NAME: ………..…………………………………………………CLASS: ……….…………………..

DEEPER LIFE HIGH SCHOOL

www.dlhschools.com, www.dlhschools.org
SECOND TERM E-NOTES COMMERCE

SS1

WEEK TOPIC

THEME 1: TRADE AND BUSINESS ORGANIZATION

1. (e) Large scale retailer e.g. super market, mail order, (f) Modern trend in retailing (brand, self-
service) etc
2. HOME TRADE: (G) main characteristics of large scale and small scale trade (h)
advantages and disadvantages of large scale retailers
3. HOME TRADE Reasons why retail business may fail? , Wholesale trade ,Channel of distribution
4. HOME TRADEWholesale trade(cont’d) , Survival process, Functions of agents ,Types of
warehouses and
5. FOREIGN TRADE: i. Meaning of foreign trade ii. Types of foreign trade: a. Bi-lateral foreign trade
b. Multilateral foreign trade iii. Division of foreign trade iv. Barriers to foreign trade v.
Advantages and disadvantages of foreign trade
6. FOREIGN TRADEINTERNATIONAL TRADE: C. Procedure for international trade. D. Balance of
trade and balance of payment.
7. Mid - term break
8. FOREIGN TRADE (INTERNATIONAL TRADE: Tariffs and reasons for the imposition of tariffs, Tools
for trade restriction and export promotion. Documents in foreign trade.
9. FOREIN TRADE (INTERNATIONAL TRADE: 1. Functions of customs and excise authority ii.
Functions of Nigeria Export Promotion Council iii. Functions Nigerian Airports Authority and iv.
The Nigeria Ports Authority.
10. Commodity Exchange: (a) Meaning of commodity (b) Types of commodity –Agricultural,
solid minerals, oil and gas. (c) Meaning of commodity exchange (d) tradable commodity
(e) Requirement for trading (i)Grading system (ii) Warehousing (iii) Clearing system (iv)
Standardizing (f)Types of commodity exchange – Spot and forward futures € Method of
trading. (i) Open outcry, (ii) Electronic.
11. Revision.
12. Examination.
WEEKS 1 & 2

TOPIC: HOME TRADE

CONTENT: 1. Large scale retailer e.g. super market, mail order.

2. Modern trend in retailing (brand, self-service) etc.

What is home trade? Home trade is the act of buying and selling of goods and services.

SUB-TOPIC 1: LARGE SCALE RETAILING:

SUPER MARKET: This is a large retailing business unit selling mainly food and household items with self
service facilities.. A supermarket may occupy a large surface area of about 200 meters. The large area
enables the customers to move freely in order to make selection of goods needed.

CHARACTERISTICS OF A SUPERMARKET

1. They specialize mainly in household goods and food items.

2. It deals in a varieties of goods
3. Operation of self service system: Customers can move round about the shop to select what they
want to purchase without any assistance
4. Goods are displayed with price tags: all the items on displayed are pre- packed and have price
tags affixed on them. There is no opportunity for bargaining.
5. Located around residential areas: goods are well displayed on shelves or counters to attract the
attention of customers.
6. Bulky purchase: this is the act of buying goods in large quantities and sell them to customers at a
lower price
7. Provision of basket and trolleys: This is provided in order to make shopping convenient for
customers
8. Large storage facilities: a super market has large storage facilities to store goods until they are
needed.
9. Specializes in household goods and food items
10. Huge capital required.

EVALUATION

 What is home trade?

 Briefly explain supermarket
 Mention 3 characteristics of a supermarket

ADVANTAGES/MERITS OF SUPERMARKET

1. Provision of self service system

2. Provision of shopping kits to make shopping convenient for their customers
 3. Encourage the impulse buying; this is to encourage the customers and to catch their
attention when goods are displayed on the counter and shelves.
4. Offer varieties of goods to customers
5. Low overhead cost: only few people are employed and therefore, the total overhead cost is
reduced
6. Constant availability of goods
7. Low prices of goods
8. Goods are displayed with prices

DISADVANTAGES/DEMERITS OF SUPERMARKET

1. No credits facilities are granted to their customers because it may reduce the sales of goods
2. Lack of personal relationship: there is no personal contact between the customers and the
attendant
3. High rate of pilferage: goods are always stolen because customers are allowed to move round
without being checked.
4. No room for bargaining
5. Restricted to high-populated area
6. Inability to bargain.
7. High running cost.

EVALUATION

 List 4 merits of a supermarket

 Mention 2 disadvantages of a supermarket

MAIL ORDER

This is a type of business whereby buying and selling is done by post. Customers can transact business
directly with the manufacturers. They contact prospective customers by mail, receive their orders by
mail and make their deliveries by mail. Catalogues or price lists are issued and sometimes order forms
are printed in newspapers or order journals. Payment is made by either cash with order (CWO), cash on
delivery (COD) or by installments.

FEATURES/CHARACTERISTICS OF MAIL ORDER BUSINESS

1. Production of goods according to customers specification

2. Mode of payment is cash on delivery: This means, customers are to pay for goods before the
goods are giving to them.
3. Direct contact with the producer: The manufacturer deals directly with the customers thereby
by-passing the middlemen.
4. Usage of catalogues
 5. Transaction takes place by post
6. Requires intensive advertising
7. Home delivery.

ADVANTAGES/MERITS OF MAIL ORDER BUSINESS

1. Cost saving :operating cost is absent such as renting a shop and so on

2. Few staff are employed since transaction takes place by post.
3. Catalogues are useful for advertisement: advertising is the creation of awareness of making
goods produced to the general public
4. Displaying of goods are absent
5. No problems of bad debt
6. Bulk purchases
7. Local and rural supply
8. Provides convenient for customers

DISADVANTAGES/DEMERITS OF MAIL ORDER BUSINESS

1. Absence of personal contact

2. Goods can be lost in transit while the money paid for the goods will not be refunded
3. Late delivery of goods due to transportation problem
4. No opportunity to inspect the goods the customers want to buy
5. Cost of advertising is very high
6. Inefficiency in postal system and high cost of postage
7. Pictures in the catalogues may be misleading
8. Much time is wasted by waiting for the goods to arrive

MODERN TREND IN RETAILING

Modern trend in retailing is the rapid growth in economic and technological development.

SELF-SERVICE: This is a system where the customers to go round the stores to select whatever goods
they want to buy from the shelves and pay to the cashier with or without any assistance of the
attendants. Appropriate packaging and display enhances self –service.

FACILITIES TO BE PUT IN PLACE

1. Cashier with automatic cash register

2. Trolleys and basket
3. Spacious floor
4. Security should be beefed up
5. Provision of spaces for packaging of goods
6. Packaging of goods with price tags
7. Attractive shelves.
FEATURES/TRAITS/CHARACTERISTICS OF SELT-SERVICE

1. Provision of shelves and counters

2. Display of goods
3. Provision of trolley and basket
4. Provision of space for movement
5. Price tags
6. Provision of security men at strategic places to forestall shoplifting

ADVANTAGES/MERITS OF SELF-SERVICE SYSTEM

1. Increase in sales: beautifully displayed goods result in impulse buying that is,customers tend to
buy what they do not budget for and this act increase overall sales.
2. Employment of few sales clerks: since customers are allowed to pick what they want to buy,
fewer sales attendants are needed and this reduces the overhead cost.
3. Time saving: self –service saves time that would have been used in bargaining (negotiation)
4. Convenient shopping: this is possible because goods are well displayed; trolleys and basket are
made available for customers to carry whatever they have bought.
5. No interference
6. It attracts customers
7. Overhead cost is reduced

DISADVANTAGES OF SELF-SERVICE

1. Possibility of pilfering: it encourages stealing since customers will not be supervised while
buying goods and this may lead to shortage
2. Possibility of over spending: customers may be tempted to buy more than what they have
budgeted for.
3. Lack of proper inspection of goods bought.
4. High running cost: the cost of renting a large accommodation will definitely increase overhead
cost
5. Goods may be damaged: handling of goods by the customers may damaged the goods.

BRANDING

Branding is the act of giving names or marks to a product so as to differentiate it from the product of
other firms. It is intended to prevent adulteration and to confer identity to the product
FEATURES OF BRANDING

1. There is usually a brand name.

2. The packaging of the product has a uniform shape and colour as a distinguishing feature.
3. Brand name has a distinguishing trade mark.
4. Registration of brand name to avoid duplication, proliferation or theft.
ADVANTAGES OF BRANDING

1. Uniform price
2. Easy recognition
3. Ensures high quality of products
4. Standardization of products:
5. Stimulation of self-service
6. Prevention of product adulteration
7. Form of advertising

DISADVANTAGES OF BRANDING

1. High cost of advertising

2. It leads to high price
3. It can confuse customers: too much brands of goods may confuse customers.
4. Creation of false buying: branding goods may ensure that customers purchase more than
what they need.

