Supply-side policy — practice question

Nigeria makes a variety of goods, such as delivery vehicles, footwear, machines, maize and office equipment. Nevertheless, oil still dominates its exports. The government attempts to promote growth in the output and export of other goods. It does this through several policy tools, including tax changes and public spending, for example by subsidising construction-worker training. Effective training can create more jobs and lead to higher wages. The government aims to strengthen Nigeria’s macroeconomic performance and improve living standards. Investment in Nigeria has been rising only gradually. Some firms are put off buying capital goods because interest rates are relatively high, the corporation tax rate is high and the economy is uncertain. Nigeria’s population is growing quickly. The birth rate is high and the death rate is falling, although there is net emigration. Nigeria’s population stood at 191 million in 2017 and is predicted to reach 402 million by 2050. A larger population will bring both benefits and problems. It will influence the level of demand in the economy, could damage the environment and will require more food. In 2016, the Nigerian government raised the tariff on imported rice in order to push up domestic rice production. Nigeria is Africa’s biggest producer of rice but also its largest importer. In 2018, Nigeria brought in almost $50\%$ of the rice it consumed. Nigerian farmers produce less rice per unit of land than Asian farmers, and their production costs are high.