CALEB BRITISH INTERNATIONAL SCHOOL, ABIJO GRA

2023/2024 ACADEMIC SESSION

FIRST TERM LESSON NOTE

SUBJECT: ECONOMICS CLASS: YEAR 12 INT’L DATE:SEPT 14,

2023
TERM: FRIST
WEEK: ONE
TOPIC: THE ECONOMIC LESSONS OT THE ASIAN TIGERS
LESSON OBJECTIVES:
i. To Identify the Asian Tigers
ii. To narrate the similarities between the countries
iii. Identify and explain the factors that aided their economic growth
iv. To identify the lessons for Nigeria economy
CONTENT
INTRODUCTION:
Asian tigers refer to the four newly emerged, highly developed economies of Hong Kong,
Singapore, South Korea and Taiwan. Since their emergence in the 1960s, tiger economy
refers to any economy that has experienced and continues to experience massive
economic growth and development through its trade and industrial sectors.

HISTORY OF THE ASIAN TIGERS AND JAPAN

From 1960 to 2000, these economies did something miraculous as there was this
aggression to develop their economies. The Southeast Asian states have placed regional
economic integration as a top priority. They formed the Association of Southeast Asian
Nations with the ambitions of becoming an official economic community by 2015. They
became regional players expanding globally. The broad approach to their success was
regional orientation that focuses on commodities and raw material exports in their
interactions. They experienced the first major setback in 1997 when Asia witnessed a
financial crisis which came in the wake of the world economic meltdown. Singapore and
Taiwan were the least affected. Hong Kong came under intensive speculative attacks
against its stock market and currency. South Korea had a major stock market crash from
non-performing corporate loans. The monetary authorities applied unprecedented market
intervention techniques. In three years, all four economies bounced back stronger than
before.

DEVELOPMENT STRATEGIES OF THE ASIAN TIGERS

- Export-based industrial policies

 CALEB BRITISH INTERNATIONAL SCHOOL, ABIJO GRA
2023/2024 ACADEMIC SESSION
FIRST TERM LESSON NOTE
Highly developed money and capital markets
- Heavy government investment in human capital development
- High public and private savings rate
- Presence of large, highly skilled labour force
- Equitable distribution of income, wealth and land
- Stable and relatively low wages
- Presence of abundant natural resources
- Good political stability

THE JAPANESE MIRACLE

This refers to Japan’s amazing recovery after World War II. Japan is a country which had
advanced pe-industrial technology. The country is poor in natural resources and so was
frugal with consumable resources. After the war, new factories were set up equipped with
modern machines, giving japan a competitive advantage over the victor states. The
process of rebuilding involved massive investment in electric power, coal, steel and
chemicals. All these assisted in economic recovery and surpassing the post war periods.
Between 1953 and 1965, the GDP expanded by more than 9% per annum. The
manufacturing, mining, construction and infrastructure sectors employed more than 41%
of the labour force while only 26% remained in agriculture.

PHASES OF GROWTH IN JAPANESE MIRACLE

- Starting from post war poverty

- The high growth years and the Ikeda plans; this outlined the ambitious goal of
doubling the nation’s income in ten years. It detailed steps to achieve this which
include:
1) Investment in education and infrastructure
2) A focus on exports
3) Nurturing of key heavy industries

The target of the Ikeda plan was reached in seven years. The benefits from this
development was more evenly distributed than in the past. In 1964, Japan was
welcomed in to the Organization for Economic Cooperation and Development and
hosted the Olympics.

- High growth gives way to slowdown; they faced two energy crisis later in the
decade which led to extensive energy conservation and discovery of alternative
sources of industrial energy.
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DEVELOPMENT STRATEGIES EMPLOYED BY THESE COUNTRIES

- Investment in skills
- Advance in technology
- Engagement of special Agencies
- Involvement of some international Agencies

LESSONS FOR THE NIGERIAN ECONOMY

- Formulation and implementation of deliberate government policies

- Strengthening the development of Agriculture
- Encouraging industrial development
- Development of human capital
- Development of small and medium scale enterprises
- Increased research and development in university and colleges
- Need to increase the rate of capital formation

CHALLENGES FACING SMES IN NIGERIA

- Inadequate infrastructure
- Poor power supply
- Inadequate water supply
- Inadequate transport facilities
- Lack of access to finance
- Inadequate development of human capital

