TUTORIAL QUESTIONS

SELECTED QUESTIONS

QUESTION 1
(a) Describe the main types of public Expenditure
(b) Give the reasons that may account for an increased government expenditure in your countr

SOLUTION

(a) Public expenditure can be classified into two headings namely, Recurrent
 expenditure and Capital expenditure. 

  • Recurrent Expenditure: These are the expenses on running costs which are repeated every year. Expenses on payment of wages and salaries, maintenance of infrastructure, payments of rents and interest are examples of recurrent expenditure.
  • Capital Expenditure: are expenses on projects of permanent nature. These expenses do not recur every year. Examples of capital expenditure include building of schools, hospitals, roads, dams, electrification projects, procuring new machineries, aircrafts and construction of airports.
(b) Government expenditure in Nigeria had been increasing year in year out for the following reasons.
  • Population growth: the need to provide more social amenities such as schools, hospitals, electricity, and roads for the rapid increasing population had led to increase in government expenditure.
  • Expansion of the administrative machinery of the country: The increasing number of civil servants to be catered for and the adoption of the presidential system of government in Nigeria have led to large increase inthe cost of administration.
  • Defence and national security: The urge to put in place a strong, efficient and well equipped security machinery against external aggression had increased expenses on the Army, Navy, and Air force.
  • Economic Development: The need to pursue developmental projects on agriculture, industrialisation, provision of amenities like roads, electricity, hospitals, educational facilities have led to huge increase in government expenditure.
  • Maintenance of internal law and order: Government expenses on police force customs, immigration, prisons and the law courts have been increased so as to enforce laws and maintain peace.
  • Rapid increase in prices: the rate of inflation in Nigeria have been astronomical hence rapid increase in government expenditure on project.
  • Expenses to meet international obligations such as aids, grants and loans repayments to other countries have been increasing.

QUESTION 2
Compare and contrast the private limited company with the public limited company

SOLUTION
The private limited company and the public limited company are similar in
 certain aspects while they are different in some others.

 SIMILARITIES
  1. LEGAL ENTITY: The private limited company and the public limited company both have a separate legal entity.
  2. LIMITED LIABILITY: The liability of the shareholders is limited to the amount of capital invested.
  3. CONTINUITY: In both companies, continuity of the company is guaranteed for the death of a shareholder does not put an end to the existence of the company.
  4. MANAGEMENT: The management of the companies is vested with the board of Directors or manager.
  5. RAISING OF CAPITAL: Both private and public limited liability companies can raise capital through loans and shares.
DIFFERENCES
  1. MINIMUM NUMBER OF OWNERS: The minimum number of owners in a public limited liability company is 7 while it is 2 in a private limited company.
  2. MAXIMUM NUMBER OF OWNERS: in a private company, the maximum number of owners is 50 while there is no upper limit for the public company.
  3. ABILITY TO SELL SHARES: Whereas the public company can sell shares to the general public. The private company sells shares to the 50 owners only.
  4. TRANSFERABILITY OF SHARES: Shareholders in public company are free to transfer their shares from hand to hand while this is not so in a private company.
  5. PUBLICATION OF ACCOUNTS: The public company must publicize its accounts annually but the private company is not required to do so.
  6. ISSUE OF DEBENTURES: While the public company can issue debentures the private company cannot issue debentures.
  7. COMMNCEMENT OF BUSINESS: The private limited liability company can start operation in full after securing the certificate of incorporation, the public company cannot operate until the certificate of trading had been secured.
QUESTION 3
(a) Explain the term under population
(b) Highlight the economic effects of high population density in
Nigeria.

SOLUTION
(a) Under population is a situation where the people within the country are insufficient to fully utilize the available resources given the existing
technology.
OR
Under population is that size of the population that is below the optimum.
There is under population if an increase in size leads to increase in output per head.

(b) Economic effects of high population density in Nigeria

  1. Pressure on land: High population density will make the demand for land for economy activities to outstrip the supply.
  2. Lower living standard: There is rapid increased in the demand for goods and services in areas of high population density hence rapid increase in prices, shortage of goods and services culminating in lower living standards.
  3. Increased expenses on social amenities: The demand for social amenities such as schools, roads, water supply, electricity etc increases in areas of high population density. This increase government expenditure on these facilities.
  4. Increase in crime rate: High population density may breed crimes like armed robbery, advance fee fraud, prostitution etc.
  5. Unemployment problems: Areas of high population density in Nigeria are associated with high rate of unemployment.
  6. Increased supply of labour force: High population density provides afeequate supply of labour.
  7. Higher rate of investment: Areas of high population density in Nigeria attract investors since these areas are potential market centres.
  8. Increased health hazards: Areas of high population density are associated with overcrowding, air and water pollution, wastes disposal problems etc. All these impair health.
  9. Balance of payments problems: High population density may force the country to import more goods and services which may lead to deficit on balance of payment

QUESTION 4
(a) What are the factors affecting the location of industry?
(b) Explain FIVE roles of industrialization in the economic
development of Nigeria.