EVALUATION:

1. What is branding?
2. Mention 2 advantages and disadvantages of self –service retailing
3. Mention 2 merits and demerits of mail order business
4. List 3 traits of a small-scale retailing

GENERAL EVALUATION:

1. ------ is the act of giving names or mark to a product in accordance with the trade mark Act
order to distinguish it from similar products manufactured by other producer (a) mail order
business (b) branding (c) self-service business
2. Which of the following is the characteristic of small-scale retailing? (a) labour intensive
system (b) high cost of advertising (c) uniform price
3. Which of the following is the disadvantage of mail order business? (a) Displayed of goods (b)
restricted to high populated area (c) Late delivery of goods due to transportation.
4. ------- is a multiple chain shops with self service facilities (a) super market (b) mail order
business (c) branding.
5. The rapid growth in economic and technological development is(a) modern trend in retailing
(b) standardization of branding (c) price tags.

ESSAY QUESTIONS

1. What is branding?
2. Briefly explain the following
3. List 4 merits of a supermarket
4. Mention 2 disadvantages and advantages of a supermarket
 5. What do you understand by mail order business? Give 2 merits and demerits of mail order
business.

WEEKEND ASSIGNMENT

Read Longman New Edition for senior secondary school Commerce book one by M.O Odedokun, P.C
Udokogu and C.O.N Oguji

PRE –READING ASSIGNMENT: Read about the home trade, foreign trade and wholesale trade

WEEKEND ACTIVITY

Mention five relevance of branding to Nigeria Economy.

REFERENCE TEXT

1. Longman Commerce for SS Book1 by M.O Odedokun, P.C Udokogu and C.O.N Oguji.
2. Amplified and Simplified Commerce for senior secondary school book1 by Femi Longe and
Tunde Olaleye.

WEEK 3

TOPIC: HOME TRADE

CONTENT:

1. Reasons why retail business may fail?

2. Wholesale trade
3. Channel of distribution

SUB-TOPIC 1: WHY RETAIL BUSINESS FAIL?

The following are the reasons why retail business fails in Nigeria

1. Finance: Because of the generally small size, retail businesses do not have ample opportunities
to obtain finance. Banks and other financial institutions do not often give loan to small
borrowers who are also disadvantaged in accessing the capital market or stock exchange to raise
funds.
2. Limited managerial and professional capacity: management and professional services are often
limited to whatever the proprietors themselves can provide.
3. Simplistic and non-modern modes of operation: adequate financial and accounting records are
sometimes not kept. Also information technology (computer terminals and networking,
electronics trading etc are not often used. All these may affect the competitiveness of the
business.
 4. Lack of diversification: because of the small size, retailers may not be able to diversify into many
areas of merchandising, which would require much money and management capability. For
example, a fall in the demand for a product may easily result in business collapse.
5. Limited government attention: government attention is more focused on larger enterprises that
are often regarded as too big to fail because of the wider effects that a failure would on the
society.
6. Unfavorable market condition and retail business environment.
7. Aggressive competition and incursion from wholesalers, manufacturer and so on.

EVALUATION

1. Give three reasons why retail business fail in Nigeria.

2. List and explain types of retail trade.

SUB-TOPIC 2: WHOLESALE TRADE

MEANING OF WHOLE SALE: A wholesaler is a trader who buys goods in bulk or in large quantities from
the producer/manufacturer and sells in small quantities to the retailer.

FEATURES OF WHOLESALE TRADE

1. Bulk breaking
2. Buys goods in large quantity and sells in small quantity to retailer.
3. They are the middlemen between the producer and retailers.

FUNCTIONS OF WHOLESALERS TO THE MANUFACTURER/PRODUCER.

1. Breaking of bulk: they buy in bulk and sell in small quantities to the retailers.
2. Warehousing function: The wholesalers are able to purchase very large quantities from the
producers, which they store in the warehouse until they are required by the retailers.
3. Transport and delivery service: they receive large quantities from the producers make them
available to countless retailers through their own network of distribution centres.
4. Risk bearing: the wholesaler can anticipate business risk in distribution and take appropriate
measures to reduce their impact by taking the necessary insurance cover.
5. Branding, packaging and labeling: The wholesalers may prepare commodity for sale by
packaging , branding and grading.
6. Advertising function: they do most of the work of finding ready-made market for the products.
This is done through advertising and promotion.
7. Price stability
8. Financing the producers.

FUNCTIONS OF WHOLESALERS TO RETAILERS

1. Wholesalers sometimes pre-packed, brand and grade goods for retailers

2. They stimulate demand for goods through sales promotion.
 3. They often offer credits facilities to the retailers.
4. They provide retailers with technical information and advice on new products.
5. For the convenience of retailers, wholesalers carry inventory of assorted goods procured from
different manufacturer.
6. Advertising of goods
7. Price stability
8. Transportation services
9. Links the retailer and producer.

ARGUMENTS FOR THE SURVIVAL OF MIDDLEMEN

The middlemen should not be eliminated because the functions they perform to both the producers and
ultimately to customers cannot be performed by any of them i.e. the manufacturer or customers. The
reasons why they should not be eliminated include;

a. Bulk breaking
b. Credit facilities to the consumer
c. Warehousing.
d. Financing
e. Giving advice to both manufacturer and consumer
f. Conducts market research
g. Branding and packaging
h. Provision of transport.
i. Risk bearing

ARGUMENTS AGAINST THE ELIMINATION OF WHOLESALERS

It is believe that the middlemen are responsible for artificial scarcity and the attendant rise in price. For
this reason, many people think that wholesalers should be eliminated in the distribution channel.
Wholesalers are regarded as unproductive. This is not strictly true since many wholesalers are as
productive as manufacturers. Factors that warrant the elimination of middlemen from the channel of
distribution are:

1. Longer channel of distribution

2. Creation of artificial scarcity of goods through hoarding
3. Increase in prices of goods.
4. Development o f Mail Order Business.
5. Involvement of Perishable goods
6. If goods are susceptible to faking or adulteration, the manufacturer would do well to by-pass the
middlemen.
7. Low rate of turnover: Goods with low rate turnover like jewelries, furniture, and large
machinery etc, the manufacturer will preferably deal directly with the consumer.
 8. Presence of technical goods: The manufacturer can sell directly to the consumers if the goods
produced are highly technical and required special specification, e.g. computers and
machineries.
9. Immediate feedback from the consumers: Manufacturers may eliminate middlemen because of
the need to obtain immediate feedback from the consumers.

EVALUATION

1. Give three features of wholesale business.

2. List two advantages of wholesalers to the producer and wholesalers to the retailers.
3. (a) Who is a wholesaler? (b) Elucidate the functions of a wholesaler.

SUB-TOPIC 3: CHANNELS OF DISTRIBUTION:

Channel of distribution is the path through which the ownership of goods is transferred as it moves from
the producer to customers

DIFFERENT CHANNELS OF DISTRIBUTION

1. PRODUCER AGENT WHOLESALER RETAILER CONSUMER

2. PRODUCER WHOLESALER RETAILER CONSUMER.
3. PRODUCER RETAILER CONSUMER.
4. PRODUCER AGENT RETAILER CONSUMER
5. PRODUCER AGENT CONSUMER
6. PRODUCER WHOLESALER CONSUMER
7. PRODUCER CONSUMER

FACTORS TO CONSIDER BEFORE CHOOSING A PARTICULAR CHANNEL OF DISTRIBUTION

1. Number of potential buyers

2. Competitors’ channel
3. Financial capability of the producer
4. Nature of goods
5. Location of customers
6. Size of order
7. Value of goods.

THE MIDDLEMEN

The middleman is the person that bridges the gulf/gap between the manufacturer and the consumer.
The middleman finds out what goods and services are wanted and where they are wanted and he
collects them with a view to satisfying their wants. Middlemen are independent business enterprises
which constitute a link between producer on one hand, and consumers. Middlemen are also
intermediaries.
TYPES OF MIDDLEMEN

Middlemen can be distinguished according to the following different services they perform:

1. Merchant middlemen: have title to the goods which they are marketing. This means that
merchant middlemen own the goods somewhere along the distribution channel before
passing the title to their customers. He bears risk of ownership of goods. Merchant
wholesalers include;
a. Specialist wholesalers
b. Rack jobbers
c. Cash and carry wholesalers
d. Truck wholesalers
e. Drop shipment etc.

2. Agent middlemen: are institutions which do not take title to goods they handle as is the
case of factors. They do not take title to the good they sell but only receive commission.
They assist in negotiating sales and purchases or both on behalf of their principals. All agent
middlemen are wholesaling middlemen but they are not wholesalers. They are in possession
of physical goods. Agent middlemen include;
a. Brokers
b. Manufacturer’s agent
c. Auctioneer
d. Commission agent
e. Factor
f. Del – credere agent.

EVALUATION:

 Give four reasons why retail business fail in Nigeria

 List and explain two features of wholesaler
 Mention three roles of retailer in the distribution channel
 Who is the middleman?
 What are the features of wholesaler?