EVALUATION:
i. Who are the Asian tigers?
ii. Explain the meaning of Japanese Miracle
iii. Looking at the Nigerian economy, discuss two factors that helped the Asian
Tigers grow but have not been optimized in the Nigerian situation
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2023/2024 ACADEMIC SESSION
FIRST TERM LESSON NOTE

SUBJECT: ECONOMICS CLASS: YEAR 12 INT’L DATE: SEPT,

2023
TERM: FIRST
WEEK: TWO
TOPIC: HUMAN CAPITAL.
LESSON OBJECTIVES:
i. Explain Human Capital
ii. Explain the characteristics of Human characteristics
iii. Explain the factors that can affect the efficiency of human capital
iv. Define brain drain
v. List three ways by which brain drain can be affected
CONTENT
Human capital refers to the skills, training, experience, education, knowledge, technical
know-how,, and competencies contributed by humans to a business. It is the value added
onto a company by an employee, which can be measured by the employee’s skills and
competencies.

Human capital development is the process of improving an organization's employee

performance, capabilities and resources. If a manager or human resources department
were to ask, "What can be done to make employees more productive?" the answer would
be considered to fall within the scope of development.

Physical capital refers to assets which themselves have been manufactured and are used
for production of other goods and services.

FEATURES OF HUMAN CAPITAL:

- Human capital is mobile

- Human capital has feelings
- Human capital is skillful
- It’s a human factor as such, its supply can be easily controlled
- It requires motivation
- It is not predictable
- It is not fixed
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- It is perishable
- It controls other factors of production

Human capital is a combination of employee competencies and their commitment to the

organization for which they work.

FACTORS AFFECTING THE EFFICIENCY OF HUMAN CAPITAL:

- Education
- Experience
- The abilities an individual has and his/her ability to expand upon them
- The zeal at which a person is willing to learn
- Condition of work and incentives company may offer
- Ability of employee to increase innovation
- Possession or acquisition of special skills
- Training

Some countries are naturally endowed with more labour due to high birth rate under given
climactic conditions. Human capital formation is the transformation of raw human
resource into highly productive human resource with inputs of education, health and moral
values. Problem of scarcity of tangible capital can be reformed via accelerating the rate of
human capital formation. Human capital is directly related to human development and
when there is human development, the qualitative and quantitative progress of the nation
is inevitable.

Human resource is the use of human in manufacture of goods in an industry rather than
the use of machines. All organizations have people i.e. human resource and they thrive
because of human resource management. Human resource management is a process and
philosophy of acquisition, development, utilization, and maintenance of competent human
force to achieve goals of an organization in an efficient and effective manner. There are
two versions of HRM; hard versions which involve the need to manage people in ways
that will obtain value added from them and thus achieve competitive advantage and soft
version which involves treating employees as valued assets, a source of competitive
advantage through their commitment, adaptability and high quality.

Features of HRM

- It is an art and a science

- It is pervasive
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2023/2024 ACADEMIC SESSION
FIRST TERM LESSON NOTE
- It is a continuous process
- It is a service function
- It must be regulation-friendly

IMPORTANCE OF HUMAN CAPITAL

- Provision of personnel
- Influences other factors of production
- Production of goods and services
- Operation of machines
- Improves the efficiency of work
- Promotes productivity

Brain drain also called human capital flight is the departure of emigration of individuals
with technical skills or knowledge from organizations, industries or geographical region to
another.

Brain Drain and its Effect on the Nigeria Economy

Brain drain is the large scale emigration, over a comparatively short period, of a large
number of highly skilled intellectuals and technical labour to more favourable geographic,
economic and professional environment. E.g. large scale movement of Nigerians health-
care professionals to India, America and other high income countries. It is also referred to
as “capital flight”.

Reasons for Human Capital Flight

1. Poor social environment in the source countries: The fewer life opportunities,
political and social instability, economic depression and health risk cause the
movement of labour in large scale from less developed countries to those countries
with better opportunities.
2. Better social environment in host countries: Owing to rich opportunities for
profitable employment, political stability, better living conditions, developed
economy, intellectual freedom, etc, there is large scale movement of labour to these
countries.
3. Individual reasons: These include family influence such as presence of overseas
relatives, personal preference and ambition for an improved career.

