned, has played a significant part in helping the peasantry to bypass and

negate the effects of the laws and regulations imposed by generations of foreign conquerors.

Thus, where illegal commerce is rampant and endemic, as it is in many developing countries,

such trade, though illegal can nevertheless be moral and acceptable for thousands of

participants. Vaughan (1983) makes a similar point in seeking an explanation for the

prevalence of corporate illegality. He talks about the growth of corporate cultures that

condone and encourage illegal behaviour:

Successful achievement of organizational goals through unlawful conduct tends to rein-

force the occurrence of this behaviour, so what society defines as illegal may be defined

in the organisation as normative. (Vaughan, 1983, p. 61 quoted by Baucus and Baucus,

1997, p. 133)

Where illegal trading is prevalent, therefore, we could conjecture that the moral and

judicial values that underlay the formulation of the laws that seek to prevent illegal trading

are out of step with the moral values of the participants of the trade, and the people they

come into daily contact with. Many countries where illegal trading is prevalent were former

colonies, which inherited the legal system and legislation imposed by the former colonial

power. Since then there has been much legislation enforced on countries by pressure from

world powers and bodies linked with UN agencies (for example, having to comply to free

trade agreements, international health conventions, to implement economic reforms con-

ditional on the receipt of loans from organizations such as the IMF and the World Bank).

As much of the law has been enacted from the pressures of outside forces rather than its

own citizens, what is illegal (flouting a law legislated by the government of the country) is

not always immoral (socially disapproved by the majority of citizens). This increases the

entrepreneurial potential of illegal activity, as the rewards of contravening the law are not

accompanied by the same degree of risk. Where a law is not considered as reinforcing

prevailing morality, its chances of being effectively enforced are considerably lessened. In

such circumstances, illegality is not always seen as damaging. Leff, (1964), Alam, (1995),


and Sardar (1996) argue, for example, that the rigid constraints of complying with strict

economic regulations imposed from outside can be evaded to the benefit of all participants.

Thus, illegal trade, if socially sanctioned, can be highly beneficial. It produces entrepren-

eurial opportunities for far more people than ‘‘official’’ trade is able to do, increases

rewards through higher profits, and lowers costs by efficiently circumventing red tape

through bribery.

Paradoxically, however, if illegality becomes so socially accepted, then the entrepreneurial

and economic advantages that accrue from illegal trading may be negated. When the law is

regularly enforced, special knowledge and resources are needed to successfully trade illegally.

The enterprising illegal trader seeks opportunities that enable this knowledge to be put to

profitable use, and constantly and creatively devises new ways to get round new techniques

of law enforcement. As most traders either do not take the risk of going down the illegal route

or find such a route morally unacceptable, the illegal trader is able to trade profitably with

reduced competition and costs. If illegal trading is socially acceptable, however, and law

enforcement becomes low, everyone has the opportunity of getting into the act, increasing

competition to levels which may be as high, if not higher, than trading conventionally and

legally. Indeed, the trader may be even worse off, as he or she may have to face

institutionalized costs of greasing palms of corrupt officials, while still having to pay at

least a portion of normal duties and taxes. Finally, the relaxation of law enforcement may

increase lawlessness and anarchy, which may substantially increase costs of conducting

businesses, through increasing vulnerability to theft, fraud, and extortion.

Where illegal trade is ‘‘institutionalized,’’ there are in effect conflicting moral, social, and

political orders. Another body of entrepreneurial theory, Barth’s (1967) ‘‘spheres of value’’

predicts that this may be especially compatible with spotting and exploiting new business

opportunities. Barth drew upon research by Bohannan (1955), who illustrated that in the Tiv

economy in Central Nigeria, certain valuables circulated in separate economic spheres of

exchange. Sanctions prevented the exchange of valuables across spheres except by special

institutional dispensations. The term ‘‘conversion’’ was used where goods crossed spheres of

exchange. Barth developed the concept of spheres of exchange, recognising their implications

to entrepreneurship. He identified that new entrepreneurial possibilities become available if

boundaries between spheres are malleable. By finding new channels of conversion,

entrepreneurs can creatively exploit considerable profit from such ‘‘bridging transactions.’’

Barth’s spheres of value, and entrepreneurial conversion between spheres, provide a

framework for analysing illegal entrepreneurial activity where morality and legality diverge.

Where illegality is institutionalized, there appears to be two parallel trading economies, the

formal and informal, each with their own rules, norms, values, and traditions, maintained by

legal sanctions on the one side, and unwritten sanctions on the other. Both are ambiguously

defined. This would imply, in terms of Barth’s theory, that entrepreneurial opportunities

would be especially prolific for those able to transform value across these spheres. We would

thus expect, the most successful entrepreneurs to be those traders or participants in the trade

who are able to bridge both spheres, and convert value from both. They are people who

‘‘operate at the margins’’ and ‘‘see more than one moral order, one field of exchange’’

(Stewart, 1990, p. 151).


1.1.4.2. Specialist knowledge and the ‘‘hassle’’ factor. Assuming that risk and morality are

overcome as obstacles to trade illegally, there still remains the hassle factor to consider. The

more effective law enforcement becomes the greater the specialized knowledge and

resources needed to circumvent it and trade successfully. How to source illegal products

successfully, transport them, and sell them is hidden knowledge constantly changing in

response to law enforcement initiatives. This may require the cultivation of contacts to

enhance trading efficiency and protection, and unconventional ways of raising necessary

financial resources (a bank will not fund smuggling, even if the business plan is wonderful).

Acquiring such knowledge may be a mixture of creative experimentation, inspiration, or

apprenticeship. However acquired, it is a complex way of doing business, beset with hassles

and problems. For most traders, particularly larger manufacturing exporters, the normal

tasks of producing goods and overcoming the normal cross-border regulations and

uncertainties may seem large enough hassles without further complicating life by dabbling

with illegal trading.

Even if law enforcement is inefficient and the risks of detection are low, however, it does

not mean that hassle is decreased. Where the law eases off, the vacuum is often filled by

corruption, fraud, and insecurity. The hassles of trading may actually increase substantially in

a relatively lawless and corrupt environment.

From this discussion, it becomes apparent that the interactions of the key concepts in the

working model outlined in Fig. 1 are complex, and likely to vary appreciably according to

socioeconomic context.

1.1.5. Illegal trade in Africa

The only in-depth treatment of illegality is contained in a study of the informal economy in

Zaire (now the Congo) by MacGaffey (1991). The study shows that people manage to survive

in what otherwise is a ‘disastrous’ economy by frequent recourse to illegal cross-border trade

involving smuggling and corruption. The trade was totally unregulated and brought in no

revenue for the government, though officials ‘‘tolerated it, as they did not know what to do

about it’’ (MacGaffey, 1991, p. 119). She records that this illegal trade is also typical of much

of Africa, and supports considerable entrepreneurial activity, forming an alternative economy.

She writes:

To some extent the second economy generates not only alternative economic opportunities for

people, but also an alternative society, with parallel social and religious institutions alongside

official ones. MacGaffey (1991, p. 154)

This makes Africa an interesting area to study illegal cross-border trading. The theoretical

discussion shows that the entrepreneurial advantages of illegal trading may differ consid-

erably according to sector and geography. In particular, where such trading is common and

almost ‘‘institutionalized,’’ there are differing theories and arguments on how far it is an

entrepreneurially favourable trade and where entrepreneurial advantage may lie. The study

site of Nigeria in this paper is similar to that described by MacGaffey (1987, 1991), and

provides an opportunity for an in-depth empirical exploration of illegal trading to enhance our

understanding of its relationship to entrepreneurial processes.


1.1.6. Aims and objectives

This paper explores these issues through analysing findings from an ethnographic study on

the nature of informal cross-border trade in the Nigeria/Benin border, conducted in 1994

(Fadahunsi, 1997). The analysis focuses on the following empirical questions:

1. What is the nature of the cross-border trade, and what is the role of entrepreneurship in

the success of the participants in the trade?

2. What is the nature and role of illegal trading? Does illegal trading confer special

advantages, and how are people motivated to participate in it? Can the trade be

considered to be an entrepreneurial activity and process?

