Evaluate whether natural resources help or hinder economic development.
4.3.2
Oil has helped- Earns most foreign currency; current account surplus of $14 bn in 2025.
- Funds government spending; historically about half of revenue.
- Attracts FDI and now supports domestic refining.
Oil has hindered- Poverty at 63% despite decades of oil exports.
- Dutch disease: farm exports collapsed after the 1970s boom.
- Volatility: recessions in 2016 and 2020 after oil crashes; corruption and Niger Delta conflict.
ChainOil boom → dollar inflows → naira appreciates → farm and factory exports become less competitive → non-oil tradable sectors shrink → economy more dependent on oil (Dutch disease).
JudgmentThe resource is not the curse; weak institutions are. Botswana and Norway show resource wealth can be managed through saving funds and good governance. Nigeria lacked these, so oil became a hindrance.
Assess the likely effects of a large currency devaluation on a developing economy.
4.1.8 · 2.1.2
Benefits- Ended the gap between official and black-market rates; dollars became available.
- Raises naira value of oil and remittance inflows; boosts government oil revenue.
- Makes imports dearer, supporting local refining and farming.
Costs- Inflation rose to 34.8% as import prices jumped.
- Poverty rose from 56% (2023) to 63% (2025).
- Non-oil exports are small, so the export boost was limited; oil is priced in dollars anyway.
ChainNaira falls → import prices rise (food, fuel, machinery) → cost-push inflation → real wages fall → consumption and living standards fall.
JudgmentDepends on price elasticities (Marshall–Lerner) and the export base. With few non-oil exports and import-dependent firms, the costs came first. Gains appear only in the long run, as with the J-curve.
Evaluate the case for removing fuel subsidies in a developing economy.
4.5 · 2.6
For removal- The subsidy cost ₦4 trn in 2022, more than many ministries' budgets.
- Benefited car owners and smugglers more than the poor.
- Frees money for health, schools and cash transfers.
Against / risks- Petrol rose from ₦238 to over ₦1,000 a litre; transport fares roughly doubled.
- Cost-push inflation hit the poor hardest.
- Savings partly lost to debt service rather than visible public services.
ChainSubsidy removed → petrol price rises → transport and food costs rise → SRAS shifts left → inflation rises and real output falls in the short run.
JudgmentRight in principle (regressive, costly, distortionary), but sequencing matters. Removal works best with targeted cash transfers in place first and visible spending of the savings.
Discuss whether economic growth reduces absolute poverty.
4.2.1 · 2.1.1
Growth helps- Growth of 3–4% each year since 2021 has raised total output.
- Jobs created in services, telecoms and trade.
- World Bank expects poverty to fall from 2026 as inflation eases.
But not here (yet)- Poverty rose from 40% (2019) to 63% (2025) while GDP grew.
- Population growth of ~2–2.5% absorbs most of the growth.
- Growth in services and oil; the poor are mostly in farming.
ChainReal GDP ↑ → but prices rise faster than nominal incomes → real incomes of the poor fall → more people below the poverty line.
JudgmentGrowth reduces poverty only if it is faster than population growth, low in inflation and in sectors where the poor work. Nigeria shows growth can coexist with rising poverty.
Evaluate the usefulness of GDP as a measure of an economy's size and living standards.
2.1.1 · 4.3.1
Useful- Rebasing to 2019 captured new sectors (telecoms, fintech, Nollywood).
- Allows comparison over time and with other countries.
- Revealed a lower debt/GDP ratio, helping investors.
Limitations- 2025 rebasing added about a third to GDP overnight; nothing real changed.
- Huge informal economy is hard to measure.
- GDP per head ~$1,200 says nothing about 63% poverty or a life expectancy of ~54.
ChainRebasing updates weights to newer sectors → measured GDP rises → debt/GDP and tax/GDP ratios fall on paper → ratios look better without any change in living standards.
JudgmentGDP is a useful starting point, but in an economy this informal and unequal, HDI, poverty rates and real income per head give a truer picture.
To what extent is a high interest rate an effective way to reduce inflation in a developing economy?
2.6 · 4.4
Effective- Rate raised to 27.5%; inflation fell from 34.8% to about 15% by 2026.
- High rates attracted foreign portfolio inflows, steadying the naira.
- A stronger naira cut imported inflation.
Limited- Inflation was mostly cost-push (fuel, currency, insecurity), so demand restraint does little.
- Most households and firms use informal credit.
- CPI rebasing in 2025 cut the measured rate by about 10 points.
ChainPolicy rate ↑ → naira assets more attractive → hot money inflows → naira strengthens → import prices fall → inflation eases.
JudgmentIn Nigeria the exchange-rate channel mattered more than the borrowing channel. Monetary policy cannot fix supply-side causes such as insecurity in farming areas.
Evaluate import substitution as a development strategy.
4.3.3 · 4.1.6
Works- Dangote refinery cut petrol imports by 26% in one month (Aug 2026) and now exports fuel.
- Saves foreign currency; supports the naira and current account.
- Cement went from importer to exporter.
Fails- Restrictions on rice imports raised food prices and boosted smuggling.
- 2019–20 border closure hurt ECOWAS neighbours and Nigerian consumers.
- Protected firms can become inefficient monopolies.
ChainDomestic refining replaces imports → demand for dollars falls → current account improves and naira steadies → lower imported inflation.
JudgmentWorks where the country has a real comparative advantage (crude oil feedstock) and private investment at scale. Fails when it relies on bans that raise prices for the poor.
Discuss the economic effects of rapid population growth on a developing country.
4.3.2 · 2.3
Positive- Large, young workforce: a potential demographic dividend.
- Big domestic market attracts firms (telecoms, consumer goods).
- Young people drive tech and creative industries.
Negative- Fertility of 4.8 keeps the dependency ratio high.
- Growth per head is only about 1–2% a year when GDP grows 3–4%.
- Schools, health care and jobs cannot keep up; youth underemployment.
ChainPopulation grows ~2–2.5% a year → labour force grows → if jobs and education keep pace, output per head rises; if not, informal work and poverty rise.
JudgmentThe dividend is not automatic. It needs falling fertility, education and job creation, as in East Asia. Nigeria has the young population but not yet the jobs.
Assess the impact of a fall in world oil prices on an oil-exporting economy.
4.1.4 · 2.1.4
Severe impact- 2016 and 2020 recessions followed oil price crashes.
- Government revenue falls; deficits and borrowing rise.
- Dollar shortages weaken the naira and raise inflation.
Cushioned by- Oil is under 5% of real GDP; most output is non-oil.
- Floating naira now absorbs part of the shock.
- Local refining cuts the fuel import bill.
ChainOil price ↓ → terms of trade worsen → export revenue and tax take ↓ → government cuts spending, naira falls → AD ↓ and inflation ↑.
JudgmentThe impact depends on how much oil money is saved in good years. With no large sovereign wealth fund, Nigeria's spending is pro-cyclical, so shocks hit hard.
Evaluate policies to increase tax revenue in a developing economy.
4.5 · 1.3
Could work- 2025 tax acts: one revenue service, simpler rules, e-invoicing.
- Removing exemptions and waivers widens the base.
- Tax/GDP forecast to rise from 9.5% (2025) to 12.5% (2027).
Limits- ~93% of jobs informal: hard to reach with income tax.
- Low trust: people see little return in services.
- Higher taxes may push more firms into informality.
ChainWider tax base → more revenue → less reliance on oil and borrowing → spending on infrastructure and education → LRAS ↑.
JudgmentAdministrative reform and broadening the base work better than higher rates. Success depends on trust: citizens must see tax turned into roads, power and schools.