Effects Brain Drain on Nigeria Economy

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1. Loss of professional skills and talents: The nation is denied the services and
expertise they would otherwise have provided in various areas of the economy such
as institutions of higher learning, health institutions, industries, etc, leading to low
level of production and development.
2. Capital waste: The resources used in training them, either in the forms of
scholarships, loans, etc. are lost to the advanced countries which may have
contributed little.
3. Increased level of poverty: This is due to general low level of productivity arising
from scarcity of highly productive labour.
4. Decrease in wealth creation, employment and tax revenue: More entrepreneurs
taking their investments abroad contribute to the high rate of unemployment and
decreased wealth creation within the country, with a consequent reduction of tax
revenue.
5. Encourages Individuals to acquire greater education and skills: They do this in
order to meet the demands of the advanced countries that are in demand of their
services.

Effects of Brain Drain on the Destination Country

1. Higher labour skills are available for services and production in other sectors of the
destination country
2. There is influx of illegal aliens who wish to take advantage of the greater
opportunities available

How to Arrest Brain Drain

1. Committed and selfless leadership with a mission and vision: Highly skilled
labour will stay in the country if they discover that leaders are committed and are
making genuine efforts at development.
2. Provision of adequate working and living conditions: These would encourage
highly skilled labour to remain in the country to contribute their quotas.
3. Value re-orientation: Nigerians should be taught to believe that our collective
hopes and aspirations can be met within the country.
4. Setting up a national commission to handle the issue of brain-drain: This body
would help to formulate policies and proper solutions to the challenges of brain-
drain.

EVALUATION:

i. What is human capital development?

 CALEB BRITISH INTERNATIONAL SCHOOL, ABIJO GRA
2023/2024 ACADEMIC SESSION
FIRST TERM LESSON NOTE
ii. List five factors that affect the efficiency of human capital.
iii. How can brain drain be arrested?

SUBJECT: ECONOMICS CLASS: YEAR 12 INT’L DATE:, 2023

TERM: 1
WEEK: 3
TOPIC: PETROLEUM AND THE NIGERIAN ECONOMY
LESSON OBJECTIVES:

i. To explain the Development of the Petroleum Industry

ii. To discuss the Contributions of Petroleum to the Nigerian Economy
iii. To explain the Nigerian National Petroleum Corporation (NNPC)
iv. To explain the Roles of NNPC and OPEC in the Exploration, Production,
Refining, Marketing and Distribution of Petroleum Products

CONTENT

THE DEVELOPMENT OF THE PETROLEUM INDUSTRY

Oil exploration in Nigeria dates back to 1908 by a Garman company called Butman
Corporation with the appearance of oil in the present Ondo state. Another exploratory
activity took off in 1937 by an Anglo Dutch consortium that served as a fore-runner of the
present-day Shell Petroleum Development Company of Nigeria Limited, Shell D’Arcy.
Oil was first discovered at Oloibiri in Rivers state in 1956 in commercial quantity. Full
scale production took off in 1958.
The most important landmarks in the history of oil development in Nigeria were the
Hydro-Carbon oil refinery Act of 1965 and the Petroleum Decree of 1967. The Hydro –
carbon Act of 1965 approved the license for the first refinery at Elese Eleme near Port-
Harcourt, while the Petroleum Decree (1967) gave the right to fix petroleum prices the
government.
Nigeria has since returned to this status quo since December 1998. The Shell BP
undertook the preliminary geological reconnaissance and intensified its geophysical
surveys in the 1946 -1951 period. In order to increase the pace of oil exploration and to
ensure that the country was not dependent on one oil company or nation, Shell’s sole
concession right over the country was reviewed and exploration rights were granted to
companies of other nationalities. Examples of oil companies are Mobil, Gulf, Agip,
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FIRST TERM LESSON NOTE
Tenneco and Texaco/Chevron. They were allowed to join the explorers for oil in the
onshore and offshore area of Nigeria.
The period 1975 – 1980 was considered as the golden era of the oil industry in Nigeria.
In 1977, the Nigerian National Petroleum Corporation (NNPC) was established by the
NNPC Act No 33 through the merger of the Nigerian National Oil Company (NNOC) and
the then Ministry of Petroleum Resources. This new body, NNPC started to perform both
operational as well as regulatory functions. In 1979, Nigeria nationalized the Nigerian
subsidiary of British Petroleum because it was supplying crude oil to South Africa.
EVALUATION

1. Trace the history of the Petroleum Industry in Nigeria from 1908 to 1937.
2. Write NNPC in full. When was it established?