3. How does bribery and corruption affect the ability of traders to conduct their business

profitably and efficiently? Does it help to cut risks in illegal trading, and make all forms

of trading more efficient, by evading costly and burdensome bureaucracy? Or is it a

significant burden of traders, adding to the hassle, costs and risks of trading?

4. What is the role of black market currency dealing in the trade, and how far does it

provide cheaper and more accessible capital for entrepreneurial traders and exporters?

5. How ‘‘institutionalized’’ are illegal practices associated with the cross-border trade, and

if so, do they, all things considered, contribute positively or negatively to the business

success of traders, and to economic development?

2. Methodology

2.1. Research approach

The research was originally designed as a structured survey of manufacturing and trading

firms in Nigeria (see Fadahunsi, 1997). The survey was carried out, but became superseded

by the need for a more qualitative approach. The survey provided some valuable background,

but proved inadequate to investigate the delicate issues surrounding informal trading,

particularly illegal cross-border trading. The experience reinforced that of MacGaffey

(1987), who questioned the appropriateness of studying informal African businesses through

quantitative approaches, based on structured questionnaires and leading to ‘‘rigorous’’

statistical analysis. Most transactions tend to rely, to some extent, on personal contact and

trust for their execution, and businesses are not easily identifiable or verifiable from

documented sources. Widespread evasion of government regulations, and complex local

political factional conflicts, make people careful to whom they talk and what they say. Even if

these handicaps are overcome, there remain awkward questions on how valid and culturally

transportable predetermined and precoded questions are. There is a constant danger of bias

through ethnocentrism, not just from the researcher coming from a different national culture,

but also from the researcher being an academic schooled in a particular discipline, and having

been trained to interpret data in certain ways (Rosa and Bowes, 1992). When it is also

considered that very little is known about the detailed processes of the informal economies of

West Africa (Igue and Soule, 1992; Hill, 1971), the advantages of a qualitative research


approach are overwhelming. A decision was made early on in the research to follow up the

survey with some form of qualitative fieldwork.

A crucial choice was whether to carry out a large number of short (1 to 3 h) unstructured

in-depth interviews and case studies of different indigenous entrepreneurs, or whether to

employ an ethnographic approach focusing on a much smaller number of entrepreneurs

over a much longer period. Formal unstructured interviews only reduce rather than

eliminate many of the basic objections to the quantitative approach outlined above.

Although an unstructured interview can be more relaxed, it is still a very short time span

to build up basic trust, to probe sensitive issues, and to cross-check and investigate

contradictions in the respondent’s narrative. It is also too short a time to erode any

ethnocentric notions that the researcher may have, or to accurately gauge how the questions

are really being interpreted and perceived by the respondent. The extent to which people

can misinterpret what a researcher says is amazing and well demonstrated in the

anthropological literature (see, for example, Burghart, 1993).3 Apart from these, there is

a danger of respondents distorting the truth by not remembering facts and events accurately,

by being too anxious to please or telling the researcher what they think s/he wants to hear,

or by being too suspicious leading to economies with the truth. They can also be unreliable

when they talk about each other, particularly in uncertain and hostile political environments

(cf. MacGaffey, 1987, p. 6).

The ethnographic approach in contrast, based on repeat interviews, intensive long-term

personal observation by the researcher, and the establishment of personal rapport and trust,

is much more likely to produce quality data and insights. In time, people get used to the

researcher, and permit the investigation of sensitive and complex issues. By intensive study

and observation, the researcher begins to make sense of apparent contradictions in what

people say and do, and crucially, of seemingly irrational practices. In this way, his or her

own ethnocentrism is gradually eroded. By long observation, the investigation of social

context also becomes possible, and a more holistic outlook is encouraged (Rosa and

Bowes, 1992).

Anthropologists studying entrepreneurial processes in unfamiliar socioeconomic systems

have used participant observation for many years. Studies have mostly focused on under-

standing the role of entrepreneurship in social change; or the formation of capitalist classes or

understanding the role of entrepreneurship and indigenous economic development (for

example, Geertz, 1973 on Indonesian entrepreneurs; Barth, 1963 on Norwegian farmers;

Blok, 1974 on the role of peasant entrepreneurship, violence, and the Sicilian Mafia; Long,

1968 on Zambian Jehovah’s witnesses; MacGaffey, 1987 on the Zairian informal sector).

Most of these studies involved periods of fieldwork measured in years rather than months.

With increased pressures on funding, however, there has been a gradual decline in the length

3 Burghart was observing the chemical purification of a polluted well by Nepalese villagers. Although trying

to maintain detached observation, he was inevitably drawn into discussions on the technical process of

purification. The villagers adopted their own solution, but when this failed, resulting in even greater pollution,

they universally blamed his advice for their predicament.


of fieldwork, and, it could be argued, a corresponding fall in the richness of ethnographic data

obtained. Ethnography nowadays has to be completed in weeks rather than months. This

inevitably requires a more structured and less intensive approach than is considered desirable

in the classical anthropological method.

The fieldwork in the present study was undertaken over a period of 8 months in 1994, of

which 6 months were devoted to participant observation of the cross-border trading

environment. Many traders, officials, and other participants engaged in various aspects of

the trade were spoken to and observed in their daily activities. This general fieldwork ran

parallel to the core data-gathering phase of the project, which involved detailed intensive

participant observation of seven extended case studies, which were observed over time.

Compared with some of the classic studies just outlined, it was a limited ethnographic study

in terms of length and scope. It is possible that certain conclusions may have been revised if

the fieldwork had lasted longer. The field researcher, being Nigerian and enjoying

advantages of language and local knowledge, mitigated the relative shortness of this period.

The learning curve was therefore not so steep. However, even though being a Nigerian sped

up the process of trust building with certain respondents, it also counted against him in

others, as he was not perceived as a neutral ‘‘foreigner.’’ Furthermore, there were increased

dangers of ethnocentric bias, as local knowledge can lead to many things being taken for

granted, which would be questioned by an outsider. The field research process itself was, on

occasion, inevitably compromised by the often arduous and even dangerous nature of

conducting this kind of research in West and Central Africa. The field study in Nigeria

commenced shortly after a military coup in the country, which, in the early days, predictably

affected access to certain informants, and may have contributed to the reticence that they

and other informants showed. It also coincided with a period of sustained public

demonstrations in the Benin republic, as well as sporadic border clashes between Ghanaian

and Togolese communities, all of which led to the field researcher being caught up in a number

of volatile situations.

2.2. The choice of case studies

Ten cases were initially selected for intensive observation, subsequently reduced to seven.

They were chosen to reflect diversity in size, sector, and location. Five of the cases were

classic traders, who buy and sell goods without producing or manufacturing them. The last

two cases are firms who manufacture products, and have had some success in exporting them.

As mentioned earlier, the participant observation period lasted for about 6 months. It involved

a series of interviews and conversations with owner–managers of the businesses, their

employees, associates and other contacts, family, and in some cases, acquaintances. It also

involved undertaking some form of unpaid work in the respondents’ businesses,4 travelling

4 This commonly involved some form of work as ‘‘personal assistant’’ or other administrative work although

Fadahunsi eventually began to be involved in other activities as the process went on and the informants in turn

found out more about him and his perceived usefulness for their businesses.


with them, and being generally involved in a number of work-related situations. In some

instances, previous ‘‘findings’’ and possible future scenarios were discussed with respond-

ents, and these contributed to the design of subsequent parts of the field study. During the

following months of observation and repeat interviews, three of the respondents dropped out5

and were not replaced. One was not included in this paper, as it was not strictly an owner-

managed trading firm, but a branch of a large multinational. Table 1 below, thus briefly

summarises the key characteristics of the remaining six case study businesses (as of July

1994) that participated in the fieldwork phase of the study for its duration.

Case 1 was a specialist cross-border trader. She was a relative newcomer to the trade,

having only switched from conventional market trading 8 months before the commencement

of the field research. The products she sold were normally purchased in the Republic of Benin

for resale in Nigeria.

Case 2 was a much more experienced trader involved in both local and foreign trade. She

was an import and export trader, although the balance of her trade was more tilted towards

purchasing outside Nigeria and selling within.

