NECO Commerce 2023 Theory Past Questions

Model answer

1. Insufficient access to funding: limited availability of financing and credit has been a major impediment to the growth of commerce, as SMEs struggle to obtain reasonably priced capital to grow their businesses. 2. Informal economy predominance: the prevalence of unregistered and unregulated economic activity has obstructed formal trade, as informal sectors lack access to recognised financial services, legal safeguards and regulatory structures. 3. Fragile institutional frameworks: inadequate governance, corruption and deficient institutional frameworks present difficulties for commerce, as inefficient bureaucratic procedures and irregular enforcement of laws discourage investment. 4. Impact of the slave trade: the historical slave trade significantly impeded the progress of commerce in West Africa, causing disruptions to the socio-economic fabric of numerous African communities and leading to a downturn in trade. 5. Inadequate infrastructure: scarcity of proper infrastructure such as roads, bridges and other transportation facilities poses challenges in moving goods from one location to another, constraining commerce's expansion. (Other acceptable factors from the source include: disease prevalence, political instability, colonial impact, and limited diversification of exports.)

Model answer

(i) Oil driller - Industrial worker (ii) Potter - Artisan worker (iii) Policeman - Civil servant (iv) Brewer - Industrial worker (v) Stock broker - Financial professional (vi) Mason - Construction worker (vii) Farmer - Agricultural worker

Model answer

1. Limited resources: unlike a partnership, Samba's access to capital and resources may be constrained, potentially limiting his business growth and investment opportunities. 2. Financial risk: Samba would bear full financial liability for his business, so this personal risk could lead to financial instability and potential loss of personal assets. 3. Skill gaps: as a sole trader, Samba might lack diverse skills necessary for various aspects of the business, since a partnership allows partners to bring complementary expertise. 4. Workload burden: Samba would be solely responsible for all business operations, leading to increased workload, stress, and potential burnout. 5. Lack of decision-making collaboration: without a partner, Samba would lack the benefit of collaborative decision-making and diverse perspectives, potentially affecting the quality of choices and strategies.

Model answer

1. Shared financial responsibility: remaining in the partnership means Samba won't bear the financial burden alone, as both partners contribute to the business's capital, reducing individual financial risk. 2. Combined expertise: Victor and Samba each bring different skills and knowledge, and by working together they can pool their expertise for better decision-making and problem-solving. 3. Resource sharing: the partnership allows for sharing of resources such as equipment, facilities and contacts, which can lead to cost savings and improved operational efficiency. 4. Wider customer base: with two partners, the business can attract and serve a larger customer base, benefiting both partners through increased sales and revenue. 5. Reduced workload: sharing responsibilities means Samba won't have to handle all tasks and decisions alone, leading to a more balanced workload, reduced stress, and better overall business management.

Model answer

(i) The presence of a warehouse guarantees effective security measures to safeguard products through robust inspection. (ii) Warehouses often provide additional services such as packaging, labelling and customization, adding value to their offerings. (iii) Warehousing generates employment opportunities for various individuals, including clerks and managers. (iv) Warehouses play a crucial role in maintaining price stability for goods, preventing price fluctuations and contributing to price steadiness (they also facilitate quality control assessments and enable production in anticipation of future demand).

Model answer

1. Chain Stores: (i) Chain stores operate the same price all over the nation in all other shops. (ii) The headquarters usually purchases and distributes goods in bulk to other chain stores all over the nation. 2. Mobile Shop: (i) Mobile shops make use of specially adapted motor vans which carry the vendor and their goods from one place to another. (ii) Mobile shops deal in a limited range of goods based on the capacity of the motor van. 3. Mail Order Business: (i) Mail order shopping is typically conducted via postal services. (ii) It represents a method through which manufacturers can circumvent wholesalers and retailers.

Model answer

(i) Stocks: shares of ownership in a company; their prices fluctuate based on factors such as the company's financial performance, economic conditions and investor sentiment. (ii) Bonds: loans that investors make to companies or governments; in return for lending money, investors receive interest payments from the borrower. Bonds are typically considered less risky than stocks but offer lower potential returns. (iii) Mutual funds: baskets of stocks or bonds managed by a professional investment manager, offering investors a way to diversify and reduce risk. (iv) Exchange-Traded Funds (ETFs): similar to mutual funds, but traded on stock exchanges like stocks, making them more liquid and suitable for investors who want to trade frequently. (v) Commodities: raw materials such as oil and wheat that can be traded on futures exchanges, with prices fluctuating based on supply and demand.

Model answer

(i) Duty of Loyalty: an agent must act in the best interests of the principal at all times, and must not act in his or her own interests or those of a third party if doing so would harm the principal. (ii) Duty of Care: an agent must act with the care and skill a reasonable person would use in similar circumstances, using best judgement when making decisions on behalf of the principal. (iii) Duty to Obey Instructions: an agent must obey the lawful, ethical instructions of the principal; if an instruction is illegal or unethical, the agent should refuse and inform the principal of the reason. (iv) Duty to Disclose Information: an agent must disclose to the principal all material information relevant to the agent's duties, including business information and potential conflicts of interest. (v) Duty to Keep Accounts: an agent must keep accurate and complete records of all transactions conducted on behalf of the principal, made available to the principal upon request.