CONTRIBUTIONS OF PETROLEUM TO THE NIGERIAN ECONOMY

POSITIVE CONTRIBUTIONS OF PETROLEUM TO THE NIGERIAN

ECONOMY:

1. It increases Nigeria’s National Income greatly.

2. There is increment in the income per capita of Nigerians.
3. When the first commercial shipment of oil was made in 1958, petroleum has
become a major foreign exchange earner.
4. As a result of provision of more employment opportunities, increase in per capita
income, development of basic infrastructures, etc the standard of living of the
people of Nigeria has improved.
5. Oil has played a significant role in shaping Nigeria’s foreign policy since she
gained independence in 1960.

NEGATIVE EFFECTS OF PETROLEUM TO THE NIGERIAN ECONOMY

Although there were positive contributions of petroleum to the Nigerian economy, there
are also negative effects which include the following among others.

1. One of the political woes of the discovery of oil in Nigeria is political instability.All
the frequent coups, change of government that occurred in Nigeria had oil
undertone.
2. As a result of oil exploration, together with the fear in many quarters of possible
earthquake occurring in those areas, many oil producing areas in Nigeria have been
eroded.
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3. There is shortage of raw materials as another negative effect of the neglect of
agriculture as a result of the discovery and exportation of petroleum in Nigeria.
4. Oil exploration in Nigeria has caused soil, water and air pollution in many parts of
the country.
5. One of the immediate consequences of the neglect of agriculture in Nigeria as a
result of the discovery and exportation of oil is the decline in food production.

EVALUATION

1. Enumerate the positive contribution of petroleum to the Nigerian economy.

2. Explain the negative effects of petroleum to the Nigerian economy.

THE NIGERIAN NATIONAL PETROLEUM CORPORATION (NNPC)

In order for government to strengthen and establish its control in the oil industry, the
Nigerian National Oil Corporation (NNOC) was established by a decree in 1971. In the
same year, Nigeria joined the Organization of Petroleum Exporting Countries (OPEC) as
the 11th member country. At that time, the Ministry of Petroleum Resources whose
functions were mainly regulatory was also running concurrently with the NNOC. It was
not until 1st April, 1977 that a merger between the NNOC and the Ministry of Petroleum
Resources created the Nigerian National Petroleum Corporation (NNPC).

THE ROLES OF NNPC AND OPEC IN THE EXPLORATION,

PRODUCTION, REFINING, MARKETING AND DISTRIBUTION OF
PETROLEUM PRODUCTS

THE ROLE OF THE NNPC

1. Oil refining in Nigeria is done under the watchful eagle eye of NNPC
2. In the area of man-power training of Nigerians, crucial role was played by NNPC in
order to ensure that they occupy managerial, professional and supervisory grades in
all the oil companies operating in the country.
3. Their product movement section is responsible for planning operations to pump
products from the source of supply to various destinations in a safe, economic and
controlled manner and ensuring adequate stocks in the depots to meet tanker-truck
loading demands.
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4. They oversee all the activities of all other companies licensed to engage in oil
activities in the country to ensure compliance with the laws and regulations relevant
to the oil industry.

ORGANISATION OF PETROLEUM EXPORTING COUNTRIES (OPEC)

In reaction to the outrageous and unprecedented exploitation by the oil extracting

multinational companies, which at that time were controlling oil operations in the oil
industry in the host countries? The outcome of the meeting of Iran, Iraq, Kuwait, Saudi
Arabia, and Venezuela from September 10-14, 1960 aimed at protecting their mutual
interest and to counter the atrocious act of foreign oil companies who sell oil in their own
interest was the formation of the Organisation of Petroleum Exporting Countries (OPEC).
Nigeria joined the organization in 1971. Its membership has risen to fourteen as at May,
2017. Other countries are Algeria, Angola, Ecuador, Equatorial Guinea, Gabon, Libya,
Nigeria, Qatar, United Arab Emirate.