GENERAL EVALUATION:

1. The middleman refers to (a)the market men and women (b) the market men only (c) the retailer
or the wholesaler (d) the men in the middle of the market (e) the man that stands between the
retailer and the consumer
2. Which of the following is the function of the wholesaler?(a) buying in large quantity from the
traders (b) sell in small bit to the consumer (c) selling in large quantity to the consumer (d) bulk
breaking (e) sell in whole and not in bit.
 3. The existence of middleman is justified because (a) he makes a large profit for the government
(b) he exploits the consumers (c)he stands between the producer and the consumer (d) he
causes a rise in price of commodities (e) he exploits the consumers and the producer
4. Which of the following best describe the channel of distribution? (a) from the importer to the
consumer (b) from the manufacturer to the consumer (c) from the wholesaler to the consumer
(d) from the manufacturer to the wholesaler, from the wholesaler to the retailer and from the
retailer to the final consumer (e) all of the above
5. Which of the following is not the function of the retailer? (a) he finances the manufacturer and
the wholesaler(b) he stores goods and moves and move them about so as to sell them in small
bit(c) he keeps a varieties of goods from the consumers make their choice (d) he supplies
information indirectly to the manufacturer through the wholesaler(e) he store, displays and sells
goods in the proximity of the consumer.

ESSAY QUESTIONS:

1. Differentiate between the wholesaler and the retailer

2. Of what importance is the wholesaler in the channel of distribution?
3. Who bridge the gap between the producer and the retailer?
4. List two examples of large scale retailer
5. The wholesaler buys in large quantity from the producer. Discuss.

PRE-READING ASSIGNMENT

Read about the wholesale trade.

WEEKEND ASSIGNMENT:

Read Longman commerce for senior secondary schools book 1 by M.O.Odedokun, P.C. Udokogu,
C.O.N.Oguji page 42-48

WEEKEND ACTIVITIES

Mention six roles of wholesaler in the chain of distribution.

REFERENCE MATERIAL

1. Read Longman commerce for senior secondary schools book 1 by M.O Odedokun, P.C. Udokogu,
C.O.N.Oguji
2. Round-up Economics for senior secondary schools book1 byA.BFalodun, P.N Omogiafo and L.C
Ezeaku.
WEEK 4

TOPIC: HOME TRADE

CONTENT

1. Home Trade (cont’d)Survival process

2. Functions of agents
3. Types of warehouses and
i. Necessary documents

SUB-TOPIC 1: MEANING OF HOME TRADE:

Home trade is the act of buying and selling of goods and services within the country.

ADVANTAGES OF HOME TRADE

1. No language barrier since buyers and sellers are close to each other
2. There is no foreign exchange problem. The distance over which goods are to move are very
short compare to foreign trade.
3. There is no difference in the weights and measures used by both the buyers and the sellers
since both groups are subject to the same laws.
4. The political and legal systems are too less heterogeneous than in the case of foreign trade.

SUB-TOPIC 2: FUNCTIONS OF AGENTS

An agent is a person employed for the purpose of establishing a contractual relationship between the
principal (who is the person employing the agent) and someone else. In commerce, an agent is the
person employed for the purpose of selling goods on behalf of the principal. The person employing the
agent is either the producer, foreign supplier, or someone larger scale domestic wholesale trader. They
assist in negotiating sales and purchases or both on behalf of their principals.

TYPES OF AGENT/AGENT MIDDLEMEN

1. Brokers: are agents employed to bring into contact intending sellers and buyers. Brokers are
never in possession of any goods and do not sell goods in their own name. They do not have
authority to fix prices. They do not contract to work on a continue basis with any principal.
They can act for several principal at the same time. They negotiate the goods with the buyer
and inform the seller about the bargaining.
2. Factors or manufacturers’ agents: they are commercial agents who have authority to sell
goods and who keep custody of goods until the goods are sold. They sell goods under own
name. They are independent because they are not employees of any manufacturer. They do
not control pricing policy. They have a continue relationship with their principals.
3. Selling agents: are agents performing the complete range of marketing functions for
manufacturers. They perform the fullness and widest range of marketing functions for the
 manufacturers. They render the marketing departments of manufacturer more or less
redundant and superfluous.
4. Del credere agents: these are agents employed to sell goods on the understanding that they
would take full responsibility for any default on credit sales. They undertake that buyer
would pay and if they are not, the agent will be liable.
5. Auctioneers: are agents whose duty is to sell goods at public auctions.

EVALUATION:

1. Who is agent?
2. Mention three types of agents and briefly explain them.

SUB-TOPIC 3:TYPES OF WAREHOUSES

Meaning of warehousing: This is concerned with all activities that help in storing goods until they are
needed/demanded in order to ensure uninterrupted and regular supply.

FACTORS TO BE CONSIDERED IN SITING A WAREHOUSE

1. Total operating cost

2. Proximity to the factory
3. Means of transportation
4. Availability of basic social amenities
5. Cost of rentage or construction
6. Nearness to the consumers
7. Nature of the product
8. Distribution centre

Features of a warehouse
1. Large hall: a warehouse is a large open space house that contains large stock of goods or raw
materials. It is large to the extent that truck, containers can go in.
2. Equipment: A warehouse is fixed or equipped with the necessary equipment for the
warehousing job e.g. crane.
3. Security: There is always heavy and tight security around the warehouse. This is to protect it
from burglary and theft and to provide safety for the stored goods.
4. Workers: A warehouse has a number of workers ranging from the warehouse manager,
supervisors, clerks etc.
IMPORTANCE/FUNCTIONS OF WAREHOUSING

1. Provision of storage facilities: it helps to store goods safely until they are needed. It allows
goods to be stored in anticipation of demand.
 2. Ensuring price stability: The development of warehousing has helped to reduce fluctuations in
price.
3. Provision of employment: it provides job opportunity for different people such as security
personnel, store attendants, clerks and driver
4. Source of revenue: government and individual can generate from warehouse. It can be rented
out to other users.
5. Provision of security for goods: it provides protection and security for goods.
6. Makes seasonal goods available
7. Facilitates prepackaging
8. Checking of smuggling
9. Keeping goods ahead of demand
10. Ensures constant supply of goods

TYPES OF WAREHOUSE

1. State warehouse: this is government owned warehouse where seized goods are kept until they
are needed/sold. It is a store where contraband or smuggled goods seized by the customs
authorities are kept until they are auctioned (sold)

FEATURES OF STATE WAREHOUSE

I. The government owns it

II. Smuggle or contraband goods are kept in it
III. Goods kept in this warehouse are auctioned to the member of the general public
2. Manufacturer’s warehouse: this is the warehouse owned and equipped by the producer at the
factory site or depot in order to store his products until they are sold. It enables the producer to
produce ahead of demand.

FEATURES OF MANUFACTURER WAREHOUSE

I. The producer owns it

II. It is located at the factory/depot
III. It is designed and equipped by the producer

3. Wholesale warehouse: this is owned and managed by the wholesaler for storing his wide range
of purchased from various producers. Wholesale warehouse are located near distribution or
sales centres.

FEATURES OF WHOLESALE WAREHOUSE

I. It is owned and managed by the wholesaler

II. It is constructed to suit his line of business
III. It is located near sales centres
 4. Bonded warehouse: This is located beside the port and approved by the customs for the
temporary storage of dutiable goods on which duties have not been paid. Goods imported into
the country are kept until duties are paid on them. It is under the supervision of custom
authority.

FEATURES OF BONDED WAREHOUSE

1. It is under the control of custom authority

2. Goods kept there are not removable until duties are paid
3. They are located at the port
4. Duties have been paid on goods kept there
5. The goods store there are referred to as bonded goods
6. A warrant will be issued to release the goods

USES OF BONDED WAREHOUSE IN INTERNATIONAL TRADE

1. It encourage international trade

2. It ensures effective check on goods
3. It ensures sales of goods
4. Facilitate branding and packaging
5. It allows adequate time for payment of duty
6. Proper calculation of goods and recorded of duties

5. Public warehouse: this is owned and managed by the individual or firms who do not make use
of their warehouse but rent it out to others for keeping their goods

FEATURES OF PUBLIC WAREHOUSE

1. It is owned by individual
2. It located near sea port or airport
3. It can be rented out to others

EVALUATION

1. List five types of warehouse

2. State 2 features of each of the warehouse mention in one above
3. Name two factors to be considered while sitting a warehouse.
4. What is warehouse?

TERMINOLOGIES

1. Customs drawback: this mean, returning /refunding duty paid on re-exported goods. When
duty has been paid on goods that are later to be re-exported
2. Import duties: these are taxes imposed on goods imported into the country
 3. Delivery order: this a document issued by the owner of goods stored in a warehouse
entitling the person whose name appears on it to collect the goods specified.
4. Dock warrant: is a document issued by the custom authority to person who deposits goods
with them. It is issued when duty have been paid and also a document of title
5. Excise duty: these are taxes imposed on home produced goods. It is imposed to raise
revenue or to check the consumption of certain commodities.

Advantages of warehousing

1. Warehousing protect goods from damage, destruction, theft, fire etc. It also preserves
the goods and minimizes wastage, spoilage, deterioration in quality.

