Past Q & A

The structure of the Nigerian economy could be taken to mean a complex organizational framework or
an outline of logical connectives through which activities of an economy are connected. Discuss the
structure and performance of Nigerian economy during pre-colonial, colonial and post-colonial periods.0

Ans: Before the arrival of the Europeans, Nigerian economic activities were based on Agriculture, Local
Craft, Manufacturing and Trade.

Agriculture is a primordial economic activity of the Nigerian people, though food production is mainly
for consumption but, however, formed the means of livelihood of the peoples and a strong factor for
the rise of states and empires The form of agriculture practiced and the crops planted were determined
by the nature of soil and the terrain of the region however, most of implement used were local and
crude methods of farming was practiced. Essentially, Nigeria is an agricultural country and the sector
became the main source for the speedy growth of Nigerian economy.

The local craft and manufacturing in the pre-colonial period were based on local skills and resources
availability in the area. transportation of octal goods such as hide and skin into wear, the transportation
of wool into clothes and other art and craft works.The great Oyo Empire was known for weaving of
Ashoke, Sokoto caliphate was engaged in mat and basket making, while the great Benin kingdom was
engaged in bronze work. Similarly, Kano is known for dying of cloth, Nupe for wood carving, Zaria for
iron work and Abuja for ceramics. These local craft and cottage industries provide employment to the
peoples and also serve as a source of income.

even though with some minor skirmishes between occasioned by rivalries mostly due to expansion of
frontiers. However the contact with the West intensified the rivalry due to increase demand for slaves,
as they were exported to the world to till the soil for plantation agriculture which led to industrial
revolution in Europe.

During that time, these kingdoms sent their men to raid for slaves, so that they would have sufficient
supply of gun powder and other instruments that could only be exchanged with slaves.

The interest of the colonial masters with regards to the creation of Nigeria was to intensify cash
production geared towards profitability of the imperialist.

In the colonial era, Nigerian socio-economy activities were still based on agriculture, local craft,
manufacturing and trade.

1.Agriculture: Agricultural activities were changed from the production of food crops to cash crops. Cash
crops such as Cocoa, Timber, Cotton, Groundnuts etc were produced and exported to their country,
which hindered and almost eradicate the production of food crops.

2. Local Craft and Manufacturing: This also received some changes when the white men arrived Nigeria.
Local craft and manufacturing were competing with foreign made goods brought by Europeans. For
example, Ashoke was competing with Manchester made materials among others. Hence the flood of
imported commodities led to the collapse of local craft and manufactured commodities that could not
withstand the foreign ones.

3. Trade: Trade was also affected through the introduction of cash crops. The production of cash crops
now spring up local markets into various places such as Ibadan, Kano and Gusau.

Hence commercial centers were established while traditional once were left to ruin and decay. Also the
constructions of roads and rail links by the colonial masters, to foster the evacuation and exportation of
cash crops favored North-South while traditional roads and rails were avoided.

Even though after independence colonial heritage in the form of Neo- colonialism keeps on influencing
public policies and programs, however, there have been continuous flow of the changes in the role
activities and responses of all the economic indicators, some of which includes: changes in the
composition of our Gross Domestic Product (GDP), improvement in our National Development Plan, shift
from agriculture to mining business, exploration of oil in the Niger delta area.

1.Agriculture: There were intensification of cash crops production and taxes were imposed both on
individuals and agricultural produced by the colonial states to maintain the existing structures and
developed new ones.

2. Local Craft and Manufacturing: in this era, also multi-national corporations were allowed to continue
to exist. Infact, export oriented economy was developed to generate more revenue to the government
for rapid development of the country. Conversely, manufacturing goods from advance capitalist world
have saturated post colonial market.

3. Trade: There is still unequal trade relationship during the post-colonial era because the prices of the
commodities produce by the colonies was still determined by the imperialist.

4. Mining and Quarrying: Mining and Quarrying is the engine growth to the Nigerian economy. Mining
and quarrying has been taking place in Nigeria from time immemorial but from the coming of
Europeans, the decline in the local participation began.

Nigeria is endowed with abundant most of the important needed natural resources of various types at
different geographical location which includes: tin and columbite in Jos, Iron Ore in Nasarawa State, Coal
in Enugu, Lime Stone in Sokoto, oil and in the South-South state and many more untapped natural
resources.

Apart from employment generation, mining and quarrying contribute significant quarter to the GDP of
Nigeria.

The coming of colonial or penetration not only changed but promoted the kind of relationship that
facilitated their often to assisting massive appropriation of our national and human resources to develop
their own countries at our expense
A. The income and expenditure of a nation for a given period of time is usually measured by means of
national income accounting. With relevant examples discuss the concept and approaches used in the
measurement of nation’s national income like Nigeria

The income and expenditure of a country for a given period of time is usually measured by means of the
national income accounting. Basically, there are four concepts used in the measurement of a nation
income namely, Gross National Product (GNP), Net National Product (NNP), Gross Domestic Product
(GDP) and National Income (Y)

Gross National Product (GNP):- This is defined as the total market value of all final goods and services
produced by the residents or nationals of a nation during a particular period of time usually one year.
Here only the output produced during the given period is considered.

