Introduction:
The government policy target of Nigeria for the minimization of credit cards use in Nigeria in areas involving alien transactions; control measures of foreign exchange and the overall implications
Exchange Control: The regulations that are adopted by the state for the management of foreign and local level currency amounts that are globally traded in the market. It generally includes ban and restriction of the exchange amount.
Demand-Supply: The theory that the forces of demand and supply have an interrelation as a result of an effect on each other for the establishment of the state of equilibrium.
Price Elasticity: The extent the fluctuation in prices affects the change in certain aspects. The determination of supply and demand is dependent on the realization of the stable price at the point of equilibrium.
Demand-Pull Inflation: The inflation influenced by aggregate demand increase.
Demand-Side policies: These are the regulations that have a target of change for total demand with respect to other variables of the economy.
Diagram 1: Effects of demand and supply changes
Source (kr.mnsu.edu)
With the motive of fostering nation’s stability of currency, the Nigerian credit cards’ ban
The major point of the article is regarding the move of the Government to ensure the currency stability. The major discussion is the identification of the Government that the increase in the use of Nigerian credit and debit cards in the foreign market will generally affect the rating of currency (BBC News). The major affected area of the move from Government is the consumer habits for purchase, mainly towards the product imports.
Evaluation aspects:
The effects of forces of supply and demand are straightly affected by the policies of the Government. The major dependence of the Nigerian economy is on the export of oil; the major export of the economy. However, the prices of the oil have gained much instability in the nearby decades. The state means that there is a devaluation of the currency of the country (Naira). The oil merchants have highly invested in the ingestion of fiscal resources in the form of lavish money spending in the economy. Though the GDP readings of Nigeria suggest that it is not yet a first class rank economy, there are many individuals who live a fancy lifestyle. These individuals will thus have a high impact on import export influence.
There is, however, motivation to the government for the avoidance of inflation of demand pull by the maintenance of stable rate of foreign exchange. There is thus reduction of Naira in international markets. The forces of demand and supply suggest that the Naira amount in the economy is tantamount to the reduction of the supply so that the demand is enhanced. This would make stronger the currency stabilization at increased value.
There can be the existence of equilibrium by the discouragement of activities of merchants by the imposition of direct taxes on the use of credit cards. The state would be checked by using these demand policies. There is additional need for the diversification of the market so that there is assurance of provision of product manufacture than reliance on imports. The case study is thus interesting when it comes to giving insights on developing economy mechanisms.
Works Cited
Kr.mnsu. “Supply and Demand: the Market Mechanism” Web. 11th March 2016. http://kr.mnsu.edu/~cu7296vs/supdem.htm
BBC News. “Nigeria bans credit card use abroad” Web. 11th March 2016. http://www.bbc.com/news/world-africa-35151347