2. Warehousing ensures a regular supply of seasoned goods, like farm produce,

throughout the year.

3. It ensures the continuity of production because the raw materials are stored in the
warehouse. It permits precautionary holding of inventory that could cater for
unexpected usage of raw material in response to market condition for final goods.

4. It reduces transportation cost since they are located at convenient location like near
roads, railway, waterways etc.

5. It promotes sale of goods by allowing prospective buyers to inspect goods in the

warehouse as well as branding packaging and sale.

6. Warehouses can provide short term credit to the owners of goods. Which would be
pledge as collateral for the credit? Banks can the goods by lending.

7. Warehousing guarantee the good condition of the Merchandise entrusted to their

care.

8. It serves as retail outlet in recent times

9. It is a means of generating revenue

DISADVANTAGES OF WAREHOUSING

1. Cost of using the facilities of warehouse may be so high as not to justify their use.

2. Some warehouse is not properly equipped and their operating efficiency may be low
that it may not be worthwhile to patronize them.
3. There is possibility of loss or damage to goods while in the warehouse.

EVALUATION
1. Discuss any five advantages and four disadvantages of warehousing.

2. What is a bonded warehouse?

b. State four ways in which a bonded warehouse may be useful in foreign
trade
3. Describe five types of warehousing.
4. Enumerate five factors to consider in sitting a warehouse
DOCUMENT S USED IN HOME TRADE

1. Trade journal: a trade journal is a booklet that contains articles or write-ups as well as
advertisements in respect of some trade. Thus, it provides new information and products
for potential buyers on various items. It also keeps the existing customers informed of new
development in the trade.
2. Letter of inquiry and request for price quotation: this is the letter that simply aske the
seller to supply more information about the goods to augment the knowledge that buyer
has acquired from the trade journal or other sources. At the same time, the letter may
request for price quotation.
3. Response to the letter: price quotation and catalogue or price list: a catalogue is simply the
lists of goods that a seller deals in. Usually, the catalogue contains the photographs or
illustrations and descriptions of goods as to the size, colour and other measures or
indications of quantity and quality.
4. Purchase order: this is the process of completing and submitting an order form prescribed
by the seller, sending own order form or simply writing to that effect
5. Reference letter
6. Pro forma invoice
7. Invoice
8. Advice note
9. Credit note
10. Debit note
11. Cheque etc

EVALUATION

1. What is warehousing?
2. Name five documents used in home trade
3. List three merits of bonded warehouse in international trade
 4. Name three features of manufacturer warehouse in Nigeria
5. Name two types of warehouse.

GENERAL EVALUATION

1. Which of the following is not a small retail outlet? (a) hawing (b) stall holding (c)
supermarket (d) mobile shop (e) market trading
2. Possible reasons why small retail businesses fail include (a)lack of access to finance (b)
limited managerial and professional capacity of the proprietors (c) inadequate diversity of
the activities (d) all of the above (e) none of the above
3. Which of the following is not the function of the producer? (a) breaking the bulk (b)
production of the goods (c) financing the wholesaler (d) production of technical
information to the wholesaler (e) advertising
4. Modern trend in retailing include (a) mail order (b) wholesale (c)use of vending machine (d)
a and b (e) a and c
5. Unlike a departmental store, a supermarket --------(a) has several shops under the same
roof (b) operate on a self-service basis (c)specializes mainly on a households and food
items (d) a and b (e) b and c
6. The type of warehouse that is supervised by custom and excise is called a… a. bonded
warehouse b. retail warehouse c. data warehouse d. custom warehouse
7. All of these except one is a type of warehouse a. State warehouse b. Bonded
warehouse c. compact warehouse d. public warehouse
8. Which of these is not a function of warehouse Nigeria? a. storage b. revenue c.
employment opportunity d. tourist attraction
9. Which of the following is an advantage of warehousing? a. It is possible for goods to be
lost or damaged while in the warehouse b. Warehouses may be inefficient c. cost of
warehouse may be high d. none of the above
10. A warehouse must have one of these features a. security b. computer c. cheque d.
container

Essay Test

1a. Distinguish between warehouse and warehousing

b. Identify five features of a good warehouse

2. Discuss five functions of warehouse

3. Write short note on the following

4. (i) Bonded warehouse (ii) Wholesaler warehouse (iii) State house

WEEKEND ASSIGNMENT

Read Complete Commerce for Senior Secondary School by Alan Whitcomb and Adekoya Fatai Olusegun
pages 152- 154

Read Commerce for Senior Secondary School Book 2 by P.S.Onuka, M.A.Adesola, O.O.Oyefesobi pages
154-158

ESSAY QUESTIONS:

1. Explain the term branding

2. Outline and discuss the function of retailer
3. What factors would you consider before setting a retail trade?
4. What are the advantages and disadvantages of branding?
5. Name two functions of an agent

WEEKEND ASSIGNMENT

Read Evan new edition commerce for senior secondary schools book 1 by M.O Odedokun, P.C Udokogu
and C.O.N Udojipage 37

PRE-READING ASSIGNMENT: Read about the problems of international trade

WEEKEND ACTIVITY: Give five distinctions between home and foreign trade.

REFERNCE TEXT:

1. Longman commerce for senior secondary schools book 1 by M.O Odedokun, P.C. Udokogu,
C.O.N.Oguji
2. Round-up Economics for senior secondary schools book1 byA.BFalodun, P.N Omogiafo and L.C
Ezeaku.

WEEK 5
TOPIC: FOREIGN TRADE

CONTENT:

i. Meaning of foreign trade

ii. Types of foreign trade: i. Bi-lateral foreign trade ii. Multilateral foreign trade
iii. Advantages and disadvantages of foreign trade
iv. Divisions and barriers to foreign trade

MEANING OF FOREIGN TRADE:

Foreign trade which is also called international trade, external trade refers to buying and selling across
the border of a country i.e. trade between buyers and sellers at least two different countries. Foreign
trade can be either export or import. Export means, selling goods or services abroad i.e. The seller is
resident in the country while the buyer is resident in another country. Import on the other hand refers
to buying of goods or services from abroad i.e. the buyer is resident in the country while the seller is
resident in another country.

EVALUATION:

What is international trade?

SUB-TOPIC 2: DIFFERNCE BETWEEN HOME TRADE AND FOREIGN TRADE

DOMESTIC TRADE FOREIGN TRADE

1. It is the trade within the country Trade with other country
2. It is not subject to restriction There are restriction
3. The same currency is used to transact Different currency is used
trade
4. It involve short distance It involve long distance
5. Same weight and measures are used Different measures and weight are used
6. The same language is used and there is no Different languages are used and there language
language barrier barrier
7. There is free mobility of labour There is restriction to mobility
8. Goods are moved within the same Goods are moved beyond geographical boundaries
boundaries

SIMILARITIES BETWEEN FOREIGN AND DOMESTIC TRADE

1. Both are facilitated by aids to trade

2. Currencies are involved in both case
3. Both involves the act of buying and selling of goods and services
4. Both are division of trade.

EVALUATION

 Give two similarities and difference between home and foreign trade

SUB-TOPIC 3: MEASURES TO PROMOTE EXPORT TRADE

1. Promotion of credits facilities to the exporters

2. Currency should be devaluated to make export cheaper than import
3. Export promotion Agency will be set up by the government I other to encourage exportation
4. Companies that are export based should be given incentive and holiday.
5. Export levied on food items should be reduced in order to encourage exportation
 6. Communication and transportation facilities should be improved on to make them more
efficient
7. The existing sea and air-port should be improved.

ENTRE-PORT: This is the re-exporting of goods that has been imported from other countries. Goods
imported to a country are later re-exported to another country.

FUNCTIONS OF NIGERIA EXPORT PROMOTION COUNCIL.

EXPORT DEVELOPING ACTIVITIES:

Nigeria export promotion council introduces measures to increase the volume and quality of goods to be
exported

1. Activities relating to export marketing: It helps to provide information Nigeria exports in the
international market and how to improve its marketability.
2. Export funding : It provides export financing facilities e.g. insurance and credit guarantee
schemes
3. Provision of trade information: It helps to review existing products for export and also to set out
the procedure for exportation.
4. Provision of activities that facilitate trade
5. Publicity function
6. Training activities: It organizes seminars and workshops on export management for people
engaging in international trade.

EVALUATION

1. List two methods taking by the government to promote export trade

2. Briefly justify the roles of Nigeria export promotion council.

SUB-TOPIC 4: FORMS/TYPES OF INTERNAIONAL TRADE

1. BILATERAL TRADE: this occurs when one country agrees to exchange goods and services with
another country. It involves buying and selling between two countries e.g. trade between
Nigeria and Russia is bilateral trade agreement.
2. MULTILATERAL TRADE: this involves buying and selling among many countries. It occurs when
each nation buys and sells with whatever country it wishes. This result in a greater volume of
trade being carried on than in a bilateral trade agreement e.g. Nigeria has multilateral trade
agreement with countries like America, China Russia, Britain and Holland.