Table 1

Key characteristics of extended case study firms

Informant

Main cross-border

business activity

Status and

size of firm Gross turnover (N)aForm of

CBT participation

Case 1: 8 years

in business

Import trader

in clothing

and accessories

Sole proprietor;

one employee

N70K for year

to June 1994

Informal/direct

Case 2: 19 years

in business

Import trader in

textile goods

Sole proprietor,

11 employees

N2.2m for year

to December 1993

Informal/direct

Case 3: 18 years

in business

Import and

export trader

in food ‘provisions’

Private limited company,

10 employees

N6.4m for year

to December 1993

Formal and

informal/indirect

Case 4: 5 years

in business

Manufacturer of

plastic products


16 employees

N1.5m for year

to July 1994

Formal/direct

and indirect

Case 5: 5 years

in business

Agro-allied products

processing, computer

hardware distributor


300 employees

N601m for year

to December 1993

Formal/direct

and indirect

Case 6: 55 years

in business

Food and

beverage processor

and manufacturer


151 employees

N48m for year

to December 1993

Formal/indirect

a The ‘‘Naira’’ (N), divided into 100 ‘‘kobo’’ (K), is the currency of Nigeria. US$1 and GB£1 officially

exchanged for N22 and N32, respectively, for the duration of the field study. Informally, US$1 and GB£1

exchanged for an average of N45 and N75, respectively, over the same period.

5 One respondent, a trader based at Alaba International Market on the outskirts of Lagos, lost his mother about

8 weeks into the observation exercise. He returned to Eastern Nigeria to bury and mourn her, temporarily closing

his business, but had not returned 3 months later. Shortly after the initial incident, two other respondents fled their

bases at the border town of Idi-Iroko, also to return to their native East as political tensions increasingly mounted

in Western Nigeria throughout 1994.


Case 3 was also involved in a two-way foreign trading system. Her cross-border trading

activities were, however, mostly as a supplier of goods to various customers who came to her

Lagos base from a number of West African countries.

Case 4 was the owner of a manufacturing firm involved in making various plastic

products, initially only for sale within Nigeria. In 1993, he started exporting to neighbouring

West African countries.

Although operating more like a sole proprietorship, Case 5 was, in fact, a multifocused

business with interests in training, as well as in the farming, production, and trading of a

number of goods. It had been involved in overseas import and export trading since its

incorporation, and in fact, only actively began to develop its cross-border business in the

2 years preceding the start of the field research.

Case 6 was a medium-sized, family-owned business that was still being run by a brother

and sister team during the field research. It was only nominally an export-oriented firm

although its products are frequently encountered in the cross-border trade.

2.3. The geographical setting

Considerable trading activity occurs along all Nigeria’s borders, and also by sea. It was

decided to narrow the scope of the study to one section of border. The site chosen was the

Western border nearest to Lagos, Nigeria’s commercial capital, and the focal point of most

trading activities in South Western Nigeria. It is here that cross-border trade routes to

Nigeria’s western neighbours (Benin, Togo, Ghana, Ivory Coast) are at their busiest (see the

map in Fig. 2).

The study focused on key border trading towns. Idi-Iroko is about 75 miles northwest of

the centre of Lagos. It is a small but bustling transit town which is only separated from Igolo

in the Republic of Benin by a 6-ft-high fence. The Benin capital of Cotonou is about 25 miles

further inland and eastwards from Igolo. Several small towns and villages dot the Lagos–Idi-

Iroko/Igolo–Cotonou route. Traders from these towns routinely trade on this route as part of

their everyday lives, and it is also used by traders from all over West Africa, making for

constant economic activity in the area. Seme, a border post, is about 40 miles southwest of the

centre of Lagos and also a vital link in West African cross-border trading. Over the years, and

especially since the mid-1980s, a market has evolved in this border post, which extends from

the Nigerian side to the Beninoise side of the border. Here, traders deal in everything from

smoked fish and livestock to luxury cars and foreign currencies. Traders and travellers (such

as Cases 1 and 2) sometimes numbered in their thousands at each of these border posts.

Also included in the study was Sango-Otta, a town benefiting a great deal from its position

of being virtually being midway between Lagos and the Nigerian/Beninoise border on the Idi-

Iroko route. It is far away enough from the centre of Lagos (about 40 miles) to offer

considerably cheaper land and labour necessary to run the town’s farms and factories, but is

by Nigerian standards, very easily accessible from Lagos. Some of Nigeria’s larger firms,

making a variety of products, including beverages, motorcycle and power plants, building

materials, metal products, various home appliances, and other products, have factories, farms,

and offices in Sango-Otta. These firms (such as Case 6) provide a convenient source of goods


to trade. They are aware that there are markets for their products outside Nigeria, and know

that a certain proportion of their sales to local distributors end up outside the country, not only

within Africa, but in certain cases, as far away as Europe and North America (there is

demand, for instance, from the large community of Nigerians living abroad). But they seem

generally content to let the traders undertake the exporting function.

3. Findings

3.1. The entrepreneurial potential and practice of cross-border trade

Nigeria is a large country with a long tradition of indigenous trade. Internal trade is

extensive, involving particularly the servicing of basic consumer needs of urban centres by

obtaining cheap goods and produce from the rural areas and selling them with generous mark

ups in the towns. Internal trade, however, satisfies only a proportion of consumer needs. The

manufacturing base lags far behind the need for modern goods and commodities, and most

have to be imported. This provides considerable opportunities for traders with a more

international outlook to engage in import/export activities. In terms of logistics, too, there are

advantages in trading internationally. Ali Mazrui’s observation in the 1978 BBC Reith

Fig. 2. Map of the study area.


Lectures that it was usually easier to phone London, Paris, or other major African cities than

phone the next town and that it was often quicker to fly abroad than to drive to the next

village, still holds true. The infrastructure along the cross-border trading routes, though still

poor relative to European standards, is often better than trading with the rural hinterland.

Hassles with officialdom and police are also no less likely to be encountered inland than on

the border crossings. Finally, for traders in the southwestern corner surrounding Lagos, the

neighbouring countries of Benin and Togo are substantially nearer to visit and trade with than

the majority of cities elsewhere in Nigeria. All these combine to form a theoretically

favourable environment for opportunity-seeking entrepreneurs.

These opportunities, however, are pursued by thousands of competing traders. Many

traders specialize in specific niches, which often require considerable cooperation. For

example, there are towns near the border that specialize in the importing and exporting of

food crops (yams, maize, vegetables) to and from the neighbouring West African countries. A

great number of townsmen and women are involved in the trade. The men harvest and buy up

produce, load and drive the lorries. Women accompany the lorries, and peddle the produce in

the border markets. From the profits, they buy up rice and livestock imported from Benin, and

drive them back into the hinterland where prices for these goods are much higher.

To be successful in this kind of cooperative niche trading, the trade has to be learnt

(Fadahunsi, 1997) and long-term trading contacts must be established and nurtured. Once

learnt profits accrue, but this process is not amenable to quick and flexible pursuit of fresh

opportunities. In trading terms such businesses are driven by managerial routine rather than

entrepreneurial vision. They are also susceptible to erosion of profits as more people learn the

trade and increase the level of competition.

One example of a moderately successful ‘‘niche’’ trader is Case 1, who was 25 years old

and single, with a young son. She abandoned the boredom and long hours of running a local

market stall to become a cross-border trader. She committed her life savings of N4000 to the

project. She traded in cheap jewelry and fashion accessories, making trips to Cotonou in

Benin and Lome in Togo to source materials. She was a very cautious trader, only buying if a

customer had already been found in Lagos. She also never sold Nigerian goods abroad, as she

had yet to establish a network of buyers, and feared the consequences of rapid currency

fluctuations. This cautious approach led to moderately profitable success, but she had not

maximised her opportunities.

The study also found, however, that there are other kinds of cross-border traders, with

stronger entrepreneurial drives, who seem to be constantly on the lookout for new profitable

opportunities. The most successful traders (in terms of social prestige as well as wealth)

displayed more entrepreneurial qualities than the average trader, flexibly evaluating many

opportunities, pulling strings, organizing and strategizing the trade as a whole, and

accumulating wealth from it by so doing. Traders like these are more likely to be found

subcontracting the risks of the trade (other than perhaps, financial), and not themselves

directly operating on a day-to-day basis as cross-border traders.