Net National Product (NNP) :- This is defined as the net market value of a country’s produced goods and
services. Depreciation of capital stock in the course of production is usually taken into account. Thus a
Capital Consumption Allocation (CCA) is made for all goods and service produced during the accounting
period. In essence, NNP is obtained by subtracting CCA from GNP (GNP-CCA).

Gross Domestic Product (GDP):-This is the most commonly used measure of nation national income.
GDP is defined as the value of final goods and services produced within the country at a given period.
GDP is therefore, concerned with what is produce domestically whether by the nationals of the country
foreigners carrying out business within the state. In a nut shell, GDP is a good measure of national
income given period of time.

Measurement Of National Income

There are two approaches used in the measurement of nation output/income within a given period of
time.

Expenditure/product approach

Income approach

1. Expenditure Approach Under this approach all expenditures on goods and services produced during
the accounting period are added together to get the country’s national income. Under this method, only
final products are counted using their final value added i.e. the sum of the value added to the product at
each stage of the production process. National expenditures are mainly categories in to four namely;
Personal (household), consumption expenditure (C), Gross private domestic investment (I) government
expenditure on goods and services (G) and the net experts (x-m). Thus the national income under the
expenditure approach is

Y = C + I + G (X – M)
Personal consumption expenditure (C) – This consist of market value of purchase of goods (durable and
non- durable) and market value of good, housing and financial services received by them as income in
kind.

Government expenditure (G) – This include expenditure by all levels of government on newly produced
goods and services on investment (capital) goods. In essence, it covers both the capital and recruitment
expenditure of the government.

Net exports (X-M) – Export is the sum of purchase by foreigners of the nation newly produced goods and
service, while imports consists of aggregate purchases of new externally produce goods and service by
the country residents. The excess of exports over import, equal to net export

2. The Income Approach:

This method of measuring national income include all the income of all factors of production within the
economy and the contribution made by them to the production process during a given accounting
period. The tools used in the measurement of national income under this method include employees’
compensation, proprietor’s income, rental income of persons and net interest earned by household and
governments.

Employees Compensation: This consists of all salaries and allowances earned by households as well as
contribution made by the employees to government and private pension and welfare funds.

Proprietors Income: This consists of all net profits of unincorporated business enterprises (such as non-
farm unincorporated business and self-employed professional) and income of farm operators.

Net Corporate Profits: This covers all private limited liability companies including corporate income
taxes, dividends and undistributed profit.

Enumerate any five challenges militating against the accurate calculation of national income in Nigeria

There are enormous challenges associated with the calculation of the national income. Some of these
challenges include:

The presence of illegal economy such as smuggling, illegal trafficking in drugs, sale of stolen items etc
which harbors parallel market transaction and thus cannot be included in the Y.

The exclusion of non-market goods and services from national income e.g. services of house wives.

Government non-business services such as maintains of low and order etc which are provided free to
the citizens and are not accounted for in the National income.

The omission of transfer payment and capital gains and losses.

Double counting/unreliable data.

Nigeria’s fiscal policy objectives are extracted from the National development plans and annual budgets
during the period 1970 – 1997. Using the above statement, identify and discuss any five (5) fiscal policy
objectives and measures used to achieve the objectives in Nigeria

Objectives of Fiscal Policy in Nigeria

Nigeria’s fiscal policy objectives can be extracted from the National development plans, rolling plans and
annual budgets during the period 1970 to 1997 which are as follows:

Generation of additional revenues

Diversification of revenue sources away from crude oil based revenue

Reduction in the tax burden on individuals and corporate bodies

Maintenance of economic equilibrium such economic growth, increased employment etc

Effective protection of domestic industries

Integration of the informal sector of the economy into the mainstream

Fighting low productivity in agriculture and low capacity utilization in manufacturing sectors

Elimination or reduction in government budget deficits

Fiscal Policy Measures in Nigeria

In Nigeria, the major fiscal policy instruments include changes in taxation rates (on personal income,
company income, petroleum profits, export and excise duties, mining rents, royalties and NNPC
earnings), and government expenditures (capital and recurrent). These taxes along with interest,
licenses and fees constitute government revenue. Such taxes are imposed not only to generate revenue
but also to provide incentives in certain specific socio-economic activities. Tariff rates are also varied not
only to regulate the external sector of the economy but also to encourage domestic production as well
as to protect domestic infant industries.

On the other hand, government expenditures constitute an instrument for direct resource allocation
while generating employment opportunities and influencing the general price level as well as
determining the extent of deficit or surplus in each fiscal year. The structural adjustment programme
introduced in July 1986 recognized that the financial resources for public expenditures for the rest of the
1980s and beyond were likely to be less than previously envisaged. Moreover, given the uncertainty in
the oil market and substantial debt repayment falling due there was the need to curtail government
expenditure. Several measures were to be taken to reduce government expenditure such as reduction in
government subsidies on fertilizer, food, petroleum products, privatization and commercialization of
public enterprises.
What is monetary policy and briefly discuss the framework of monetary policy in Nigeria

Monetary Policy in Nigeria

Monetary policy involves measures designed to regulate and control the volume, cost, availability and
direction of money and credit in an economy for the purpose of achieving some specified
macroeconomic policy objectives (Anyanwu, 1993). Monetary policy is therefore, a deliberate effort
made by the monetary authorities such as Central Bank to control the money supply and credit
conditions for achieving certain broad economic objectives.