REASONS FOR INTERNATIONAL TRADE

1. Differences in the level of industrialization: the level of industrialization differs from one country
to another. Some countries are highly industrialized while some are not. This will bring a
disparity in the level of production.
 2. Inequality in the distribution of national resources: Natural resources are not evenly distributed
on the surface of the earth. Different resources are found in different part of the world. Nigeria
has crude oil in abundance while Ghana has gold.
3. Difference in climatic condition: One of the reasons for international trade is the difference in
climatic condition and weather. Some countries are very cold while some are temperate. Rubber
and cocoa are found in the countries that are located in the rain forest while groundnut grows
better in the savannah regions.
4. Different in skill and technical knowledge: The level of technology in some country is more
advanced than others. Because of their skills and technical knowledge, goods of high quality are
produced e.g. Japan is very good in production of automobile and electronics
5. Difference in level of technology: The level of technology of some countries is more advanced
than others. Because of these reasons, goods can be produced efficiently in large quantities and
better quality than others. This will necessitate international trade.
6. Difference in human resources
7. Expansion of world market.
8. Difference in the efficiency in the use of natural resources.

EVALUATION:

1. Differentiate between bilateral and multilateral trade

2. Give reasons for international trade.
3. Give 2 reasons for international trade

BENEFITS OF INTERNATIONAL TRADE

1. Increase in the total world output: International trade lead to the maximization of output.
Specialization gives rise to greater output. Total world output will increase as a result of
international trade.
2. Source of foreign exchange: International trade is a major source of foreign exchange earnings.
By selling goods and services to other countries, a country can obtain exchange earning.
3. Increase in revenue: It provides revenue for the countries concerned. More revenue can be
obtained from tariffs levied on import and export.
4. Increase in specialization: Foreign trade affords nation the opportunity of specializing in the
production of goods in which she has comparative advantage. This gives rise to greater output
and more standard product.
5. Efficient allocation of resources: When a country specializes in the production of a commodity in
which she may be of great has comparative advantage, it will lead to efficient and effective
allocation of resources.
6. Equitable re-distribution of resources: Resources from one country may be of great importance
to another country. International trade will ensure equitable re-distribution from one country to
another.
7. Foster friend relationship and world peace
8. Expansion of world market
 9. Increase in the standard of living.
10. Prevention of monopoly
11. Provision of employment
12. Acquisition of skills from one country to another.

DIADVANTAGES OF INTERNATIONAL TRADE

1. Excessive production: in foreign trade, each country specializes in what she has comparative
advantage. This will increase world output while cost per unit will reduce.
2. Collapse of infant industry: international trade may lead to the collapse of infant industries. This
industry may not be able to withstand competition from foreign companies which are bigger and
more efficient.. Moreover, the product of these companies are cheaper and of high quality than
others.
3. Importation of dangerous goods: through international trade, dangerous and harmful goods may
be imported the country e.g. hard drug or expire drug
4. Lack of unemployment: infant industry may not be able to compete with foreign companies and
this may lead to retrenchment of workers and the collapse of the industry.
5. Lead to dependence: it brings over dependence on foreign goods at the detriment of the made
goods,
6. It encourages dumping ; is the process whereby goods are more cheaper and better in a foreign
market than the domestic market
7. Exploitation of poor countries
8. Discourages –self reliance

EVALUATION:

1. Of what relevance is international trade to Nigeria economy?

2. List 4 disadvantages of international trade.

SUB-TOPIC 5: DIVISION OF FOREIGN TRADE

Foreign trade is divided into three. Namely: Import, Export and Entre port.

 IMPORT TRADE: this is the process of buying or purchasing of goods items from other country to
another. Import trade can be categorized into two, visible and invisible import.
i. Visible imports: these are physical or tangible goods purchased from other countries. It
includes both capital and consumer goods e.g.
1. Automobile
2. Equipment
3. Machinery
4. Rice and
5. Electronics
ii. Invisible import: these are services provided by other countries. Invisible import cannot be
seen physically. Invisible items are as follows:
 i. Banking
ii. Insurance
iii. Payment for travels
iv. Transportation

EXPORT TRADE: This is the process of selling the product of the country to another country
(abroad). It includes goods and services sold to other countries. Export can be visible or invisible.

i. Visible export: These are tangible goods sold to other nations. Exports from Nigeria to other
countries are made up of agricultural product and mineral resources. The goods are sold to
other countries without being processed such as :
i. Crude oil
ii. Cotton and palm oil

Ii. Invisible export: These are services sold by a country to other countries of the world. Invisible
export cannot be seen or inspected. Examples of invisible export include the following:

i. Banking
ii. Insurance
iii. Transport

EVALUATION

 Differentiate between import and export trade

SUB-TOPIC 6: BARRIERS TO FOREIGN TRADE

1. Ideological difference: Foreign trade will be affected where there is difference in option and
political ideology among nations of the world. This will restrict free flow of goods among them.
2. Currency difference: Difference in currency is a barrier to international trade. Since it involves
two or more currencies, fluctuation in exchange rate and non- availability of foreign currency
will impede the flow of goods
3. Artificial barrier: The imposition on duties like tariff on goods create barrier. Strict regulation
and tariff limit the extent of foreign trade. Goods that are dispatched to other countries will
usually pass through some barriers. This will hinder trading activities.
4. Distance: International trade involves great distance. Because of the distance between one
country and another, the cost of freight will be increased. Moreover, it takes several days or
months before goods can be dispatched from one country to another.
5. Language: Having different languages create barriers. This is a major setback because there
would be no effective communication between businessmen from one country to another.
6. Cultural problem: The multiplicity of customs and traditions of various countries can keep
away businessmen. The culture, beliefs and norms differ from one country to another and this
have a negative impact on foreign trade
 7. Difference in legal system: The legal system operating in one country differs from another
country. This may hinder international trade as different countries enact different law.
8. Differences in weight and measures
9. Poor communication facilities
10. Political instability.

EVALUATION:

ESSAY QUESTIONS

1. List two barriers to foreign trade

2. Foreign trade is basically divided into two, name them.
3. What is the difference between visible and invisible export?
4. What is the difference between visible and invisible import?
5. Mention 2 examples of invisible export.
6. Name and explain four hindrances to foreign trade in Nigeria.
7. Briefly explain the following
i. Home trade
ii. Foreign trade
iii. Entrepot trade
8. Mention 2 disadvantages of foreign trade
9. List two measures taking by the government to promote export trade
10. Briefly justify the roles of Nigeria export promotion council.

GENERAL EVALUATION

OBJECTIVE TEST

1. ------- the multiplicity of customs and traditions of various countries can keep away
businessmen. The culture, beliefs and norms differ from one country to another and this have a
negative impact on foreign trade (a) difference in legal system (b) cultural problem (c) language
barrier
2. The difference in option and political ideology among nations of the world. This will restrict free
flow of goods among them (a) cultural difference (b) ideological reasons (c) poor communication
problems.
3. The process of selling the product of the country to another country is known as (a) external
trade (b) import trade (c) excise duty
4. Which of the following is the example of invisible export? (a) banking (b) cocoa (c) tariffs
5. Physical or tangible goods purchased from other countries are known as (a) visible import (b)
visible export (c) invisible export.
6. Which of the following is not true of bilateral trade? (a) it is trade between two countries (b) it is
normally a product of bilateral agreement (c) it normally involves the use of foreign currency (d)
a and b (e) all of the above.
 7. Which of the following is not the function of the Nigerian Export Promotion Council? (a) export
development (b)export financing and provision of export incentive (c) capacity development and
export activity operators (d)Provision of technical advice to Nigerian exporters (e) prevention of
importation of illegal goods into the country.
8. Which of the following is a disadvantage of international trade? (a) exploitation of young infant
industry (b) employment opportunity (c) bulk breaking (d) innovation and motivation
(e)expansion of world market
9. Invisible export include the following except (a) banking (b) equipment(c) machinery (d) crude
oil (e) groundnut and groundnut oil.
10. Which of the following is the clear distinction between home and foreign trade? (a) both are
aids to trade (b) both are bilateral trade (c) both are multilateral trade (d) both are international
trade (e) both are entre port trade

WEEKEND ASSIGNMENT

Read Evan new edition commerce for senior secondary schools book 1 by M.O Odedokun, P.C Udokogu
and C.O.N Udoji; Page 37.

Give five distinctions between home and foreign trade.

PRE-READING ASSIGNMENT: Read about the problems of international trade

Read Evan new edition commerce for senior secondary schools book 1 by M.O Odedokun, P.C Udokogu
and C.O.N Udoji page75- 79

WEEKEND ACTIVITY: Give five distinctions between home and foreign trade.

REFERENCE MATERIAL

1. Evan new edition commerce for senior secondary schools book 1 by M.O Odedokun, P.C
Udokogu and C.O.N Udoji
2. Amplified and Simplified commerce for senior secondary schools book.

WEEK 6

DATE:…………………………..