An example of such a successful entrepreneurial trader is Case 3, a 53-year-old business-

woman married 29 years to an engineer. She had four children. After becoming dissatisfied

with employment, she invested her savings in a market stall in 1976. After some success at


basic market trading, she used her husband’s contacts to become a distributor for several

manufacturing companies. By the 1980s, she had built this up to become a major wholesaler

and distributor, running the business from a 12-ft garage/warehouse in her Ikoyi home. She

combined opportunity seeking with highly efficient control and organization. She organized a

team of six assistants, whose main job was to solicit for business. They would roam the huge

commercial truck-park adjoining the market containing vehicles bound for various West

African destinations. The assistants would make the acquaintance of likely buyers, and direct

the potential bulk buyers to the shop, where she would further evaluate and negotiate the deal.

She also bought a pick-up van, staffed with two assistants, whose job was to peddle goods

around Lagos. She maintained regular contact by phone with favoured customers and

suppliers abroad and increased her sales abroad by being one of a small number of

distributors to engage in the selling of products to subdistributors and retailers on credit.

During the course of the fieldwork, she began to import used cars from Europe, in partnership

with her eldest son who lived in Britain at that time. A feature of her success is the way she

constantly sought out new market opportunities, the way she mobilized staff and resources to

exploit them, and her capacity to delegate. Her multimillion Naira turnover has been achieved

without her hardly having to leave the shop.

Another example is Case 2, who owned three retail shops, having built up the business

from a small donation of textile materials by her husband. She started by selling textile goods

in the rural hinterland, and buying cheap foodstuffs on the return journey to sell at a profit in

the city. She started cross-border trading in 1982, which she operated by taking trips to

neighbouring African countries as far as the Ivory Coast, and beyond as far as Saudi Arabia,

following her inaugural hajj pilgrimage to Mecca. During her trips, she sourced materials for

her shops, and was constantly alert for new opportunities within her specialty of textile-

related products. She also proactively accessed new customers by paying assistants to target

potential traders at airports and the border crossing and invite them to her shop for bulk

purchasing. Though more mobile than Case 3, she still showed the same combination of

proactive opportunity seeking and efficient organization. She also displayed a very progress-

ive and positive attitude to trading and risk, which she frequently experienced in her informal

trading trips abroad:

Once upon a time things were much simpler. But how many years would I have sat peddling

aso-oke6 for? How many people are even buying it nowadays? Yet if you go to Oje Market

(in Ibadan) that’s what they are all doing. The world is far more advanced these days, and you

have to advance with it. But when you have struggled to put together N100,000, and then you

give it to someone to go and spend on your behalf in a strange country, where you can’t even

see them, even if it is your mother’s child, let me tell you, my brother, you are taking a big

risk, or don’t you think so?

The various participants in the trade, direct and indirect, are all involved in an ongoing

evolution of rules or niches in the trade, which by various processes of negotiation and

accommodation, they are all taking steps to protect and develop. The cases illustrate that both

6 Embroidered cotton material, usually worn on ceremonial occasions.


entrepreneurial and managerial expertise are necessary for gaining the optimum rewards from

the trading process.

3.2. Illegal practices in the trade: do they confer real advantages to business success?

Trading can be broadly associated with the following illegal forms of behaviour:

(a) Smuggling of prohibited or restricted goods (e.g., drugs, arms, certain wildlife and

wildlife products, agricultural produce not complying with health regulations, etc.).

(b) Smuggling of goods to evade revenue and duties.

(c) Smuggling to evade burdensome bureaucracy, regulations, and paperwork.

(d) Evading financial regulations that are a disadvantage in currency exchange (e.g.,

engaging in currency black markets); and

(e) Bribery and corruption of officials to lower the risks of being caught.

Generally, the risks faced are:

(a) Getting caught by law enforcement officers and facing fines, confiscation of goods,

or imprisonment.

(b) Forgoing the protection of the law that comes through legitimate trading. Thieving

from a thief is often not reported to the authorities. Government defines the limits of

duties, but there are no defined limits of bribes that need to be paid once a corrupt

official has a business owner in his or her power.

3.3. Trading in illegal goods

All manners of legal and illegal goods are traded on the cross-border routes. Internationally

prohibited goods such as narcotics, wildlife, and arms are traded in Nigeria as elsewhere, but

these are specialized criminal activities that were too dangerous to research directly, and

which, in any case account for only a low volume of cross-border trade. There are, however,

other more acceptable goods whose illegality makes them particularly profitable to trade in.

There are goods in high demand both in Nigeria and outside that are restricted either through

imposition of high import duties to limit the national trade deficit; or prohibited altogether to

protect indigenous industries. Automobiles and their parts, and several kinds of electrical/

electronic goods fit into this category of goods, and are a mainstay of regional cross-border

trading. Several other ‘‘standard’’ cross-border trade goods like rice, flour, palm and

vegetable oil, wheat, fertiliser, and such other ‘cash’ crops/produce have had their importation

into Nigeria prohibited since 1986 (in some cases since 1978) to stimulate Nigerian self-

sufficiency in these products or their substitutes. However, local production (e.g., in wheat)

has not quite matched expectations and there is an obvious gap in the market which several

traders have moved to fill, creating a lucrative illegal import trade in such products. By the

same token, there is a trade in smuggled exports of goods legal in Nigeria to plug prohibited

shortfalls in other West African countries. Again there are various goods in this category with


petrochemical and pharmaceutical products particularly prominent. Most of the prohibited or

highly restricted goods traded are thus goods that in most countries are perfectly legal, but

which are banned in Nigeria or other West African countries for special economic reasons

legislated by remote central governments.

There was no evidence from the case studies that illegal goods of this kind were

perceived as especially attractive to trade in, just because of their illegality. All five of the

cross-border traders (Cases 1 to 5) sought profitable goods to trade irrespective of their

official legal status, and did not appear to deliberately target restricted goods. Case 3, for

example, had established a lucrative business importing cars and parts (all restricted

goods), but these took their place alongside a range of perfectly legal goods she also traded

in. The owner–manager of the larger manufacturing firm (Case 6) was more conscious of

the status of illegal goods, and took steps to avoid being directly involved with their

trade. He stated that he was anxious to trade legally, as he could not afford to risk his

reputation in the international markets he traded in. This attitude, however, was made

easier by the fact that his trading operations concentrated primarily on the sale of his own

manufactured products to distributors who tended to be the ones directly involved in the

illegal trading.

The evasion of custom duties is widespread in the trade and many instances of this were

observed during the fieldwork, which led directly to considerable advantage. Particularly

prominent was the petty smuggling of petrol and other petroleum products by most vehicle

drivers from Nigeria to Benin, where prices were up to five times higher. Large quantities

of these and other goods tended to be smuggled at night, usually with the collusion of

border officials.

While evasion of duties was prevalent, it should not be concluded automatically that it is

an entrepreneurial strategy to widen profit margins. All the smaller traders in the sample

evaded duty during their operations, but this often was not a deliberate or a conscious

strategy. Indeed, none of the cases seemed to put any emphasis on the desirability to evade

custom duties. The reality was that widespread bribery and harassment along the border by

officials often made the payment of duties difficult. Any advantage that accrued from evading

duties tended to be negated by having to pay bribes to officials.

3.4. The settlement culture

In Western countries, there is usually a clear choice between trading legally or illegally.

Customs and excise have regulations on the import and export of goods, usually prominently

displayed in writing. An entrepreneur engaging in illegal trading knows that ignorance of the

law is no excuse and that penalties are significant, and unlikely to be evaded if caught. The

risks are clear-cut. In Nigeria there appears at first to be an equally clear choice. Smuggling,

bribery, and corruption are also illegal, and known to be so by most citizens. Many larger

traders also trade legally, openly approaching the border with goods, and (almost) conven-

tionally exporting them. Why should the choice facing Nigerian trading entrepreneurs be any

different from their British, European, or American counterparts when confronted with the

tempting rewards and draconian penalties of illegal trading?


