What is Economy?
The word “Economy” is derived and gotten from the two Greek word, “Economics”. Some emphasis has to be made on both terminologies in order to distinguish both words from their ideal concept and meaning. Economics refers to the science of how money is made, spent and utilized. Economics focused on how resources are gotten and utilized to achieve a particular goal. As a field of study, economics is a social science which studies human behavior by analyzing how people, individuals, government, and companies produce what they what to produce, consume what they produce and how they make money and build wealth on what they produced. Economics oversees the business activities, trading activities and financial activities on how people survive in the economy of a country. The relationship, connection, and interaction between money, resources, production and wealth is being determined by economics.
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Economics directs people on the way in which they will make choices in times where they are alternatives in the wants and needs of a person. Economy studies all activities which are directly or indirectly involved in the production, exchange, and distribution of goods in the economy of a country. Economics studies the production and market activities such as supply and demand for an item or commodity in the market. Economics tells if there will be a great demand for an item if the price of such item is reduced. Economics tells if there will be a scarcity for a good, item or commodity which is in circulation.
As a science, economics makes policies, formulas, theories, and principles which they go a long way in detecting and predicting the outcome of any economic policy or economic activity. As a science, economics observes the different economic activities, identifies the problem of the economy, collects data and information on the records related to the economy, analyzes the data and information collected, formulates a hypothesis, makes series of tests, comes up with a generalization, makes a law of economic activities for the problem and comes up with theories; this makes economics a science.
An Economy refers to a careful management, utility and controls the production of goods, rendering of services and the supply of money. An economy is an area in which different agents, professionals, and workers engage in production, commercial and consumption activities to see how money circulates and how scarce resources are allocated and distributed.
TYPES OF ECONOMY
There are different types of an economy which are been used and implemented by various countries and nations of the world. Prominent among them are three major economic systems that are used in modern communities and governments in the world. They are:
- Communism: Communism is an economic system in which every single individual or citizen of a country or society contributes to the growth of that very community and enjoys rewards and privileges as a member of such community. In such economic system, there is a common ownership of assets and the means of production. This system eliminates any form of social and political inequality because nobody is richer or wealthier than the other person. In other words, everyone is on the same social status. There is no conflict or clash or competition in the means of production because the economy is an economy of public ownership of the means of production, distribution an exchange. For instance, in a communist state, the land used for farming activities such as fishing, game hunting, planting, harvesting of crops etc are owned by the community; individuals do not possess the land because the land is owned by the society and if any harvest should be recorded by the effect of their agricultural activities, then they will all share the benefits and fruits collectively. In this economic system, there is collective and public ownership of anything that concerns or has to do with the economy, industrial and trading activity in the community.
In a communist state, there is the idea and principle of a classless and egalitarian society. This is because certain properties and assets are shared in such economy. The classless feature means that there is no recognition of a leader in this system since everyone is of equal social status and political class.
- Socialism: Socialism is an economic system in which the state or the government handles, manages and controls the means of production, distribution, and exchange in a country. In a socialist system, there is little, no or less freedom for private individuals to have the ownership of assets and means of production in the economy. In a socialist economy, the government has the ownership of everything in the economy, ownership of the means of production isn’t allowed and tolerated. Once an individual owns assets in such economy and is caught, he or she will face the wrath of the country as he may have to relinquish and forfeit his assets to the government.
In a socialist economy, the end goal of motive is not for profit maximization or profit making. The objective is not for making a profit but rather for rendering essential services to the people. The management of assets is in the hands of the government. The government controls everything in the economy and finances it.
For instance, in a socialist state, the government has the ownership of hospitals, clinics, houses, businesses, aviation, transportation, investments and trading. Individuals are not given the freedom and liberty to own businesses, properties or assets in such economic system. Economic and business activities are overseen by the government as the government handles and make provisions for public enterprises in the economy. The machinery of a socialist economic system is that the allocation of the means of production is vested in the government and its agencies.
- Capitalism: Capitalism is a market thriving economic system in which private individuals own and control the means of production in the economy. The means of production and the factors of production (Land, Labor, Capital) are being managed and controlled by the individual(s). The economy is usually filled with competition as the capitalist strive for their products to be sold. Demand and Supply plays a key role in this economy because once a product is on a high demand, the price is likely to go high and those products become available and accessible to those who can afford them. In a capitalist system, there is liberty for people to own assets and properties. The freedom given to the capitalist results to an increase in production activity because the competition in the capitalist system makes every businessman or capitalist will improve in the quality of his product; failure to do will see make other capitalists outrank him. Unlike the socialist system, the capitalist system is not monopolistic in nature. Since the economy is placed in the hands of the private individuals, this means that it is the individuals and not the government that finances the business enterprises, controls it and manages it.
The motive and objective of every capitalist is to maximize profit. Capitalists gear at the exploitation of people for them to make the profit upon the services and products they offer.
TYPE OF ECONOMY WHICH NIGERIA IS PRACTICING
As a country, Nigeria is practicing a mixed economy system which is a mixture and a combination of the capitalist and the socialist system. Nigeria’s economy is based on the traits and characteristics of the capitalist economic system and the capitalist system. This further illustrates that the country has a dual economy system in which private individuals and the state (government) handle and control the means of production, distribution, and exchange in the country.
In a mixed economy or in a mixed market economy, there is a private ownership of the means of production and ownership of resources, assets, and properties which is further observed with governmental ownership, control, management and participation in the economic activities in the country.
The government will fail if it decides to handle all parts and sectors of the economy because it will not be able to build a structure which will make economic activities to have an increase in productivity because of its monopolistic nature and lack of competition.
The government oversees the economy and also gives ownership of firms, companies, and businesses to private individuals. A good example is the Power Holding Company of Nigeria (PHCN) which was formerly on the hands of the government as it served as a source of the revenue to the government and since it could not satisfy people, it was privatized and given to individuals to handle and control.
STRUCTURE OF THE NIGERIAN ECONOMY
The economy of a Nigeria is built on her foreign policy, natural resources and other sectors that make up the economy such as agriculture, tourism, health, education, mining, petroleum, farming, currency, insurance, marine, transportation, aviation, and forestry.
After the discovery of oil in Oloibiri in Bayelsa, Nigeria became dependent on oil and they focused less on agriculture. 90% of the revenue which the country makes is made through the export of oil to other countries.
The economy of Nigeria is partially fixed on the country’s exchange rate. Businessmen, traders, investors, and entrepreneurs in Nigeria leave the country to import products form other countries. The increase and imbalance in the exchange rate increases the GDP of the foreign country and it makes the goods and products to be sold at a high rate here in Nigeria, and that kills the economy