TOPIC: INTERNATIONAL TRADE

CONTENT:

1. Procedure for international trade

2. Balance of trade and balance of payment

SUB-TOPIC 1: PROCEDURE FOR INTERNATIONAL TRADE

A businessman who wishes to engage in international trade should follow certain procedures. The - step
- by step procedures are:

1. Contact should be established between importer and exporter different means e.g. letter of
inquiry, telephone, internet advertising etc.
2. A quotation, outlining the description, price and features of the products are furnished by
the exporter in response to the letter of inquiry.
3. If the intending importer is satisfied with quotation, he will place an order with the
manufacturer. The indent will show details of the goods, price and date of delivery.
4. The next step is to make arrangement for payment through any agreed means of payment
e.g. western money transfer, documentary credit, telegraphic mail transfer etc.
5. Then, an arrangement of the goods to be shipped through a shipping company will be made.
The shipping agent will get all the necessary documents e.g. shipping note, calling forward
note etc.
6. The exporter prepares and sends copies of bill of lading to the importer in advance. Other
documents that will accompany the consignment will be prepared and sent.
7. On arrival of the goods, the clearing agent will process and complete all necessary
documents. He will check the manifest to ensure the goods are on board. The custom will
assess the consignment and compute the duties to be paid.
8. The goods will be taken to the warehouse after all necessary documentation have been
completed.

EVALUATION

1. Name 2 procedures needed in external trade

SUB-TOPIC 2: BALANCE OF TRADE AND BALANCE OF PAYMENT

BALANCE OF TRADE: is the difference between the value of a country’s visible exports and visible
imports over a given period of time. It is favorable when a country’s visible exports are more than visible
imports. It is unfavorable when a country’s visible imports are more than visible exports.

TERMS OF TRADE: This is the rate at which a country’s export is exchanged for its import. It is the
relationship between the prices of exports and prices of imports. It is measured as the ratio of index of
export prices to index of import price expressed as a percentage. It is given as :

Terms of trade = index of export price × 100

Index of imports price 1

A country has favorable terms of trade if the prices of its exports are higher than the prices of its imports
and unfavorable if the index of imports is greater than exports.
BALANCE OF PAYMENTS: This is a statement or record showing the relationship between a country’s
total payments to other countries and its total receipts from foreign countries during a specific time
period, usually a year. It is the summary of a country’s financial transactions with the rest of the world. If
the total receipts from foreigners exceed the total payments, the Balance of payment is said to be
favorable. On the other hand, if the total payments to the foreigners exceed the total receipts, the
balance of payment is unfavorable.

COMPONENTS OF BALANCE OF PAYMENTS

1. Current account: This account covers receipt and payment for visible goods and invisible
services. Invisible services are insurance, transportation, banking etc while visible goods are
automobiles, cocoa, crude oil etc.
2. Capital account: This shows the inflow and outflow of capital – both long and short terms. It
consists of capital movement. It shows changes in the volume of a country’s foreign assets and
liabilities through various capital movements and investment. It involves the actual movement
of capital from one country to another.
3. Monetary movement account: This official settlement account shows how a country balances its
current and capital accounts. It shows how the surplus or deficit on both current and capital
accounts is settled.

FACTORS RESPONSIBLE FOR BALANCE OF PAYMENTS DEFICITS IN NIGERIA

1. Low level of foreign direct investment: the level of foreign investment is very low. This is
because the environment is hostile to foreign investment.
2. Overvaluation of the official exchange rate: the exchange rate in Nigeria is overvalued. As a
result of this, more will be imported and less exported.
3. High debt service payment: The need to service the public has resulted into serious drain on the
foreign earning.
4. Poor performance of non-oil sector: the unimpressed performance of non-oil exports in recent
years remains one of the reasons for balance of payments of deficit.
5. Drought leading to poor harvest and yielding little or nothing for export.

MEASURES TO CORRECT BALANCE OF PAYMENTS DEFICIT

1. Increase in local production : Increase in production will reduce domestic prices of goods and
this will stimulate export and reduce import
2. Sales of foreign investment: The country’s investment abroad can be sold and used to pay the
creditors in order to reduce balance of payments deficit.
3. Drawing of the reserve: Drawing from external reserve can be used to settle the creditors
4. Export promotion measures: Exports can be promoted by giving tax relief and concessions to
local entrepreneurs so as to stimulate and promote greater export to pay increased import.
5. Grants and aids from richer countries: Aids and grants can be obtained from countries to offset
the balance of payments deficit.
6. Imposition of tariff: To reduce importation of goods by increasing their prices
 7. Devaluation of country’s local currency.
8. Borrowing from financial institution e.g. IMF
9. Establishment and promotion of import – substitution industries.

EVALUATION:

1. Differentiate between balance of trade and balance of payment.

2. Describe four ways by which an adverse balance of payment can be corrected.

GENERAL EVALUATION

OBJECTIVE TEST:

1. The reduction in domestic prices of goods and stimulate export will (a) increase in local
production (b) reduce local production (c) balanced up local production proceses.
2. Which of the following is used to settle creditors? (a) drawing of the resrve (b) export
promotion council (c) foreign investment.
3. A country has favorable terms of trade if the prices of its exports are higher than(a) prices of
its imports (b) index of imports (c) exports-import
4. All the following are the components balance of payment except (a) current account (b) saving
account (c) excise duty.
5. Which of the following is the procedure for international trade? (a) representative (b)excise
duties (c) custom duties

ESSAY QUESTIONS:

1. List and explain five problems associated with international trade

2. State five reasons why countries restrict foreign trade.

WEEKEND ASSIGNMENT

Read Evan new edition commerce for senior secondary schools book 1 by M.O Odedokun, P.C Udokogu
and C.O.N Udoji page 100 -102

PRE-READING ASSIGNMENT: Read about the problems of international

WEEKEND ACTIVITY: Give 2 reasons to control balance of payment deficits.

REFERENCE MATERIAL

Read Evan new edition commerce for senior secondary schools book 1 by M.O Odedokun, P.C Udokogu
and C.O.N Udoji .

Amplified and Simplified commerce for senior secondary schools book 1.

WEEK7

MID – TERM BREAK

WEEK 8

DATE: ………………………………….

TOPIC: FOREIGN TRADE (INTERNATIONAL TRADE)

CONTENT:

1. Tariffs and reasons for the imposition of tariffs

2. Tools for trade restriction and export promotion
3. Documents in foreign trade

SUB-TOPIC 1: TARIFFS AND REASONS FOR THE IMPOSITION OF TARIFFS

WHAT IS TARIFFS? Import tariff which is also called import duty, is the tax levied on goods imported into
the country. The tax is expressed either as a percentage i.e. fraction of the value of an imported good or
per unit of it. When expressed as a fraction of the value of good, it is called an ad valorem import tax .
Example, is an import duty of 10 percent of value of an imported cars, so that import duty of N200,000
would be paid on a car costing N2 million. When expressed on per unit basis, it is called a specific duty.
In order words, while an ad valorem duty is calculated on the monetary values of the imported goods, a
specific duty is calculated on the weight of quantity of imported goods, irrespective of their monetary
value or the market price. Imported duties are assessed and collected in Nigeria by the customs
Authority called the Nigerian Customs Service (NCS).

REASONS FOR THE IMPOSITION OF TARIFF

1. Revenue generation: Tariff revenue is a major component of government total revenue. It

comes only after the government revenue derived from petroleum activities
2. Infant industry protection: Industries have to be protected against unfair competition from
abroad. Imposition of tariffs on imports coming from other countries competitors is a way of
accomplishing this protection.
3. To prevent dumping of goods: Sometimes foreign suppliers deliberately sell imports at a
very low prices, even if this means they would be making a loss by so doing. Their home
governments too may subsidize them to enable them to sell cheaply in other countries.
4. A tool for settling political score: Tariffs may be imposed on goods emanating from countries
perceived to be unfriendly.
5. Improvement in the balance of payments deficits: Imposing tariffs helps to discourage
importation of goods which in turn corrects unfavorable balance of payments
 6. Protection of domestic currency against depreciation: Depreciation is the use for loses in
value of an asset due to wear and tear in the course of its uses.
7. Retaliation against tariff imposition by trading partners as an instrument of trade
negotiation.
8. A change in income distribution pattern.
9. To prevent importation of dangerous goods
10. To promote self sufficiency

EVALUATION:

1. What is tariff?
2. Give 5 reasons for the imposition of tariff in Nigeria.

SUB-TOPIC 2: TOOLS FOR TRADE RESTRICTION AND EXPORT PROMOTION

1. Tools for import restriction

i. Import duties or tariff: This is the tax imposed on the importation of imported goods
coming into the country.
ii. Quota or qualitative restriction: This occurs when there is an upper limit to the
quantity that can be imported of a particular good.
iii. Embargo: this refers to an outright ban on the importation of a good
iv. Qualitative barriers: These refer to various impediments and inhibitions that are put
in place regarding the quality attributes and specification that some goods must
possess for them to be permitted to be imported into the country.
v. Devaluation
vi. Bilateral trade agreements
vii. Subsidy to domestics producers
viii. Excise duty reduction
ix. Import license.
2. Tools for export promotion :
i. Tax concession: Tax exemption and concession are often given to export industries
and activities, as an incentive to produce more. It is a form of what is called fiscal
incentive.
ii. Grant, subsidies and loans: This is another forms of fiscal incentive . The
government gives grants or subsidies to export industries to assist them. Credits
facilities are also sometime provided on much more concessionary terms (in term of
interest rates, maturity, collateral requirements when compared with loans from
banks.
iii. Underwriting of risk associated with export: Due to the operations of exporters in
less familiar grounds of foreign countries, they faced peculiar risks, including the
risks of non-payment by the foreign customers.
 iv. Provision of information on export potentials on opportunities: Government often
enlightens industrialists and entrepreneurs on the opportunity and potentials that
in exporting certain products to specific industries.
v. Reduction of export duties.
vi. Devaluation of local currencies.
vii. Infrastructural development
viii. Organizing international trade fairs

EVALUATION:

1. Explain 5 measures each taken by a country to (a)restrict imports b. promote exports

2. List and explain 5 reasons for imposition of import tariff

SUB – TOPIC 3: DOCUMENTS IN FOREIGN TRADE

There are various documents which facilitate international trade. These documents include:

1. Consular invoice
2. Bill of lading
3. Certificate of origin
4. Shipping note
5. Airway bills
6. Indent
7. Ship manifest
8. Mate receipt
9. Freight note
10. Custom specification
11. Dock warrant
12. Dock landing account
13. Bill of sight
14. Bill of entry
15. Calling forward note
16. License
17. Export invoice
18. Ship report
19. Insurance certificate
20. Bill of exchange.

CONSULAR INVOICE: Consular invoice is the invoice that is issued by the embassy of the importing
country showing the original price of the goods in the country of origin. It is issued to avoid under
invoicing for correct import duties to be paid. Its main purpose it used by the custom authority to
ascertain duty payable on goods, also to prevent falsification of prices of goods.
BILL OF LADING: A document that contains the detail of the goods being sent. It is the document of title
to goods which are sent across two countries. It contents include:

a. The name of the ship carrying the goods

b. Description of the goods such as the quantity, type and weight.
c. Shippers name.
d. Names of the consignor and consignee.
e. Addresses of both consignor and consignee.
f. The port of embarking/port of loading
g. Conditions of carriage, e.g. who pays the freight charges
h. The port of disembarkation/port of unloading.
i. Location of the goods in the ship
j. The expected time of arrival.

CERTIFICATE OF ORIGIN: A document signed by a custom officer of the exporting country to show the
country from which the goods originated. It serves as an instrument for preferential tariff. It also helps
to determine the outflow of foreign exchange to the country of origin.

DOCK WARRANT: A receipt for goods delivered and stored in the warehouse. It entitles the holder to
take possession of goods. It is also known as dock receipt. It states that goods have been kept in the
ware house by the owner awaiting clearing or loading.

INDENT: An indent is a document used in international trade. It is an order to buy goods conveyed bby
an importer to a potential supplier.

An open indent is an order from abroad to a merchant with freedom to purchase good from any
manufacturer he pleases to while in closed indent; the foreign buyer will specify the manufacturer from
whom the goods are to be purchased.

GENERAL EVALUATION:

OBJECTIVE TEST:

1. The tax levied on goods imported into the country is known as (a) tariff (b) excise duty (c)
custom duties.
2. The qualitative restriction on either imported or exported goods is known as (a) tariff (b) quota
(c) custom duties.
3. Which of the following is the correct reason for the imposition of tariff? (a) to raise revenue
(b)to raise the monthly income of the top politician (c) to raise the monthly income of house of
Representative so that they can travel at will
4. Which of the following tools is used for export restriction? (a) export tariff (b) import tariff (c)
import duties
 5. All the following are calculated on the monetary values of the imported goods except (a) ad
valorem duties (b) specific duties (c) general duties

ESSAY QUESTIONS:

1. Explain 5 documents used in foreign trade.

2. Differentiate between open and closed indent.
3. Differentiate between bill of lading and bill of exchange

WEEKEND ASSIGNMENT

Read Evan new edition commerce for senior secondary schools book 1 by M.O Odedokun, P.C Udokogu
and C.O.N Udoji page 105 -107

PRE-READING ASSIGNMENT: Read about the problems of international

WEEKEND ACTIVITY: Give 2 merits of customs and excise duties

REFERENCE MATERIAL: Evan new edition commerce for senior secondary schools book 1 by M.O
Odedokun, P.C Udokogu and C.O.N Udoji .

WEEK 9

DATE: …………………………..

TOPIC: FOREIN TRADE (INTERNATIONAL TRADE)

CONTENT:

1. Functions of customs and excise authority

2. Functions of Nigeria Export Promotion Council
3. Functions Nigerian Airports Authority and
4. The Nigeria Ports Authority.

SUB-TOPIC 1: Functions of customs and excise authority

The customs and excise management Act (CEMA) cap 45, Law of the Federation of Nigeria, 2004 vest
legal authority in the Nigeria Customs service (NCS) to act o behave of the Federal Government of
Nigeria in all customs matter

1. Control and management of the administration of the customs and excise laws in general
2. Collection of revenues of customs and excise and accounting for same to the government
3. Enforcement of import and export restriction and prohibition: This includes carrying out anti-
smuggling operations at the ports and borders in order to forestall importation and exportation
of contrabands and goods injurious to the health and security of the country.
 4. Provision of useful inter-agency cooperation with other agencies of government such as the
Nigeria Police , NDLEA, NAFDAC, and SON
5. Trade facilitation
6. Handling trade procedures and documentation.

NIGERIA EXPORT PROMOTION COUNCIL

1. TO promote the development and diversification of Nigeria’s export trade

2. To assist in the development and promotion of export-related industries in Nigeria
3. To spearhead the creation of appropriate incentive
4. To articulate the promotion and implementation of policy relating to export and programme of
the Nigerian Government

FEDERAL AIRPOTS AUTHORITY OF NIGERIA (FAAN)

1. Development, maintenance and provision of necessary services and facilities for air transport
2. Provision of adequate facilities and personnel for effective security at all air port
3. Creating in a general sense, conditions for development of air transport and services connected
with it.
4. Development and provision of facilities for surface transportation within airports.
5. Provision of accommodation and other services for effective handling of passengers and freight.

NIGERIA AIRPORT AUTHORITY (NPA)

1. Development, ownership and operation of ports and harbours

2. Provision of safe and navigable channels
3. Offering of cargo handling and storage services
4. Maintenance of ports facilities and equipment.
5. Ensuring safety and security.
6. Development and ownership of property.

EVALUATION

1. List two functions of the following agents

a. Federal airports authority of Nigeria
b. Nigeria airport authority
c. Nigeria export promotion council
d. Nigeria customs and excise duty

GENERAL EVALUATION

OBJECTIVE TEST:
 1. Which of the following is not a normal reason for imposition of import tariff? (a) revenue
generation for the government (b) retaliation against tariff imposition by trading partner
(c)protection of domestic economic activities foreign competition
2. Which of the following is not a function of the Nigeria export promotion council? (a)
prevention of illegal goods into the country (b) export development (c)export financing and
provision of export incentive
3. Enforcement of import and export restriction and prohibition is the function of (a) custom
and excise duty (b) Nigeria port authority (c) Nigeria export promotion council.
4. To articulate the promotion and implementation of policy relating to export and programme
of the Nigerian Government (a) custom and excise duty (b) Nigeria port authority (c) Nigeria
export promotion council.
5. Provision of useful inter-agency cooperation with other agencies of government such as the
Nigeria Police , NDLEA, NAFDAC, and SON (a) custom and excise duty (b) Nigeria port
authority (c) Nigeria export promotion council.

ESSAY TEST

1. List two functions of the following agents

a. Federal airports authority of Nigeria
b. Nigeria airport authority
c. Nigeria export promotion council
d. Nigeria customs and excise duty

WEEKEND ASSIGNMENT

Read Evan new edition commerce for senior secondary schools book 1 by M.O Odedokun, P.C Udokogu
and C.O.N Udoji page 103 -104

PRE-READING ASSIGNMENT: Read about the problems of international

WEEKEND ACTIVITY: Give 2 merits of customs and excise duties

REFERENCE MATERIAL

Read Evan new edition commerce for senior secondary schools book 1 by M.O Odedokun, P.C Udokogu
and C.O.N Udoji .
WEEK 10

SUBJECT: COMMERCE

CLASS: SS1
TOPIC: COMMODITY EXCHANGE

CONTENT:

1. Meaning of Commodity
2. Types of commodity – Agricultural produce, solid minerals, oil and gas.
3. Meaning of commodity exchange
4. (d) tradable commodity (e)
5. Requirement for trading (i)Grading system (ii) Warehousing (iii) Clearing system (iv)
Standardizing (f)
6. Types of commodity exchange – Spot and forward futures € Method of trading. (i) Open
outcry, (ii) Electronic. (g)

SUB-TOPIC 1: MEANING OF COMMODITY

Commodity is any good or material produced to satisfy wants or needs. Commodities may also
be defined as materials or products that can be traded or exchanged for value at a particular
time and at a pre-determined price. Any material or anything regarded as commodity must
possess standard quality and price. For instance, gold, silver are commodities because they
have standardized quality and price which are objective and are determined in line with local or
international standard. Commodity is used to describe a class of goods for which there is
demand but which is supplied without qualitative differentiation across a market.