One difference observed in the study was that the degree of harassment by officials is

considerably greater in Nigeria than in Western European countries. Indeed, for many cross-

border traders, constant harassment by various law enforcement agents was a way of life. Not

many traders could remember a time when they did not have to endure some form of

harassment. ‘‘Harassment’’ here may take many forms. There were those that took place by

law enforcement agents pursuing official duties, such as snap market raids, often designed to

enforce tax or environmental regulations. There were also those that were unauthorised, such

as demands for bribes at roadblocks. In the former category are included incidents such as

what happened to Case 2, one of whose shops was summarily pulled down by Lagos State

environmental health officials as an ‘‘illegal’’ structure despite the fact that the stall had been

erected and let by the local council.

Harassment by border police and customs officials (authorised and unauthorised) was more

widespread and thus seemed potentially more damaging. Traders had to run the gauntlet of a

series of authorised and unauthorised checkpoints, manned sometimes by army and custom

officers, but most commonly by police. Up to 12 were regularly encountered on a 30-mile

stretch of road that led into Idi-Iroko. The traders the researcher was accompanying were

stopped at virtually every checkpoint — some within 200 or 300 m of one another — and

searched in most of them. The searches were usually prelude to a demand for bribes.

Although similar checkpoints were also observed in the other West African countries, the

frequency and scale of harassment tended to be less prevalent than on the Nigeria side.

Individuals and vehicles crossing the border into both Nigeria and the Republic of Benin

were routinely charged an unofficial ‘‘crossing fee.’’ At the Idi-Iroko/Igolo border post, for

example, the amount was negotiable although it was normal for people travelling across

borders on foot, without passports, who appear to be on some sort of business trip, to be

‘‘charged’’ twice the amount that the equivalent traveller with a passport was charged. The

amount demanded also varied according to the type and value of good being transported. One

customs official stated that the payment could be up to three or four times the normal ‘‘fee’’

depending on the legal status and value, and that many other border personnel could share in

the windfall. Greater sums were usually demanded from people crossing borders in vehicles,

and the usual consequence of refusal to pay was an indefinite and potentially very costly delay.

One driver who was observed trying to cross the border at Idi-Iroko claimed to have been

waiting 3 days for his ‘‘boss’’ to arrive from Lagos to ‘‘settle’’ the border officials so that he

could continue his journey. He had once had to wait almost 2 weeks. Many drivers not only

found the delays costly, but also potentially dangerous, as hostile ‘‘bandits’’ frequently targeted

and raided trucks immobilized for long periods by the border posts. It was suspected that they

were trading touts (kelebes) by day. To protect themselves, many lorry drivers had formed

vigilante groups or hired protection, which added to the burden and costs of their journey.

As an experiment, the first author twice tried to cross the border at the Seme border post

refusing to pay the bribe, and insisting on going through the proper official process. On each

occasion, he was frog-marched into an office, supposedly while immigration formalities were

completed, and was only allowed to proceed when the bribe was paid. Consequently, traders,

especially those with experience, recognise the futility of naı̈ve refusal to pay, and such

resistance appeared to be less uncommon.


The attitude of officials who perpetuate this harassment was difficult to elicit at first. It

took some time to gain their trust, but eventually, they did offer some justification for their

practices. Their responses seemed to more consistently depict their activities in the classic

sense of informal ventures being used to augment unsatisfactory incomes being obtained in

their formal ventures (Rogut, 1995). An apt comment came from a border official, who was

being interviewed along with a group of two other officials. In response to a line of

questioning about the adequacy of their wages, he responded (in Pidgin English):

I beg, which kin’ salary be dat sef? . . . How person go siddon here from early morning come

reach evening for nothing, when no be say na groundnut I come sell? If anybody wan pass,

make dem pass . . . my own be say if I sabi say you fit see me, you go see me. Finish. Person

no go chop? Abi which one you dey sef? [Excuse me, what salary are you referring to

anyway? How can I sit down here from morning till evening for nothing? It is not as if I came

here to sell groundnuts. If anyone wants to go (across the border), let them go . . . all I knowis, if it seems to me like you ought to pay me (a bribe), then you will. That’s all. Will I not eat?

Whose side are you on anyway?]

In various interviews, the officials also blamed the government especially for ‘‘poor’’ pay,

‘‘delayed’’ pay, and poor working conditions. Most crucially, they tended to express little ill

feeling towards the traders, and often compared their situation to that of the traders. Over

time, the various reasons for following their chosen tactics could be grouped together into two

main ones: Firstly, they ‘‘protected’’ cross-border traders from armed robbers and other

dangers and so were earning their own ‘‘cut’’ from the trade. Secondly, their own bosses

expected it of them. Some officials reported that a portion of their earnings were passed on to

their bosses, and they expected to be transferred away from what was considered to be a

prime posting if they did not deliver some returns to their station bosses.

Checkpoints and other border practices invariably slow down journey times and add costs

to traders which, as far as possible, are passed on to consumers. Yet constant travelling is an

inevitable feature of the cross-border trade. In an environment where telecommunication

services are notoriously unreliable and underdeveloped, it is normal practice for traders to

constantly travel from place to place, even when merely carrying out trade enquiries and not

actual transactions.

Unlike in Western countries, therefore, conventional totally legal trading is difficult to

undertake in Nigeria. Pointedly, settlement or egunje is commonly regarded in Nigerian

commercial circles as a means of keeping an interfering and ponderous state system at bay

from the ‘smooth’ running of business (Fadahunsi, 1997). Such is the normality of the

informal ‘‘settlement’’ culture that many of those interviewed only had vague ideas of what

the ‘‘legitimate duties’’ actually were. It was mostly the larger enterprises that were better

informed on duties. Larger firms came closest to trading conventionally (for example,

openly sending goods in its own vehicles to a client in a neighbouring African country,

filling in the right forms, paying duty). However, even in their case, the payment of bribes

when employing this conventional means is regarded as inevitable. The first author carried

out some journeys with larger firms such as sales teams from Case 5, most of which went

smoothly except for several bribe demands and payments along the route. These larger

manufacturers and traders regarded the bribes as an irritating but routine transport cost.


The savings in time more than compensated for the failure to minimise revenue and

bribery costs.

3.4.1. Evasion of the border posts

Understanding the ‘‘settlement’’ culture and how far officials harass traders puts a new

perspective to our understanding of entrepreneurial processes involved in illegal trading.

The conventional entrepreneurial model of illegal trading as understood in the West is one

where economic advantage accrues from successfully smuggling in prohibited or restricted

goods in high demand, or through the evasion of duties. The entrepreneur targets such

goods because they are profitable, devises methods to minimise the risks of discovery and

capture, and if successful, reaps the rewards. The Nigerian entrepreneurial cross-border

trader tends to target any goods that have good profit margins, which are accessible in

practice. Whether they are legal or not is no primary concern. The main risks are not in

trading illegally, but in trading at all. The harassment by officials is constant for all traded

goods (legal as well as illegal). Success is linked to the ability of individuals to minimise

the risks and costs of having to ‘‘settle’’ so many officials. It is thus not surprising that

much creative effort has been devoted to evolving effective techniques to get round this

system. There is much more energy and enterprise put into this than into conventional

evasion of authority.

3.4.1.1. Bypassing the border posts. To avoid extortion, the payment of legal duties, or if

trading prohibited goods, it used to be common for traders to take many of the bush paths

some way beyond the immediate vicinity of the border posts. It is now much rarer as robbery

has greatly increased (and just as important, is perceived to be a very likely event). Such a

system adds appreciably to journey times, and is inconvenient. None of the cases observed

used this method.

3.4.1.2. Concealment. It is more usual, particularly in the case of the owners/agents of

smaller-sized trading firms, to attempt various forms of concealment. Some of the traders

insist, however, that this is more of a reaction to the various forms of extortion they

experience when in transit, than a desire to avoid the payment of legitimate duties. The extent

to which a trader will go in concealing his or her purchases from border personnel depends

firstly on the scale of operations. Only small cargoes can be effectively concealed routinely.