Framework of Monetary Policy in Nigeria

The framework of monetary policy in Nigeria can be organized into; the legal basis of monetary policy,
objectives of the policy, coordination with other policies, policy formulation, policy tools/instruments
and its implementation.

Legal Basis of Monetary Policy: The authority to formulate and implement monetary policy is vested on
the CBN as stated in the CBN Act of 1958 (and subsequent amendments) the CBN Decree NO.24 of 1991
and Bank and other financial institutions decree (BOFID) NO.25 of 1991. These laws enjoin the CBN to
promote monetary stability and sound financial system in Nigeria under the overall guidance of the
federal government. The CBN is required to make proposals to the president through Ministry of
Finance who has the power to accept and amend such proposals. At the end, the CBN obliged to
implement the policy approved by the president.

Objectives of Monetary Policy: Monetary policy in Nigeria is aimed at moderating the inflation rate,
promotion of growth, reducing pressures on external sectors, stabilizing the Naira exchange rate and
inducing increased financial savings, investment and employment.

Coordination of Monetary Policy with other Policies: Government economic policies such as monetary,
fiscal, income and exchange rate policies must be coordinated so as to contain an in built consistency
and hence be able to achieve the desired objectives. The CBN as the initiator of monetary policy must
also consult other agencies such as National Planning Commission, Federal Ministry of Finance and
Nigeria National Petroleum Corporation.

Monetary Policy Formulation: In formulation monetary policy in Nigeria, the CBN relies on the technique
of financial programming whose starting point is comprehensive review of recent economic
performance as well as current and anticipated economic problems. Projections are also usually made
on money supply, GDP growth, inflation rates and balance of payments positions.

Monetary Policy Instruments/Tools: These are variables that are under the control of monetary
authorities and have effects on the targets. Monetary policy tools can be direct or indirect. The direct
tools include:
Aggregate credit ceilings

Deposit ceilings

Exchange rate control

Special deposits

Stabilization securities

Direct monetary tools were first used in Nigeria in the 1960s and 1970s and were retained up to June
1986. Such direct control tools/instruments were used to determine:

Proportion of bank loans going to the preferred sectors

Merchant banks assets portfolio

Proportion of bank loans to indigenous borrowers

Proportion of bank loans to indigenous small scale enterprises

Proportion of rural banks deposits granted as loans to rural borrowers

Cash deposit for imports

On the other hand, the indirect tools/instruments include the following:

Open market operation (OMO)

Cash reserve requirement

Liquidity ratio

Selective credit policies

Discount rate

Monetary Policy Implementation: After the CBN monetary policy proposals are approved by the
president, the relevant proposal are outlined in the form of a monetary policy circular for
implementation by banks and other financial institutions. Penalties for avoidance of specific guidelines
are also stipulated in the circular. The CBN conduct periodic and special supervision of books of all
licensed banks to evaluate the extent of compliance with the circular and the policy effect on the overall
economy.

a. Identify and discuss any four (4) roles of agriculture in the economy of developing countries like Nigria

A. Adequate Food Supply: Nigerian agriculture has recent years not been able to meet the food needs of
the country. Food shortage may lead to higher prices or inflation. The average food imports have
accounted for about 9.5% of total imports over the period 1960-1993. In 1970, was a sign of collapse of
the agricultural sector. Therefore, the role of agricultural sector in terms of provision of food supply in
Nigeria was not achieved as practically witnessed a large number of populace facing food insecurity.

B. Export Potentials: Agriculture became the major or most important source of export to many
countries including Nigeria especially at the end of the Second World War and this continued up till 1960
when petroleum accounted 26% foreign export from Nigeria. However, by 1965 the entire picture
changes dramatically to 25% and in 1970 to 57%, 1974 to 92% respectively. This trend was matched by
equal decline in the share in agricultural exports; it went to the extent that some commodities such as
palm oil and groundnut have disappeared from the commodities being exported presently.

C. Employment Generation: Migration from rural to urban areas is very much stagnating agricultural
productivity and has given rise to great under employment of the youth and at the same time increasing
the level of unemployment in the nation generally. In 1977, the sector provides employment to more
than 56% and 57% in 1980.

D. Tax Revenue: Some years back, a large sum of income was collected in form of revenue from
agricultural exports. From 1951 to 1952 agriculture contributed to 70.6% and 47.5% of total revenue
accrued. The lowest contribution came in 1981 when 62.11% of the total revenue accrued was from
agriculture.

b. Briefly explain any five (5) problems militating against the growth of agricultural sector in
Nigerian economy and suggest the way out as a student of development economics

Problems of Agricultural Sector in Nigeria

Labor shortage

Low yield or productivity

Lack of modern technology

Diseases and pests

Land tenure system

Lack of accessible credit facilities

Poor or inadequate extension services

Poor transport system