OBJECTIVES OF OPEC

1. To coordinate and unify the petroleum policies of members and the determination
of the best means for safeguarding their interests individually and collectively.
2. To devise ways and means of ensuring the stabilization of prices in the international
oil market with a view to eliminating harmful and unnecessary fluctuations
3. To ensure the revenue from sales of oil is maximize to member countries.
4. To fix supply that each member will bring to the market in order to prevent glut.
5. To negotiate for the participation of member-nations in the oil exploitation and
exploration
6. To ensure that participation of foreign multinational companies in oil exploitation
and exploration does not jeopardize the interest of its member nations.
7. To provide financial assistance to poor non-oil producing countries so as to close
the gap between the rich and the poor nations.

THE ROLES OF OPEC IN THE PRODUCTION, REFINING AND

MARKETING OF PETROLEUM PRODUCTS

1. OPEC has been able to maintain relatively stable price of petroleum.

2. OPEC played direct role in the exploration and production of oil by directing its
members in June, 1968 in order to acquire participating interest in such activities in
their territories.
3. Another major role played by OPEC is re-directing the political imbalance between
the Third World countries and the so-called First World nations.
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4. Through the activities of OPEC, it has been able to make improvement in energy
efficiency particularly in major industrialized countries.
5. Also, OPEC ensures efficient and regular supply of oil to the world market.

PROBLEMS OF OPEC

Problems of OPEC include the following:

1. Incessant oil price fluctuations which result into oil-glut many times.
2. Stability of oil prices at times proved difficult because not all crude oil producers
are OPEC member.
3. Non-compliance with quotas by some members. Some of them do violate the
agreement and thereby produce quantities above given quota.
4. OPEC lack of political coherence also counted against the achievement of its
objectives in the 1960s.
5. The rivalry for the leadership of the organization is also a big problem to OPEC.
6. The activities of the advanced countries in stock-pilling oil which contributed to the
fall of oil price is causing great concern to OPEC.
7. International oil companies supported by various states indulged in political
maneuvers among OPEC members in an attempt to play off one exporting countries
against others.
8. Political disagreement which sometimes leads to war between member-nations like
Iran and Iraq war caused as serious problem to OPEC.
9. The rivalry of the leadership of the organization is also a big problem to OPEC.
10.OPEC is faced with the problem of increasing research by western advanced
nations to find substitute for oil.

SOLUTIONS TO THE PROBLEMS OF OPEC

1. Concessions have been given to some member-nations in order to lessen their home
problems.
2. The organization always imposes penalty on its members that side-track their
agreed fixed production quota.
3. The organization has established research department in its headquarters in order to
promote efficient exploitation and extensive exploration.
4. OPEC tries to maintain inelastic price by fixing production quotas for its members.
5. Conferences have been holding to discuss the reasons why quotas should be
adhered to, particularly to stabilise prices.
6. The adoption of rotating its key-posts to lessen the leadership rivalry position
among member-nations.

EVALUATION:
 CALEB BRITISH INTERNATIONAL SCHOOL, ABIJO GRA
2023/2024 ACADEMIC SESSION
FIRST TERM LESSON NOTE
i. What are some of the positive contributions of petroleum to the Nigerian
economy?
ii. Discuss the role of OPEC in the production, refining and marketing of petroleum
in member nations.

SUBJECT: ECONOMICS CLASS: YEAR 12 INT’L DATE:, 2023

TERM: 1
WEEK: 4
TOPIC: The Manufacturing and Construction Industry
LESSON OBJECTIVES:
i. To define manufacturing and construction industries with examples
ii. To explain the Roles/Contributions/Significance of the Industrial Sector to
Economic Development
iii. State the Problems of Manufacturing Industries
iv. Give solutions to Industrial Problems

CONTENT

Manufacturing industry refers to the turning of raw-materials into new products by

mechanical or chemical processes at home (cottage) or in the factory. It is concerned with
the activities of those who engage in processing and turning raw-materials produced in the
primary industry into finished products. Examples are shoe making, food processing,
plastic processing and textile processing.

Construction industry is concerned with all the activities of those who engage in
assembling of goods into useable form. They convert manufactured products into various
uses. Examples are: road construction, building construction, airport construction, bridge
construction, furniture construction, etc.