Secondly, it also seemed to depend to a large extent on the relative wealth or status of the

trader in question. The wealthier and more established the trader, the less likely it seemed

concealment would be needed or adopted. While Case 1, for instance, seemed to have

developed a repertoire of ingenious concealment methods in the various public transportation

vehicles that she used when occasion demanded it, Case 2, who usually travelled in her

chauffeur-driven vehicle, would normally purchase enough materials to fill most of the

unused space in the vehicle. She did not even attempt to hide her purchases and seemed

resigned to having to pay out bribes at each one of the checkpoints that she encountered on

her way back into Nigeria, and even sometimes on her way out. She always reserved a sum of

money for this purpose, as an outlay, on her journeys.


3.5. Use of specialist intermediaries

3.5.1. Carriers

The use of carriers was probably the most common method employed by Nigerian cross-

border traders, particularly sole traders or other micro/small-scale trading firms who do not

have, or choose not to use their own vehicles for their trips. This was a practice whereby a

trader transports in the first instance the goods s/he has purchased outside Nigeria to the

Beninoise end of the border where s/he hands them over to one or more of the several touts

(commonly known as kelebe) who operate as independent carriers along the borders. The

kelebes had ‘‘stations’’ a short distance from either end of the border post, although they were

mostly to be found on the Beninoise end. They would normally carry the trader’s container on

their person or on a rickshaw containing the goods, while the trader casually walked across

the border to the makeshift motor-park on the Nigerian side. Customs and immigration

officers of both countries tended to look the other way when these occur as most kelebes had

arrangements with border officials whereby they paid a daily ‘‘rent’’ to designated point-men

in the border post in return for being allowed to work. In return, they were not harassed as

long as they cooperated. Those who did not were locked up, sometimes for several days at a

time for their ‘‘offences.’’ Although many of the border tout carriers appeared impoverished,

some explained that it was impossible to look any other way, working the way they did. Some

were clearly more successful at the job than others. One explained to the researcher that it had

been his ambition to be in the ‘‘business.’’ He had been apprenticed to his uncle for more than

a year before beginning to work for himself. He asserted his satisfaction with his standard of

living thus:

I make enough money to eat well and I have a (Peugeot) 504. Soon I will build my house . . . Ihave already bought a piece of land in Ijanikin (near Lagos). No one has come to the world to

live an idle life. We too will make it, by God’s grace.

Estimating the carriers’ numbers is difficult. In Seme, for instance, Fadahunsi regularly

counted close to a hundred working kelebes around the border posts, although, a number of

drivers this was put to estimated the figure in the thousands. Once across, the containers are

handed back to the trader who then pays an agreed amount per container, depending on the

size of each, to the kelebe. If necessary, the kelebe will ‘‘subcontract’’ out to one or more

others to assist in ferrying the containers across the border. Most containers were usually

taken across in a single journey in order to avoid the need for the trader to pay bribes to the

border personnel each time s/he returned.

The trader–kelebe relationship is necessarily based on an element of trust as a kelebe can,

in theory at least, very easily make away with a naı̈ve trader’s goods. Some traders therefore

would choose to walk beside their chosen kelebe during the crossing. There were further risks

attached to doing this because sometimes, while the carrier was allowed to cross the border

unchallenged, an unfortunate trader (linked to the carrier) could find him- or herself detained

and bribes demanded. During this time, the carrier has an even better opportunity to escape

with the goods. Several traders, like Case 1, therefore tended to instruct their kelebe to go

across ahead of them while they mingle in a group of walkers not far behind.


Most regular traders tended, over the course of their travels, to develop relationships with

particular kelebes whom they then used to the exclusion of all others. They would rather take

the time to locate them in their ‘‘station’’ area, than settle for the first one they see. Case 1, for

instance, commonly used one of a pool of three carriers with whom she had come to develop a

relationship of trust. The kelebes are also impressively able to constitute themselves quite

quickly into an impromptu body to seek retribution against foul play by, or against one of their

number. It was therefore unusual to hear of cases of carriers absconding with traders’ goods.

3.5.2. Subcontracted drivers

This is a complementary method to that of the foot and rickshaw carriers described above.

Among the Nigerian cross-border trading community, it appears to be more commonly

employed, either by traders who trade beyond the Benin republic and so have to cross more

than one national boundary with the logistic problems that this entails, or those who make

heavy or bulky purchases. It involves handing over goods purchased, say in Cotonou or

Lome, to a specialist commercial driver who, for a fee, would be expected to deliver intact a

trader’s goods at an appointed time and place in Nigeria, usually a residence in Lagos the day

after the goods are handed over. The trader would then board a bus, or drive back to his or her

Nigerian base in relative peace, to await the delivery of the purchased goods.

Such a transaction, like that of the traders with the foot carriers, was also built on trust,

since there was no formal right of restitution for a trader whose goods were not delivered

because of the informality of the arrangement. To reduce the risk of foul play by the driver,

such arrangements would ordinarily depend on personal recommendation, usually from a kin

of the driver, prepared to act rather like a guarantor for the safe delivery of the goods. Case 1,

for instance, normally used this method for her bulkier purchases. On these occasions, she

relied on the services of a driver who was the father of a trader friend of hers. The drivers

assumed all the risk of getting the goods into Nigeria. Unless a driver thereafter wished to

retire from the business altogether, there was not much of an incentive to deliberately not

deliver a trader’s goods. Word-of-mouth spread very quickly about unreliable drivers, and

they were simply avoided by other traders. The drivers were usually therefore quite prepared

to go to extraordinary lengths to ensure safe delivery of goods in their care.

The foregoing is not to say that traditional petty smuggling does not remain. Several

residents of the various border communities think nothing of going across the border to buy

or sell items, either for their personal use or for trade. Traders are, however, increasingly less

likely to engage in bush smuggling, preferring to engage in the kinds of acts of concealment

described above. Those that continue to engage in petty smuggling have, however, evolved

an unlikely alliance with Okada7 riders, who will usually transport the petty trader (or

smuggler) and his or her wares, which must be small enough to be transportable on the

motorcycle through the border post, or just as commonly, through the several bush paths

beyond the immediate vicinity of the border post.

7 ‘‘Okada,’’ the name of a local private-owned airline, also became the affectionate term used to describe

commercial motorcycles. They supplement the local taxi service. The same vehicles are referred to as ‘‘Bebe’’ in

the Benin republic.


3.5.3. Specialist services

Some categories of goods have special requirements, which have led to the development

of specialist services that can be accessed to facilitate the transfer of goods. An example of

this is the illegal import of cars into Nigeria from the Benin republic. Cars imported from

Europe (mainly Germany, Belgium, and the Netherlands), would be driven across the

Nigeria–Benin border with the usual payment of bribes. To smooth the process, false

registration documents and number plates could be obtained from specialist workshops. For

about N500, papers and plates could be produced in about an hour. It is important to note,

however, that the primary purpose of investing in false number plates was not to evade duties

or smuggle the car into Nigeria, but to minimise bribes. The scale of bribes requested was

much higher for cars entering Nigeria with foreign number plates or if transported in a batch

on a trailer.

3.5.4. Building relationships with officials

Officials tend to become much more cooperative and accommodating when their

friendship and trust is gained. Fadahunsi became friendly with officials in the Idi-Iroko

border crossing, and they frequently escorted him back and forth, smoothing problems for

him. Such trust, once gained, becomes an important competitive advantage to experienced

traders. It lowers costs for experienced traders, and acts as an entry barrier to new traders.

Bribes will still be needed, but their scale and the degree to which a ‘‘blind eye’’ is turned will

be much more favourable to the trader. The relationship with officials becomes very

important if bulky items are being transported, which were highly visible and valuable. In

such cases, traders would normally hire custom officials to facilitate the passage of the cargo

through the border. This was a comparatively safe and reliable method of ensuring safe

passage, but was clearly more expensive than using groups of kelebe.

Building relationships with officials is not confined to the direct relationship between

trader and official. Sometimes, the key relationship is that built up between a business

owner operating in the background, and a border or other official. The trader may also have

the option to access benefits from relationships built up by others. Some traders, for

instance, have relatives, friends, or other kin working the border towns, who have built up

some trust with local officials, and who can be called upon to mediate if needed. For

instance, Bantu and Ewe people from as far away as Senegal and Sierra Leone appear to

prefer dealing with kelebes who are their kinsmen because they feel safer with them. In such

cases, kelebes are more than mere goods carriers. Either on their own or through Nigerian or

Beninoise contacts, the kelebes will mediate in negotiations with transporters, or with border

officials, or in other cases where language or local knowledge can offer one party an

operating advantage.

