Trade: Importance and Aid to Trade

Trade means buying and selling of goods and services to satisfy human wants.

In the olden days, trade was carried out by barter system whereby goods are exchanged for goods and services for services without the use of money.

Importance of trade

1. Trade helps in bringing producer and buyer into contact

2. It facilitates means of selling surplus goods

3. It prevents wastage of some products

4. It helps producers to market their goods

5. It brings two or more countries together through international trade.

Forms of trade

Trade can be divided into two: (i) Home trade (ii) Foreign trade

A. HOME TRADE: is buying and selling within a geographical boundary e.g. Lagos – Port/Harcourt, Oshodi – Idumota. It is also known as internal or domestic trade

Home is divided into: (i) Wholesale trade      (ii) Retail trade

1. WHOLESALE TRADE – is buying in large quantities/bulk from manufacturer/producer and selling in small quantities to the retailer.

2. RETAIL TRADE – is buying in small quantities from the wholesaler and selling in units to the final consumers

B. FOREIGN TRADE – is buying and selling between two or more countries e.g. Ghana – Nigeria, Germany – Nigeria. It is alsoknown as international or external trade.

Foreign trade involves the use of different currencies and different languages.

Foreign trade is divided into:

1. Import – takes place when goods are sent from outside country into a particular country e.g. imported goods to Nigeria are television, machine, vehicles, drugs etc.

2. Export – takes place when a particular country sends goods to another country e.g goods sent from Nigeria to China are export goods e.g. crude oil, cassava, cocoa etc

3. Entrepot – is importing of goods for re-exporting purpose. The goods already import into a country for the purpose of re-exporting

Exercise: (i) Explain five roles of customs and excise in foreign trade

AIDS TO TRADE

These are services that make trade easy or facilitate trade. They are:

1. Advertising
2. Banking
3. Communication
4. Insurance
5. Tourism
6. Transportation
7. Warehousing

1. Advertising – is creating awareness in the mind of the public about the existence of old and new in the market. There are several media of advertising such as radio, magazine, television, newspaper, cinema, billboard, internet, journal etc.

2. Banking – is making fund available for business and individual. It makes trade easy. Banks make money available inform of loan and overdraft. Banks helps to keep money, valuables and give financial advise.

3. Communication – is a means of sending and receiving information from pre place to another. It makes trade easy because it links suppliers with the customers through telephone, telex, internet, E-mail etc.

4. Insurance – make a security/protection against the risk/loss in business because business is full of risk.

There are different types of insurance – marine, motor vehicle, fire, life assurance etc.

5. Tourism – is a a place for recreation holidays. Tourist centres increase trade activities e.g. Olumo Rock, Zakari game reserve, Obudo cattle ranch etc

6. Transportation – provides the means of carrying people and goods from one place to another. Transportation could be by land, water, air and pipeline

7. Warehousing – the provision of facility to store goods and materials until they are needed. It ensures steady supply of goods.it could be ordinary warehousing bonded and public warehouse. Warehouse is a place where finished goods and kept until they are needed.

Exercise List and explain five services that make trade easy.