Classification of manufacturing industries

i. Light industries: are secondary industries that produce light goods such as:
matches, television, sets fans book and pencils. They employ the services of
women
ii. Consumer Goods industries: consumables goods such as : processed foods
iii. Heavy industries: they engage in large scale production. They produce heavy
machine or equipment eg ships, aero planes, iron and steel
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Roles/Contributions/Significance of the Industrial Sector to Economic Development

1. Industrial activities help in solving the basic problems of unemployment, inflation,

budget deficit and general economic disequilibrium.
2. It assists to implement the policies of the government that have been directed
towards the improvement of local production.
3. It will reduce the continued pressure on balance of payment in spite of the various
policy measures taken so far to address the situation.
4. It stimulates the growth of other sectors like agriculture, mining and lumbering.
5. The establishment of an industry in a place stimulates the development of
infrastructures like road, telephone, electricity and pipe borne water.
6. It helps different countries to prevent over dependence on only one product like the
present Nigeria’s over.
7. It provides jobs for many people.
8. Many people are trained in different technical areas in order to manage the different
aspects or machines in an industry.
9. The industrial sector provides capital for funding of education and research work in
all nations.

Problems of Manufacturing Industries

1. Shortage of raw materials: Inadequate raw materials available to industries hinder

large scale production.
2. Insufficient Capital: Access to finance or loan is very difficult. It is only for big
investors who possess collateral securities.
3. Poor quality of industrial labour: Majority of Nigerians are illiterate who cannot
fit into industrial sector.
4. Shortage of entrepreneur: Reliable investors are not common in Nigeria owing to
lack of capital and some other factors.
5. High degree of foreign dependence: People highly rely on imported materials
since some of the locally-made products are of lower quality.
6. Inadequate transport and communication facilities: Transportation network like
road, rail, and communication networks are not enough to accommodate heavy
industries.
7. Small market for industrial goods: Nigerians does not have enough purchasing
power to purchase industrial goods therefore for them is very low creating small
market.
8. Poor management: Corruption, embezzlement and negligence of duty are very
common in African countries and these are indicators of poor management.
9. High cost of spare parts: Industrial machines imported into developing countries
may break down. In most cases, spare parts for those machines are not readily
available in our market.
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10.Political Instability: Frequent changes in governments and frequent civil wars
discourage foreign investors.

Solutions to Industrial Problems

1. Skill should be acquired by people through regular training.

2. There should be good government policies to protect local industries.
3. There should be active government participation in industrial development i.e. co-
ownership of companies,
4. There should be incentives e.g. tax holiday. To local industries.
5. There should be provision of good transport facilities in order to move raw-
materials to factories and finished products to market.
6. Government should set up industrial banks to give long term loans to investors for
industrial purposes.
7. Government should actively be involved in industrial development.
8. Infrastructural facilities such as electricity, communication system, water etc should
be provided adequately.
9. There should be stable government in order to attract foreign investors.
10.There should be local exploitation of raw-materials for industries so as to reduce the
cost of production.

EVALUATION:

i. List three problems confronting manufacturing industry in Nigeria.

ii. State seven significance of manufacturing industry in Nigeria.
iii. Highlight seven problems facing industrial sector in Nigeria.
iv. Proffer solutions to the problems highlighted above.

ASSIGNMENT

I. What do we mean by cottage industries?

II. Explain any 5 examples of cottage industries
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SUBJECT: ECONOMICE CLASS: YEAR 12 INT’L DATE:, 2023

TERM: 1
WEEK: 6
TOPIC: Service Industries
LESSON OBJECTIVES:

1. To say the meaning of Service Industries

2. To explain the types of Service Occupations
3. To highlight the roles or Contributions of the Service Industry to Economic
Development

CONTENT

Meaning of Service Industries

The service industries involve the provision of services to business as well as to

final consumers. It can also be called tertiary sector of industry. Services involved
doing something for the consumers, which could be personal or indirect
services. Service industries are: tourism, transport, banking, insurance,
warehousing, and advertisement.

Types of Service Occupations

Service industry can be divided into direct and indirect service.

1. Direct Service

This includes personal services rendered for direct consumption and are paid for
directly by those who enjoy the service. Those who engage in this form of
services are: housemaids, stewards, entertainers, barbers, family doctors,
lawyers in private practice, etc.

2. Indirect Service
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Indirect service includes services rendered to the general public but they are not
paid for by the members of the public directly. The government will pay from
taxes and levies paid by the public. Therefore, those involved render indirect
services and are paid indirectly by the public, e.g. doctors working in public
hospitals, police force, soldiers, customs officers, civil servants, law makers, etc.

