Eco. 0511 Assignment-14th September, 2018

Development Economics

• Ogbodo chinyere joan
• 2016/235273
• Combined social sciences(Economics&sociology)
Topic: Identify your talent and skills : how do you intend to develop your talent and skill to create wealth for you.

TALENT and SKILLS

• Comprehensive knowledge on Microsoft offices
• Microsoft word
• Microsoft power point
• Microsoft publisher
• Corel draw application
• Microsoft excel.

• Web designing :which includes graphics designing, coding. E. T. C. (still under perfection )
• Baking.
• Advisory skills.

I intend to use my talent and skills to develop myself first before going into developing others. In more time to come, I still intend to learn and acquire more skills such as programming,tailoring,hairdressing.
The best way of acquiring wealth through my skills and talent is by working for myself and building up my own successful business so that every hour I spend working is spent on building up my own wealth and prosperity. Then once am stable and balanced both financially and otherwise, I could talk of expanding the business and also employ one or two persons to start with.

depreciation and existing capital stock. The difference of the fixed accelerator theory and the flexible accelerator theory is business expectation. It takes lag i.e yt-1

Marginal hypothesis of investment
a) What determine a firm’s decision to invest
b) When to invest
c) How much to invest
All the question where answer by Lord Kenyen’s with his marginal efficiency of capital (marginal efficiency of investment criteria).
Decision to invest
Business men will always invest if the yield or rate of return over cost (what you get as profit) is greater than the market (ie. the rate at which money is borrowed).
Note
The rate of return over cost (RROC) is called marginal efficiency of capital (MEC) or simply Internal rate of Return (IRR)
IRR = MEC = RROC
Using accounting methods formulas
SI = Prt ——————————————— (i)
A = P + (prt) ————————————————- (ii)
A = P (I +r)t ————————————————- (iii)
Present value: The present value is the value of a future sum of money today. And is represented as pv.
Formula for present value is Pv = —————– (iv)
Pv = A (I + r ———————————————— (v)
Net present value: The net present is the sum of present value and is represent as Npv. Formula for net present value is NPv =
IRR = NPV = 0
I.e where present value is equal to zero. (ie where the company breaks even point in business. Internal rate of return, this is where the company stop investment. Note: When the net present value is equal to zero (NPV = 0), a company should stop to invest or should stop investment.
Decision to invest comes in the cases like this:
a) When marginal (M) is greater than interest rate (r) accept investment proposal.
b) When marginal (M) is less than interest rate (r) reject investment proposal.
c) When marginal (M) is equal to interest rate (r) indifference.
Mathematically we have:
a) When m > r = accept investment
b) When M<r = reject investment
c) When M = r =indifference

Note
That when net present value is positive, investment can continue and when net present value is negative it means the business is not profitable and therefore, cannot continue.
If the net present value NPV is positive, A company should continue to invest until is equal to zero = 0) which is IRR internal rate of return where a company should stop investment.

2. Friedman’s permanent income Hypothesis
According to Professor Milton Friedman of the University of Chicago, the main determinant of consumption expenditures is not current income but “permanent income”. By permanent income, he means the average income which a household expects to earn over its planning horizon (planning horizon could be for 3-5 years). Permanent income includes past, current and expected future income.
Friedman’s theory of consumption may be summarized in these equations:
Cp = K (I, W. U) Yp ——————————- (1)
Y = Yp + YT ————————————— (2)
C = Cp + CT —————————————- (3)
and
P = P = P = 0 ————————————— (4)
Yp YT Cp CT YT CT —–
The first equation is the core of the theory. It hypothesized that consumption of a household is proportional to its permanent income. Note that K, the factor of proportionality implies that households consume about the same proportion of their permanent income notwithstanding (Yp). K is also a constant equals MPC and APC. The value of k depends on the rate of interest (i), the ratio of non-human wealth to permanent income (w) and u, a permanent variable for utility (a variable capturing the household’s taste and preferences for consumption versus additions of wealth). According to Friedman, K is a variable constant which vary with the household’s stage in the life cycle.
Equations 2 and 3 are definitional. Equation 2 shows that current (measured) disposable income y is made up of permanent income Yp and transition income Yt. Where Yp (permanent income) comprises the income which the households expect to receive into the future. While YT is an addition to or subtraction from Yp which was unexpected: a windfall income or calamity e.g. pool belting and unemployment respectively.
In equation 4, P stands for the correlation coefficient between the variables designated by the subscripts. Hence, all it says is that the transitory components of income and consumption are uncorrelated with their corresponding permanent components. Given this specification, it follows immediately that all positive transitory income (ie. all temporary income gains) will be saved and symmetrically, all negative transitory income (i.e. all temporary income losses) will be wholly offset by dissaving. Succinctly, Friedman permanent income hypothesis (PIH) was the monetarist’s response to Keynes’ Absolute income Hypothesis (AIH). Friedman was able to remedy the defects in absolute income hypothesis (AIH) be successfully introducing wealth as a consumption determining variable (See equation 1). Moreover, he was able to reconcile the inconsistencies that were detailed in Keynes’s absolute income hypothesis. This he does by taking long term, wide measure of income as determinant of consumption. Also, since permanent consumption and permanent income are long run time series data which suggests that APC is constant. In addition, the theory proposes the proportional nature of the basic long run relationship while predicting a short run non proportional relationship for Cross section data.
A major problem with Friedman permanent income hypothesis is the elusive nature of the key variables. From experience, it is difficult to obtain a measure of permanent income and consumption since they are subject to changes overtime due to expectation and past experience.
THEORIES OF INVESTMENT
The theories of investment seek to explain the investment behavior of firms. These theories include:

(5) Allocation and policy decisions: It implies that the trustees or investors need to integrate or implement risks and other vital issues that concern the firm or company for high efficiency and productivity of such investment in both sectoral and overall.
(6) Adequate or steady electricity supply, infrastructure and good roads: This is a very essential factor that boosts the efficiency and productivity of investment both in sectoral and overall, if there exists a steady electricity supply the investment will grow and yield more profit which is the main aim of the investment.
(7) Quality accounting: This is important and necessary to increase efficiency and productivity of investment in sectoral and overall.

ASSIGNMENT 2
Clinically and critically discuss and analyse
a) The theory(ies) of consumption
b) The theories of investment
Due to the crucial role of consumption in determining the size of a nation’s aggregate income (national income), through its impact on employment and other macroeconomic variables, a lot of theories/hypotheses have been propounded to explain the causes and behavior of consumption in both the short and long run. These include:
1) Keynes’ Absolute income Hypothesis: Keynes postulated that the propensity to consume was a functional relationship between a given level of real (current) income and the expenditure on consumption out that given level of income. Thus,
C = a + byd
The propensity to consume represented by b is now more commonly known as the consumption function which is stable. Keynes hypothesized that the shape of the consumption curve is upward sloping, with a slop between zero and unity. Keynes proposition was based on fundamental “psychological law” which states that men are disposed to increase their consumption as their income rises: but not as much as the increase in their income. Keynes asserted to any modern community from this, it follows that the marginal propensity to consume (MPC) would lie between zero and one, Keynes further conjectured that the MPC would fall as income rises. This clearly means that the average propensity to consume (APC), which is the share of national income consumed, will decline with increases in total income.
The major assumptions underlying Keynes’ Hypothesized consumption function are as follows:
(a) Current consumption is a stable, positive function of current income; i.e.
C = C0 + Cyd —————————– (1)
(b) The MPC is less in the short run than in the long run. So, an increase in consumption will be smaller than an increase in disposable income.
(c) In the long run, a smaller proportion of income will be consumed as income increases, and hence the MPC will be less than the average propensity to consume (APC).
(d) At low levels of disposable income, consumption will exceed income, (MPC>1).
(e) Changes in the stock of their wealth will directly affect household level of consumption.

No 6
Why is it that some countries are able to attract a huge quantum of foreign direct investment over a long period of time?
(1) A business conducive environment to the investors: A country that has a conducive business environment is ultimately to attract more investors to their country than a country with unfriendly environment. Business friendly environment largely depends on good governance, rule of law, political will and infrastructure of the country and rules and regulations.
(2) Congenial climate: This is another factor that any investor has to consider before moving to any country to invest. However, at the same time, a country with/endowed with a good climate will ultimately attract more investors that’s sure than the other that do not have.
(3) Political stability/situation: This is very essential and credit to any country that their political situation is conducive/stable and thereby it’s obvious that foreign direct investors will move over to such a country than the opposite (country). It’s also a prime determinant for attracting foreign direct investment, the investors consider it very well to avoid economic waste or lost of their hard earned income.
(4) The availability of raw materials/resources: The investors deemed it right to consider this as also the factor that makes them to invest more in one country than the other where there is no availability of the raw materials that may be needed for their production cannot be considered to move on for investment in such a country.
(5) Cost of Labour/wages: This is important determinant that makes some country attract more foreign direct investment while other are starved of such, a rational investor consider this very well before progressing to any foreign direct investment because labour has a direct Relationship with the profit the investor is aiming to gain which is the sole aim of the investors and for their voice to be heard in enterprises (IMF) but this is secondary.
(6) Friendly tax, custom regulations and attractive packages: It is another factor or reason that some country gain/attract more investment than the other because any rational investor has to consider the tax, custom regulations of any country they want to move to for investment.
(7) Tolerable and moderate inflation and reasonably stable exchange rate: Here is a very big factor that foreign direct investors look into consideration before moving on to any country to invest because high inflation and unstable exchange rate is not friendly to any investor to put his/her hard earned capital/income to such country while those that have tolerable and moderate inflation and reasonable exchange rate attract more investment in their country.
(8) Technological progress/industrialization: This is also one of the factors that makes a country to attract more investment/investors than the other because investors are always looking at country that have innovation, improvement ideas, skills, machinery and steady electricity supply for the proper functionality of their investment but any country that are technologically weak, they are bound to be starved for a foreign direct investment.