3.6. Service spin-offs

The harassment by officials and the delays arising from this process have led to greater costs

for traders. However, they have also spawned a huge increase in ancillary services that not only

help to lubricate the trade (such as the manufacture of false number plates, intermediaries, the


kelebes, protection guards, and so on), but also services to service the traders during their long

delays (restaurants, hotels, brothels, etc.). All the main border posts have thus spawned

dynamic and entrepreneurial businessmen and women who depend on the continuation of

illegal activities and the ‘‘settlement’’ culture for prosperity and survival.

3.7. Corrupt officials as entrepreneurs

The officials themselves could also be considered an entrepreneurial form of self-

employment, in which opportunities are systematically and creatively exploited. The border

official acts in effect as a franchisee, with a guaranteed work patch. The level of ‘‘settle-

ments’’ extracted must not routinely exceed the ‘‘market rate,’’ or the traders will go to other

crossing points. At the same time, the higher custom officials who supervise them act as

quasi-franchisers, getting a kick back, and thus guaranteeing minimal interference by

government in curbing corrupt practices. One interesting development has been the collusion

between (usually) police officers and touts, in which police roadblocks are manned by a

kelebe who would stop and search vehicles, demand relevant vehicle documents, and

especially from commercial vehicles, bribes. The personal attention of the watching officers

would only be applied to drivers who were perceived as difficult.

3.8. Illegal finance

The foreign exchange shortage in the government-controlled formal sector has given rise

to a new generation of informal currency traders in Nigeria. Ever since the traders first came

on to the scene in the late 1980s following the government’s institution of the second-tier

foreign exchange market (SFEM) in 1986, the government has found itself playing second

fiddle to them in the money market, in spite of numerous legislation to enforce the opposite.

In that time, the Naira has suffered unrelenting problems of availability and exchangeability.

Traders and manufacturers frequently protested that the amount of hard currency made

available for sale at the government’s bi-weekly auctions were far from adequate, resulting in

constant shortages. Even multibillion Naira businesses like Case 7 claimed not to be immune

from the uncertainties surrounding the Naira, and reported that this was a major factor

dissuading them from engaging in substantial long-range strategic planning.

The parallel black market emerged to provide an alternative and apparently more

accessible and reliable source of hard currency, and effectively became the real determinant

of the Naira’s exchange rate, helping, for instance, to force the federal government into a

turnabout in 1995 on its then fixed exchange rate policy, and later, to relegalise the currency

trading private bureaux de change that had been outlawed during the government’s battles

with the informal money market in the early 1990s.

The actual field traders now number several thousand all over the country and mostly tend

to be commissioned agents of other, largely faceless backers. They are present in large

numbers in many of the country’s commercial districts, and have become an accepted part of

day-to-day trading activities. Just how much funds are at their disposal remains largely

unknown with any degree of accuracy, but it is instructive to note that some currency dealers


spoken to on the subject generally claimed access to several thousand US dollars instanta-

neously, and several hundred thousand US dollars from a named ‘‘depot’’ across town, and

much more if time permitted a trip to other bases up country. Most firms either patronise or

are aware of the presence of the traders. Smaller firms like Cases 2 and 3, who trade

regularly on the international scene routinely use the informal money market. Case 3

believed that trying to obtain foreign exchange at the official rate was a waste of time and

had abandoned it years before. Case 2 talked about making more than a dozen attempts over

a 2-year period without a single success. Along with other market traders, she had even tried

to back a bureaux de change, but gave up when it was outlawed as it began to trade. Her

attitude about using the informal foreign exchange market was fairly typical of what other

traders felt:

Tell them (the government) we are only harming ourselves with this exchange rate wahala

(fuss). As for me, whether the (informal market exchange) rate is 50 or 100:1 (i.e. US$:N), I

don’t care. I will buy whatever I can afford, and I will not sell at a loss. I won’t even sell on

credit . . . My children and I must eat. I also have wards in my care who must eat and be

clothed. No government can tell me not to earn a living; Not when I don’t owe them a kobo,

nor have I stolen from any of their forefathers . . .

In this way, respondents often claimed to have been driven to use the informal currency

markets. For the smaller firms, in particular, it was not so much an entrepreneurial op-

portunistic strategy, as a practical necessity. The same thing applied to a lesser extent

perhaps, in the larger firms, where willingness to obtain capital in the informal sector was

often determined more by the relative visibility of the firm rather than any moral

opposition to the illegality of informal capital. Thus, both larger, owner-managed firms

(Cases 5 and 6), were conscious of possible risks to their reputation as respectable

substantial firms, by overtly accessing illegal currency sources. However, faced with

substantial higher costs and shortages of official currency exchange, they too found it

expedient to access the informal currency market. All the cases were thus driven at some

time to access the currency black market.

4. Discussion

How do the Nigerian findings in this paper relate to the theoretical working model in Fig. 1

discussed earlier? The findings showed that in terms of opportunities, there are significant

additional and potentially profitable illegal trading opportunities to tempt traders. These are

fuelled by government protectionist measures that have imposed heavy import duties on

many goods, and greatly added to the list of prohibited or restricted goods, most of which are

not illegal to trade in other countries.

In the model, the likelihood of trading illegally depends on motivation, which in turn is

dependent on other factors. In terms of moral resistance, this turned out not to be a strong factor

for the cross-border traders. No one interviewed even thought about avoiding illegal trading

because it was immoral. This, however, does not mean they pursued it with enthusiasm either.

Their attitude was rather mainly one of indifference, coupled with some ignorance. Their


awareness of what was legal and what was not, was often hazy and poorly defined. In a macro

sense, prohibited goods were relatively scarce, in demand, and commanded higher prices. The

traders, however, did not tend to consciously target prohibited goods because they were aware

of the link between illegality and profits. When they did trade in such goods, it was because the

good was there to be traded and offered promising returns. The prohibited goods were part of a

whole range of goods in high demand, most of which could be traded legally. Thus, the legal/

illegal distinction did not figure strongly in the choice of goods to trade.

The evasion of duties similarly provided little entrepreneurial incentive, as most traders

operated in a system where bribery and corruption by officials was routine. Even if some of

the payment was legitimate duty, it was very difficult for traders to separate this from

unauthorised payments. This led to a feeling of apathy towards official customs duties.

The willingness to take calculated risks was a strong entrepreneurial feature of the case

studies, but this was not associated with the risks of confronting law enforcement that may

accompany illegal trading. The ‘‘settlement’’ culture more or less completely removed this

type of risk. The only cases that directly related risk to illegality were the two large

manufacturing exporters, who stated that they avoided illegal trading because it could damage

their international reputation. Much more serious sources of risk were the lack of legal

protection for trading abroad. Firstly, trade tended to be informal, and depended on setting up

relationships of trust with suppliers, intermediaries, and buyers, which could go wrong with

little warning. The likelihood of effective legal redress was small if trust was betrayed.

Secondly, the traders faced the risks of lawlessness in the form of fraudsters, thieves, highway

robbers, and corrupt officials. Thirdly, there were the risks of trading in different volatile

economies, which could lead to sudden and disturbing currency fluctuations, which could

reduce profits with little warning. All the traders took and accepted these risks, but were very

careful how they operated, seeking always to minimise them.

The ‘‘hassle factor’’ was extremely strong in the trade. Harassment by corrupt officials was

prevalent, and greatly added to the inconvenience and costs of trading, but was a constant

factor in all trading, irrespective of whether goods were legal or illegal. Trading in illegal

goods did not increase hassle, merely the price traders had to pay to ‘‘settle’’ officials.

The need to access special resources was also important. The financing of risky trade with

any illegal component becomes difficult from conventional sources. The traders obtained

much of their trading capital through the accumulation of their own profits, but when

additional funds were needed, informal lenders were often the preferred option. Official

foreign exchange was costly and hard to obtain, potentially a serious handicap to cross-border

trading. This was overcome through accessing a thriving and extensive black market whose

rates were much cheaper than the official ones. Finally, human resources were very important.

The ability to cultivate relationships with politician protectors and other persons of influence,

with officials and subcontractors was vital to successful trading on any scale.