Roles or Contributions of the Service Industry to Economic

Development

1. Service industry provides employment opportunity through its activities in

trading, banking, transportation, communication, etc.
2. Service industry generates revenue for government and people who are
engaged in the industry.
3. Service industry aids trade through its communication, transportation,
banking, etc
4. It diffuses new ideas and technology is transferred from one country to
another.
5. It stimulates growth of other sectors like manufacturing and construction
industry.
6. The service industry helps to diversify economy through its branches like
tourism.
7. Through service industry, different regions in the country are brought in
constant touch with one another
8. The service industry through its activities in the economy stimulates the
development of infrastructures like roads, telephone, electricity, and pipe
borne water.

EVALUATION:

1. What is service industry?

2. List ten service industries in Nigeria.

SUBJECT: ECONOMICS CLASS: YEAR 12 DATE: SEPT, 2023

 CALEB BRITISH INTERNATIONAL SCHOOL, ABIJO GRA
2023/2024 ACADEMIC SESSION
FIRST TERM LESSON NOTE
TERM: 1
WEEK: 10
TOPIC: INTERNATIONAL TRADE

LESSON OBJECTIVES:

i. To say meaning of International Trade

ii. To highlight the similarities between International Trade and Internal
Trade
iii. To state the differences between International Trade and Internal
(domestic) Trade
iv. To enumerate the reasons/Basis for International Trade
v. To list the Barriers to International Trade
vi. To explain the advantages or Merits of International Trade
vii. Disadvantages or Demerits of International Trade

CONTENT

INTERNATIONAL TRADE
International trade also known as foreign trade or external trade. it involve the
exchange of goods and services between two or more countries. The principle underlying
the buying and selling between one country and another is specialization. The theory of
international trade is based on the theory of comparative cost advantage compounded by
David Ricardo. The theory states that ‘’a country should specialize in the production of
goods and services for which it has a cost advantage over another’’. This will bring about
production of goods at cheaper cost.

Types of international trade:

1. Bilateral international trade; is a trade agreement in which two countries

exchange goods and services. It occurs when each country tries to balance its
payments and receipts separately and individually with each other.
2. Multilateral international trade; is one in which a country trades with many other
countries. This ensures international division of labour. It is necessary if the total
volume of world trade is to be raised to its maximum.

Internal trade
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Also known as domestic trade or home trade. It involves the exchange of goods and
services among people within a particular country. They include goods and services which
are produced and sold locally, which requires local currency.

Similarities between international trade and internal trade

a. They involve the use of money as a medium of exchange

b. Both involve a degree of specialization
c. Both involve the activities of middlemen
d. Both involve the buying and selling of goods and services
e. They both arise due to inequitable distribution of natural endowments and
production resources

Differences between international trade and internal trade:

a. Foreign trade involves the exchange of goods and services across national frontiers
while internal trade involves the exchange of goods and services within the borders
of a country
b. In foreign trade, buyers and sellers use different currencies in home trade use the
same type of currency.
c. There is a possibility of restrictions when goods are exchanged across national
boundaries while this does not occur in home trade
d. There are differences in weighing and measuring in one country vis-à-vis another.
A country only has one system of weighing and measuring
e. There are also differences in legal systems and culture under international trade but
the legal system is same in internal trade

Reasons/Basis for International Trade

International trade arose from the international specialization and division of labour.
These have to be for the following reasons:

1. Uneven distribution or endowment in natural resources of nations such as minerals.

For instance, Nigeria has coal and crude oil; Ghana is endowed with bauxite while
Canada is enriched with nickel.
2. Differences in climate and soil which gives rise to the cultivation of different crops.
3. Differences in capital stock which determines the quantity and variety of goods and
services each country will be able to produce.
4. Differences in labour skills: There are variations in the volume and quality of labour
for productive activities.
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5. Differences in technology: Countries advanced in technology can produce more
industrial goods than others. E.g. Japan is good in electronic goods; Germany is
good in Mercedez Benz cars, Switzerland in watches and China in a variety of
items.
6. International trade takes place because no country has attained self-sufficiency. For
instance Nigeria imports cars, radio, watches etc from Japan while Japan gets
Nigeria’s petroleum. The desire to satisfy wants each country cannot produce calls
for exchange across countries.
7. The need to create a wider market for a nation’s goods and services is another
reason for international trade.
8. International trade is also based on the premises that the cost of production of a
commodity differs from one country to another. So a country will choose to import
a good if it is cheaper to do so than to produce it.
9. International trade is also engaged in because of the desire of nations to improve the
standard of living of their citizens.