SOLUTION
(a) The entrepreneur must consider certain locational factors with the overall interest of reducing unit cost of production.
Such factors include:

  • Source of raw materials: if the raw material is heavy and its cost of transportation is very high, the entrepreneur may decide to locate his business near the source of raw materials. Example are cement factories and plywood factories.
  • Market Consideration: The ultimate aim of the producer is to sell the final product. A business unit may be sited in areas with high population densities. If the product is fragile, perishable or bulky to transport, the business unit may be located near the market. Examples are production of eggs, fresh milk and bricks.
  • Nearness to the source of power supply: Power supply is an essential ingredient to production. The producer may locate his business near the source of power be it coal, electricity or water.
  • Labour supply: for labour intensive form of businesses, adequate supply of labour will be considered for location.
  • Availability of good transport and communication system: An efficient transportation system is needed to transport raw materials and finished products. Also, a business unit needs an efficient communication system such as telephones and post offices. These may encourage the producer to site the business in places where these facilities are available.
  • Favourable natural conditions such as suitable climate and land may determine where one form of agricultural activity or the other will be sited.
  • Political factors apart from economic factors may determine location of industries.
  • The presence of amenities such as banks, insurance companies, educational institutions, pipe borne water may attract producers to such areas.

(b) Industrialization In Nigeria plays major roles towards economic development. Such roles include the following:

  1. Economic growth: Industrialization increase the Gross National product hence economic growth is guaranteed.
  2. Reduction in the rate of unemployment: Industrialization creates employment opportunities to many unemployed Nigerians thus helping to reduce the rate of unemployment.
  3. Industrialization increases the standard of living of the people by making greater quantities and varieties of goods and services available.
  4. Diversification of the economy: industrialization in Nigeria removes over-dependence on agriculture.
  5. Industrialization provides more foreign exchange earnings through exports.
  6. Reduction in the inflation rate through the flooding of the market with more manufactured product.
  7. Industrialization helps to correct deficit balance of payment in Nigeria.
  8. Industrialization will expand the market for agricultural raw materials hence higher earnings for farmers.
  9. Improvement in farming techniques: the industrial sector produces modern and more efficient machineries for agriculture such as ploughs, harvesters, silos etc. The sector produces fertilizers, herbicides and insecticides for the agricultural sector.
  10. Increase in government revenue: The manufacturing companies will pay taxes in form of royalties, excise duties or profit tax to the government thereby increasing government revenue.
  11. Transfer of Technology: Industrialization enables Nigerians to acquire the necessary technical and managerial skills necessary for indigenous business ventures.
  12. Industrialisation leads to the development of infrastructural facilities.

QUESTION 5
(a) State the theory of comparative advantage in international marketing.
(b) Discuss the measures that can be taken by a country seeking to correct its
balance of payments deficit.

SOLUTION
(a) The theory of comparative advantage states that a country should
concentrate on the production of the goods and services in which she has a greater comparative advantage over others.

(b) A country can correct deficit on its balance of payments using any or a 
combination of the following measures:

  1. Tariffs: Increase in import duties and decrease in export duties may reduce importation and increase exportation respectively thus reducing the imbalance on balance of payments.
  2. Reduction in money supply through tight credit policies of the Central Bank and the adoption of budget surplus may reduce importation and correct adverse balance of payments.
  3. Increase in income tax so as to reduce the disposable income of the people and thus reduce the consumption of imported products.
  4. The use of import quotas: the maximum quantity of goods to be imported by importers can be fixed by the government to reduce importation.
  5. Prohibition of goods: The government may place embargo on importation of certain goods.
  6. Foreign exchange control: the quantity of foreign exchange that can be approved for importation may be regulated to curtail importation.
  7. Establishment of import substituting industries: Indigenous investors may be encouraged to establish industries that will produce goods that were hitherto imported.
  8. Export promotion measured such as tax holidays, provisions of subsidies and liberal credit policy for export – based industries.
  9. Devaluation of currency: A deliberate reduction in the value of the currency of a country in relation to that of another country may correct adverse balance of payment

QUESTION 6
(a) Outline the importance of agriculture in the economic development of 
Nigeria.
(b) Explain these terms:
(i) Plantation Agriculture
(ii) Subsistence Agriculture

SOLUTION
(a) the contribution of the agricultural sector towards economic development 
in Nigeria includes the follows:

  1. Source of food supply: Agriculture provides food for the ever increasing population of Nigeria. 
  2. Employment opportunities: The agricultural sector employs a large percentage of Nigerians.
  3. Source of foreign exchange: Through the exports of agricultural raw materials, agriculture provides the much needed foreign exchange for industrialization.
  4. Agriculture supplies raw materials to the Nigeria manufacturing sector.
  5. A source of government revenue: the government derives a lot of revenue from income taxes from farmers and revenue from export duties on exported agricultural products.
  6. The agricultural sector provides a ready market for the industrial sector thereby helping to facilitate industrialization in Nigeria.
  7. Contribution to Gross Domestic Product: The agricultural sector contributes a substantial percentage to the Gross
  8. Supply of labour to the industrial sector: The agricultural sector releases unskilled and semi skilled labour to the industrial sector.

(b) (i) Plantation Agriculture: Plantation agriculture has the following 
characteristics:
  • It involves cultivation of large acreage of land, hence the scale of production is large
  • In most cases, plantation agriculture involves cultivation of permanent or cash crops.
  • The method of production is mechanization and modern techniques of production.
  • Plantations are either owned by the government, private individuals or corporate bodies.
  •  Production is for the market or exports.
(b)(ii)Subsistence Agriculture involves the Following:
  • Cultivation of small acreage of land hence a small scale production.
  • Production of food crops only
  • Production is essentially to meet the need of the immediate family and not necessarily for the market.
  • There is the adoption of crude technology and the use of  traditional methods.
  • Subsistence farms are owned by individuals who are the owners of family land on which Agriculture is practice.

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