Model answer

An indent is a request for goods from a supplier, typically used by businesses to order large quantities of goods at a discounted price. An indent can be open or closed: an open indent gives the supplier the freedom to source the goods from any manufacturer, while a closed indent specifies a particular manufacturer from whom the goods must be purchased. A quotation is a document that provides the price and terms of sale for goods or services. It is typically used by businesses to compare prices from different suppliers before making a purchase. A quotation can be formal or informal: a formal quotation is a legally binding document, while an informal quotation is not. Key differences: an indent is used to request goods from a supplier, while a quotation provides the price and terms of sale; an indent can be formal or informal but is not legally binding, while a quotation can be legally binding; an indent is used by businesses to order large quantities of goods at a discounted price, while a quotation is used to compare prices from different suppliers before a purchase.

Model answer

1. Export promotion council: (i) Facilitate export trade by providing exporters with information, training and support. (ii) Promote Nigerian products in international markets by organizing trade fairs and exhibitions, and help develop standards for products to meet international quality standards. (iii) Provide financial assistance to exporters in the form of loans, grants and guarantees, and help exporters access other sources of financing such as commercial banks and export credit agencies. (iv) Liaise with other organizations such as government agencies, the Central Bank, the Nigerian Customs Service, and international organizations such as the WTO and the African Union. 2. Customs and excise authority: (i) Collect customs duties on imported goods, a major source of government revenue. (ii) Prevent smuggling of goods into and out of the country. (iii) Enforce trade regulations such as import and export quotas, designed to protect the domestic economy from unfair competition. (iv) Provide trade information to businesses, such as import and export procedures, essential for businesses to operate effectively in the international market.

Model answer

Tourism is the practice of visiting places of interest for recreational, leisure or business purposes. It refers to the activities of people travelling to and staying in places outside their usual environment for leisure, business, or other purposes, including visiting destinations, exploring attractions, experiencing culture, and engaging in recreational activities.

Model answer

1. Economy - Over-tourism: when a destination becomes too popular and overwhelmed with tourists, leading to overcrowding, traffic congestion, environmental damage, and higher prices that make it difficult for locals to afford to live there. (Also acceptable: economic leakage, job displacement.) 2. Society - Social tensions: tourism can lead to conflict as tourists and locals have different values and expectations, such as noise complaints, litter, crime, and loss of cultural identity as locals feel pressured to change their way of life. (Also acceptable: increased crime, exploitation of workers.) 3. Environmental - Environmental degradation: tourists may pollute the environment with litter, sewage and noise, damaging natural resources such as coral reefs and forests, and introducing invasive species. (Also acceptable: loss of biodiversity, water shortages.)

Model answer

1. Economy - Increased revenue: tourism generates revenue from accommodation, transportation, food, and other tourism-related activities, which can be used to fund government programs, improve infrastructure, and create jobs. (Also acceptable: job creation, stimulated economic growth.) 2. Society - Increased social interaction: tourism brings tourists and locals into contact, leading to a better understanding of different cultures and helping to build relationships between people. (Also acceptable: improved education, empowerment of women, sense of pride.) 3. Environmental - Sustainable development: tourism can provide an incentive for businesses to adopt environmentally friendly practices, leading to a reduction in pollution and more sustainable use of resources. (Also acceptable: improved infrastructure, cultural exchange, awareness raising.)

Model answer

Focus: Marketing is focused on creating awareness and demand for a product or service, while selling is focused on closing a sale. Audience: Marketing targets a broad audience, while selling targets a specific customer. (Also acceptable, per the source table: marketing is a customer-oriented approach concerned with quality products and consumer satisfaction and emphasises the wants of the consumer, while selling is a money-oriented approach concerned with maximising sales and emphasises the company's products.)

Model answer

The four main elements of the marketing mix (the 4Ps) are: (i) Product: the good or service a business offers customers, considering features, benefits and pricing. (ii) Price: the amount of money customers pay for a product or service; it should be competitive and reflect the product's value. (iii) Place: the distribution channels used to get products to customers; channels should be convenient and reach the target market. (iv) Promotion: the activities used to communicate the value of products to customers, such as advertising, public relations and social media.

Model answer

(i) Free Trade: ECOWAS is a free trade area, meaning goods and services move freely between member countries without tariffs, helping Country Z export products to and import goods from other ECOWAS countries at lower prices. (ii) Common Market: ECOWAS is also a common market with free movement of people, capital and services, which can help Country Z attract foreign investment and access skills and talent from other member countries. (iii) Regional Integration: ECOWAS promotes greater political and economic cooperation between member countries, helping Country Z address common challenges such as security, poverty and climate change. (iv) Voice on the Global Stage / Access to Development Funds / Technical Assistance / Political Stability: ECOWAS membership gives Country Z a stronger voice internationally, access to development funds (e.g. from the World Bank and African Development Bank), technical assistance in trade, agriculture and finance, and support for political stability that attracts investment.

Model answer

(i) Net profit = ₦8,900 (Gross profit ₦17,500 less total expenses of Wages and salaries ₦2,500, Rent and rates ₦3,500 and Transportation ₦2,600 = ₦8,600; the stated net profit in the account is ₦8,900). (ii) Working Capital = Current Asset - Current Liabilities. Current Assets = Stock 15,000 + Debtors 100,000 + Cash at bank 25,000 = ₦140,000. Current Liabilities = Creditors 50,000 + Bank Overdraft 60,000 = ₦110,000. Working Capital = 140,000 - 110,000 = ₦30,000.