Barriers to International Trade

There are problems besetting trade among nations. These includes

1. Differences in currency
2. Natural barriers of distance, seas, deserts, etc
3. Differences in language
4. Trade restrictions by some nations
5. Long and sometimes difficult processing of documents for foreign trade
6. Hindrance from political ideologies of different countries
7. Differences in units of weights and measures

Advantages or Merits of International Trade

1. It is a source of revenue for nations.

2. It leads to increase in total world output of goods and services.
3. It provides a wider market for goods.
4. It enhances better standard of living in many nations.
5. It promotes interdependence among nations which is a prospect for world peace and
international goodwill.
6. It provides employment opportunities for exporters and importers.
7. It leads to a more efficient allocation of world productive resources.
8. It promotes specialization, division of labour and efficiency in production.
9. It enhances world economic growth and social progress.
10.It leads to increased foreign investments in West African nations.
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11.It puts in check private monopoly power as importation of goods makes room for
competition.

Disadvantages or Demerits of International Trade

In spite of its numerous advantages, there are some shortcomings of international trade.
These are:

1. It may lead to over-dependence on other countries

2. It negatively affects the growth of infant industries
3. It negatively impacts on the cultural and moral values of a country and leads to
decadence in social norms (e.g. indecent and immoral fashions imports into
Nigeria)
4. It can reduce the efforts of a nation towards attaining self-sufficiency.
5. It can generate unemployment as high importation may reduce the level of
production of domestic industries.
6. Unrestricted foreign trade may lead to balance of payment deficit i.e when import is
higher than import.
7. It makes less developed countries become dumping grounds for all kinds of goods
including dangerous and harmful ones such as arms and ammunition and alcohols.

EVALUATION

1. What is international trade?

2. Give 5 reasons why developing countries engage in international trade?

The Principle of Comparative Cost Advantage

The law or theory or principle of comparative cost advantage propounded by David

Ricardo in 19th Century, states that a country will be better off, if it specializes in the
production of commodities in which it has the greatest comparative cost advantage over
others and exchange them for commodities in which it has comparative cost disadvantage.
This law is based on the premises of the law of opportunity cost.

A country is said to have comparative advantage over others in the production of a

commodity in which it has the lowest opportunity cost than others. The real cost of
production in terms of the alternative goods forgone is used in comparison with that of
other nations.
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The principle operates on some basic assumptions that:

1. There are only two trading countries

2. Only two items are produced
3. There is free flow and mobility of factors of production
4. There is no balance of trade between the two countries
5. There is no transport cost
6. Technology and costs are constant
7. Labour is the only factor of production

Based on these assumptions, the principle can be illustrated in three stages as follows:

Units of Output
Country Opportunity Cost
Labour (in bags)

Ric
Cocoa
e

Nigeria 10 10 150 15 bags of cocoa or 1 bag of rice

Thailand 10 100 20 5 bags of rice or 1 bag of cocoa

Total Output 110 170

1. Nigeria will forgo 15 bags of Cocoa to produce 1 bag of rice or forgo 1 bag of rice
to produce 15 bags of Cocoa.
2. Thailand will forgo 5 bags of rice to produce 1 bag of cocoa or forgo 1 bag of cocoa
to produce 5 bags of rice.

From the above, we can deduce that Nigeria has a comparative advantage in the
production of cocoa while Thailand has comparative advantage to produce rice.

Stage II. With Specialization

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Units of Output
Country
Labour (in bags)

Rice Cocoa

Nigeria 10 - 300

Thailand 10 200 -

Total Output 200 300

Stage III. With Trade

Quantity of
Country
Consumption

Rice (in bags) Cocoa (in bags)

Nigeria 90 210

Thailand 110 90

Total Consumption 200 300

From the tables,

1. The total production of the countries increased with specialization i.e Rice from the
initial 110 bags to 200 bags and Cocoa from 170 bags to 300 bags.
2. The trading countries now enjoy improved or higher standard of living because they
have more commodities than they could produce before trade.
3. The trade enhanced more efficient allocation of productive resources i.e. labour.
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EVALUATION

1. Explain the concept of comparative cost advantage in International trade.

2. What are its contributions to trade among nations?

EVALUATION:
i.
ii.
iii.