Most entrepreneurial creativity and the lessons of experience went into finding ways of

avoiding the harassment by officials and to minimise the costs of lawlessness. The paper

outlined a variety of strategies employed by the different traders under study. Some learnt

‘‘best practice’’ through several years of apprenticeship, but the more successful cases soon

learnt the system through their own experience, and were able to improvise effective


strategies best suited for the scale and types of goods they were trading in. Improvisation was

important in this process, as apparent routine practices could be short-lived in Nigeria’s

volatile political climate.

Most of the successful traders would have preferred to trade in comfortably predictable

relatively hassle-free lawful system, but were resigned to the realities of illegal trading. They

just could not avoid participating in illegal practices of some kind, as the researcher

experimentally demonstrated, when he failed in his attempts to cross the border legally

‘‘by the book.’’ Faced with these realities, the successful traders tried to make the best of the

situation through entrepreneurial improvisation.

The model in Fig. 1 is particularly appropriate for the kinds of illegal trading processes that

occur in countries with strong law enforcement and close congruence between legality and

morality. The Nigerian findings show that the same factors in the model are still important but

that they relate with each other in quite a different way than in the hypothesised western

context. Where law enforcement is poor, and morality divorced from illegality in large

sections of the population, illegal trading ceases to have any special entrepreneurial advantage

over legal trading. Indeed, the two merge, and the main focus of entrepreneurial energy

becomes devoted to overcoming lawlessness and hassle.

4.1. Wider theoretical implications

It was argued earlier in the paper that the transactional approach of Barth might be

promising in helping to analyse complex entrepreneurial processes from a grounded

perspective. Its emphasis on spheres of value separated by social sanctions and the

entrepreneurial rewards of creating ‘‘bridging conversions’’ across spheres appeared to offer

a novel way to conceptualise the entrepreneurship/illegal business relationship and process.

The legal and illegal economic systems in Nigeria are compatible with this approach, being

different economic spheres of exchange that for most traders do not intersect or converge.

Each operates under different rules and values. Entrepreneurial advantage, according to

Barth’s theory, should be at its greatest where people succeed in bridging the two systems of

values. From the evidence of this paper, it is the government officials who are the clearest

entrepreneurial beneficiaries of value conversion. They gain their authority and power from

the legal system of government, but exercise this authority for their own profit by exploiting

moral acceptance of informal illegal practices and the widespread mistrust of government.

They are effectively quasi-franchisees who pay out rents for their patch to higher officials. A

second group that benefits are large-scale Nigerian entrepreneurs who have the capacity to

trade legally on a substantial scale, but who can also access the informal illegal trade

whenever it suits them, at little risk to themselves. Although not directly researched in this

paper, a third group that benefits are corporate investors from abroad, that participate in

bribery and corruption to enter and better exploit markets in Nigeria. They thus are able to

circumvent irksome legally enforced rules in their countries of origin (Das, 1997). They

access alternative Nigerian moralities to telling effect. The least beneficiaries are the small

cross-border traders. This is because, as discussed above, they do not, in practice, bridge two

spheres of value (legal and illegal), but trade almost exclusively in one (the illegal).


4.2. Issues of generalization

In all the social sciences research attempts to extrapolated general trends from specific

data, and relate this to broader theoretical frameworks. Both quantitative and qualitative

research approaches lead to generalizations. The differences lie in how generalizations are

evaluated. Quantitative studies seek replicable findings from scientific experimentation or

from statistical analysis. There are standard statistical techniques to test representativeness of

samples, and the validity and reliability of variables. However, these often give a false sense

of objective truth, as they depend on assumptions that are often not met. For example, the

choice of variables may be ethnocentric; or the may be too complex to define without

unreasonable reductionism; or because the nature of the variables violates statistical

assumptions. Validating data is also important in qualitative studies, but cannot be done in

a standardised mathematical way.

There are many potential pitfalls that beset the qualitative researcher. These include

sampling nonrepresentative informants, generalizing from untypical events or activities,

driving the research from ethnocentric preconceptions, overweighting of dramatic events,

not recording data accurately (Miles and Huberman, 1994). The current researchers are aware

of these pitfalls, and tried to reduce them. However, just as few researchers ever have the time

in practice to rigorously validate every individual variable in a quantitative survey, so the

researchers inevitably fall short of the ideal. In terms of representativeness, it should be noted,

however, that the limited range of case studies was selected for intensive observation from a

much wider base of field research, which involved observation and conversations with a wide

range of traders and officials. The field researcher was also conscious throughout of the

dangers of ethnocentrism, and tried to preserve an open mind throughout.

The key question is how far the results can be generalised to gain wider insights into the

relationship between entrepreneurship and illegal trading. This question ultimately can only

be answered by comparative studies in different areas of the world where illegal trading is an

issue. This study has tried to make any future comparative research more systematic by

attempting to identify key variables that relate to the entrepreneurship of illegal trading, and

suggesting a working model by which relationships between variables can be explored in-

depth. These variables, originally derived from a Western view of what this model should

contain, were explored in considerable depth in a radically different geographical and

socioeconomic context. The results revealed that the nature of preconceived relationships

was radically different in the Nigerian context than what we might expect in countries with

different systems of law enforcement and morality. It succeeded in questioning basic

assumptions of the predicated model. The relationships were different, but the core variables

identified appeared to be equally relevant to focus research on in Nigeria, and is thus

potentially robust to use in other research.

The model, having been explored empirically, has possibilities of being able to predict

what entrepreneurial illegal cross-border trade may be like elsewhere. For example, we might

predict from the model in the light of the Nigerian experience that in countries where law

enforcement is weak and corruption is prevalent, that harassment of traders will be high, and

the entrepreneurial advantages (in terms of profitable opportunities) of trading illegally will,


in practice, be negligible over the trading of legal goods (not a predication supported by

conventional wisdom). Conversely, in a country where law enforcement is high, harassment

will be punitive when it strikes, but at a low level of intensity. Entrepreneurial opportunities

from successfully trading illegally will thus be higher.

4.3. Policy implications

In the Introduction, it was pointed out that illegal trading, bribery, and corruption are

officially widely condemned for being detrimental to economic development (Hanke, 1996).

Illegality discourages honest entrepreneurs, bribes add to the costs of trading, undermine

revenues to the State that would otherwise have percolated back in the form of infrastructural

improvements and business support. It ultimately undermines the whole moral fabric of

Western capitalism and free trade. There are other arguments, however, that see illegality as a

necessary evil, even a beneficial force, an indigenous response to restrictions imposed

predominantly by neo-colonial forces led by the United States and Europe (Leff, 1964; Alam,

1995). In African countries, for example, entrepreneurs have had to conduct business in a

legal trading environment, which was a legacy of former colonial masters; they have had to

face additional restrictive laws designed to encourage large state enterprises at the expense of

small ones; they have more recently had to accommodate the consequences of structural

adjustment policies imposed by the World Bank through national governments. Illegal trading

and the alternative informal economy are responses to these forces.

The illegality of the trade in Nigeria has had some apparent benefits. It has provided

livelihoods for thousands of intermediaries who service the trade, and who would have no job

without it. It makes opportunities accessible to a much wider range of businessmen and

women — large multinationals cannot dominate import/export of basic goods and commod-

ities. Institutionalized illegality has led to a thriving free market with efficient black market

finance accessible by all entrepreneurs. Finally, it has reduced the costs to the state of paying

proper wages to thousands of officials. On the dark side, however, illegality is oppressive, it

increases uncertainty of legal as well as illegal trade, and definitely increases the hassle of

trading. (It is less certain whether it increases costs of trading, however, because bribes often

merely substitute for duties.) Most traders would prefer to trade legally and enjoy the peace of

mind that comes from impartial law enforcement.

The lesson for policymakers is that illegality and trading is a complex issue, and involves

sociological forces that go well beyond simple entrepreneurial greed and entrepreneurial

evasion of law enforcement. Until these are understood better, the eradication of illegality will

be a hopeless task.

Acknowledgments

We dedicate this article to the memory of the late Professor Scott, who was inspirational in

his comments throughout the study. We would also like to thank the anonymous referees who

contributed considerably to the rigour of this paper.


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