However, gold jewellery is not a commodity because the price is subjective depending on
factors such as design, period of sale, etc.

TYPES OFCOMMODITY

Commodities are basically classified or divided into three categories.

1. Agricultural Produce: these are goods that are grown or cultivated for human consumption.
They include food crops, cash crops and livestock which are traded or exchanged at a pre-
determined price and graded quality. Cash crops are sold in international market based on
certain standardized price and quality. Another name for agricultural produce are soft
commodities. Examples are beans, wheat, sugar, coffee etc.
2. Solid Minerals: They are basically solid materials which are extracted thorough mining. They
include natural or mineral resources which can be sold in the local market or international
market based on regulated pre-determined quality, quantity and price. Examples are gold, iron
ore, silver, copper, tin, etc. Solid minerals can also be called hard commodities.

3. Oil and gas/energy commodities: these entail commodities which are generated from
certain sources for the purpose of domestic or industrial consumption. Such commodities are
consumed as soon as they are produced because they cannot be stored for many years.
Examples are electricity, gas, oil etc.

EVALUATION:

1. What is a commodity?
2. List ten commodities and classify them into :
i. Food crops
ii. Cash crops
iii. Solid crops
iv. Oil and gas
3. Explain the following terms: oil and gas commodity, agricultural produce, and solid
minerals.

SUB-TOPIC 2: MEANING OF COMMODITY EXCHANGE AND TRADABLE COMMODITY

MEANING OF COMMODITY EXCHANGE

Commodity Exchange can be defined as an open and organized market place where ownership and titles
to certain quantity of tradable commodity are exchanged at a predetermined standardized price and
quality. It can also be defined as an organized process and procedure where buyers and sellers of
tradable commodities come into contact to exchange such commodities at a pre-determined price and
quality. Commodity exchange is characterized by commoditization or commodification in which
commodities are made to lose any form of differentiation across their supply base for the purpose of
arriving at a globalised standard. Example of commodity exchange in Nigeria is the agricultural
commodity board where samples of agricultural commodities are physically examined and graded to
meet the international standard.

TRADABLE COMMODITY.

Tradable commodities are materials which are exchanged for value in big quantities and whose quality
standards and prices are universally applicable (have international markets). Examples of tradable
commodities in West Africa are: energy (natural gas, crude oil, furnace oil), fibre (cotton, raw jute),
Grains (rice, maize, cowpea, millet etc. Non-tradable commodities are the goods that have only
domestic markets. For example, land is a non-tradable commodity.
Distinctions between tradable and non-tradable commodities

Tradable commodity Non-tradable commodity

1. It is universally supplied and demanded It is universally supplied and demanded subjected
without qualitative differentiation to different quality.

2. The price sand quality are objective in The price and quality are subjective in nature
nature
3. It is commonly traded in international It is commonly traded in local market.
market.
4. The price of tradable commodities The prices of non-tradable goods fluctuate based
fluctuates based on global supply and on local supply and demand.
demand
5. The price of tradable commodity is The price of non-tradable commodity is not fixed
relatively fixed at a specified quality due to differentiation in aspect of production.

EVALUATION:

1. Explain the term commodity exchange.

2. Explain the term tradable commodity.

REQUIREMENT FOR TRADING IN COMMODITY EXCHANGE.

1. Grading System: This involves the process of arranging the commodities in a manner to ensure
quality delivery of the commodities to the customers. This is a systematic procedure and process
involved in examining and sorting of tradable commodities in order to meet up with the world
standard.
2. Warehousing: It is the process whereby tradable commodities are stores for a specified future
period to satisfy trading purpose i.e. until they are needed.
3. Clearing system: This is the process of ensuring that commodities exported are carefully cleared
from the seaports or airports. During clearing, efforts must be made to ensure that the
commodities do not get damaged and goods cleared must be intact in order to meet up
customers’ requirements.
4. Standardizing: This process ensures that commodities being traded are able meet the standard
set by the destination country. It also involves the process of establishing or obtaining
agreement or standard for tradable commodity in order to meet up with the taste of the buyers.
Standardizing gives room for consistent quality, uniformity and reduction in variety of
commodity in the commodity exchange market.
5. Simplification: it is the process of reducing wasteful and irrelevant commodity which may not
contribute to effective exchanging process.

TYPES OF COMMODITY EXCHANGE – spot and forward futures.

The following are the types or forms of commodity exchange:

 1. Spot Trading: it is a system or type of commodity trading or transaction on the spot where
delivery takes place immediately as well as payment. The seller may receive part payment
before the commodity is delivered or full payment after the commodity is received.
2. Forward Future: this can be regarded as forward contract. it is a trading agreement between
sellers and buyers to exchange a pre-determined quantity of commodity at a pre-specified
market price and fixed future period of time. It involves trading which shall be completed at a
later date between the parties involved.
3. Hedging: this is a system of future contract of selling or buying goods at a pre-determined fixed
market price in order to prevent fluctuations in price of the commodity.

METHODS OF TRADING- OPEN OUTCRY AND ELECTRONIC.

1. Open Outcry is the name of a method of communication between professionals on a future

exchange (and also on a stock exchange), which involves shouting and use of hand signals,
whistles, bells, trumpets etc to transfer or send information about buying and selling orders. The
part of the trading floor where this takes place is called a ‘pit’. Open outcry allows the sellers
and buyers to physically meet for trading purpose.
2. Electronic Trading: this is otherwise known as e-trading or online trading. It is a method of
trading securities (such as stocks and bonds), foreign exchange or financial derivatives
electronically. The use of electronic trading method is supported due to the fact that it is faster,
cheaper, more efficient for users and less prone to manipulation by market makers and broker
or dealers.

EVALUATION:

1. Explain 5 requirements for trading.

2. What is the difference between spot trading and forward future?
3. Should electronic method of trading replace open outcry? Explain

GENERAL EVALUATION:

OBJECTIVE TEST

GENERAL EVALUATION

1. Commodity is ……………. A. services B. any material that must possess standard quality and price
c. any material that has product differentiation d. any good that can be consumed immediately.
2. One of the following is an agricultural produce…….. A. silver b. electricity c. sugar d. gold.
3. Which of the following cannot be accurately graded? A wheat b. tea c. cotton d. sugar.
4. Oil and gas commodities are ………….. Except a. gold b. electricity c. natural gas d. crude oil.
5. Another name for hard commodities is…………commodities. A. energy b. soft c. agricultural
produces d. solid minerals.
6. ……………. Is a requirement for trading a. spot trading b. forward future c. standardizing d. open
outcry
 7. …………… involves movement of traded commodities from the warehouse to a specified market
for exchange purpose. A. warehousing b. clearing system c. simplification d. graded system.
8. One of the following is a non-tradable commodity…………. A. oil b. raw jute c. gold d. land.
9. The method of trading that allows shouting and hand signals is called………….. a. open outcry b.
town cry c. electronic system d. open communication.
10. …………….. is a type of commodity exchange that provides for delivery at some future point in
time. a. forward match b. forward contract c. forward d. clearing and forwarding.

ESSAY QUESTIONS:

1. Define commodity exchange.

2. Write short notes on the following: spot trading, forward future, hedging.
3. Explain five requirements for commodity trading.
4. State the two technique of trading
5. State five differences between tradable and non-tradable commodities.

WEEKEND ASSIGNMENT:

Read Extension Modern Commerce for Senior Secondary Schools, by Bello A. A. et al; (pages 85
and 86)

WEEKEND ACTIVITY:

1. What is commodity exchange?

2. State and explain six requirements for commodity trading.

REFERENCE TEXTS:

1. Extension Modern Commerce for Senior Secondary School by A .A. Bello et al; Extension
Publication Limited.
2. Complete Commerce for Senior Secondary Schools by Alan Whitcomb and Adekoya Fatai
Olusegun ;Pearson Educational Limited.

WEEKEND ASSIGNMENT:

Read Extension Modern Commerce for Senior Secondary Schools, by Bello A. A. et al; (pages
86-98)

WEEKEND ACTIVITY:

1. List five benefits of commodity exchange.

REFERENCE TEXTS:

1. Extension Modern Commerce for Senior Secondary School by A .A. Bello et al; Extension
Publication Limited.
 2. Complete Commerce for Senior Secondary Schools by Alan Whitcomb and Adekoya Fatai
Olusegun; Pearson Educational Limited.

WEEK11. REVISION

WEEK12. EXAMINATION