Building a Globally Competitive Economy: Restoring Nigeria’s economic growth and laying the foundations for long-term development requires a dynamic, agile private sector that can innovate and respond to global opportunities. The ERGP aims to tackle the obstacles hindering the competitiveness of Nigerian businesses, notably poor or non-existent infrastructural facilities and the difficult business environment. It will increase competitiveness by investing in infrastructure and improving the business environment.
Investing in infrastructure: The ERGP emphasizes investment in infrastructure, especially in power, roads, rail, ports and broadband networks. It builds on ongoing projects and identifies new ones to be implemented by 2020 to improve the national infrastructure backbone. Given the huge capital layout required to address the massive infrastructure deficit in the country, the private sector is expected to play a key role in providing critical infrastructure, either directly or in collaboration with the Government under public private partnership (PPP) arrangements.
Promoting Digital-led growth: To make the Nigerian economy more competitive in the 21st century global economy, its industrial policy must be linked to a digital-led strategy for growth. The ERGP will build on The Smart Nigeria Digital Economy Project to increase the contribution from ICT and ICT-enabled activity to GDP. The overall goals of a digital-led strategy for growth centre on the establishment of an ICT ecosystem in Nigeria. This is enabled through significantly expanding broadband coverage, increasing e-government, and establishing ICT clusters, starting in the SEZs. Government will also drive a programme to build the skills in this sector, focusing on training IT Engineers in software development, programming, network development and cyber security.

No 4
What is the optimal blend of national savings and foreign savings or external borrowing to finance the aggregate level of investment?
This suggests that the country has saved a specific amount in external account while in reality the deficit reflect a gap or excess demand in its foreign exchange transaction for a given period of time. National income account which is formally written as S – I = X – M where symbol S, I, X and M indicate respectively natural savings, total investment, export of goods and services and import of goods and services. If the left hand side of these identity which indicate the savings investment gap is in the negative, is invariably follows that, the right hand side, the foreign exchange gap would be in the negative as well and vice versa.
The identity highlights one of the most important behavioural relationships of an economy namely the current account deficit added to the national savings equal to the level of total investment. Finally, investment must be financed by some combination of private domestic savings, government savings (surplus) and foreign savings (foreign capital inflow).

CLINICALLY AND CRITICALLY DISCUSS AND ANALYZE THE MILLION DOLLAR QUESTIONS RAISE UNDER THE ISSUE SURROUNDING CAPITAL FUNDAMENTALISM?
QUESTION ONE
No 1
What is the desired level of gross investment for an economy to realize the target growth rate of real (GDP)?
Gross investment refers to the expenditure on buying capital goods over a specific period of time. On the other hand, net considers depreciation and is calculated by subtracting depreciation from gross investment. Gross investment can also be viewed as the amount a company invests in business assets that does not account for any depreciation. The Gross figure more accurately reflects the company’s actual financial commitment to an asset from which it can derive a return on investment.
Real Gross Domestic Product (GDP) is an inflation – adjusted measure that reflects the value of all goods and service produced by an economy in a given year, expressed in based – year prices, and is often referred to as “constant-price”,
“Inflation – corrected GDP or “Constant Dollar GDP”. Unlike Nominal GDP, real GDP can account for a change in price level and provided a more accurate figure of economic growth. For an economy to realize the desired level of target growth rate of real GDP, such economy should invest fully on gross investment because this is a kind of investment in which capital goods like plants, machinery, etc are used for the production of other goods which in return leads to high increase in the value of assets and securities and on the long-run leads to the largest growth rate of real GDP.
No 2
How is the ex-arte investment to be appropriated between the public and private sector to help achieve the real growth rate?
Ex-arte is a phrase meaning “before the event”. Example is used mostly in commercial world, where result of a particular action or series of actions, forecast advance (or intended). The real growth in an economy is critically dependent on the existing stock of capital and net accumulation in the stock through current investment. Since the stock of capital at one point of time is the output of the stream of investment made in the past, therefore, the growth rate of an economy in the final analysis is the function of investment of both current and past.
There is massive gap between the need for infrastructure. Investment around the world and the ability of Government which is the public sector to pay for those investments while the private sector should build, control and operates infrastructure project and subject to strict government oversight and regulation, can help to achieve the real growth rate. However, public sector should sets the groundwork to enable private investment and allow it to thrive and private sector should also try to be doing the necessary because both sectors are so important for each other for favourable or sound Economic growth or the real growth rate.

FACTORS THAT DETERMINE INVESTMENT
(1) Expected rate of net profit: Profit hope to realize investment
(2) Current Rate of Interest: Users cost of capital- percentage increase will discourage the investors and investment will fall completely.
(3) Government policies: This is very crucial to consider before establishing or intending to venture into any kind of investment because high taxes depress the expected net profit but subsides enhance expected rate. Hence, Tax is a cost to business. High cooperate profit taxes translate to low retained earnings by firms and vice versa.
(4) Expectation of businessmen:
(5) Acquisition, maintenance and operating costs: If the above goes up the profit will be low thereby investment will be discouraged and vice versa.
It is the second component of the Keynesian model of Income.
Y = C = 1
It = Kt – K t-1 + Dt
Where It = Gross Investment in period t
Kt = Current capital stock at period t
K t-1 = Capital stock at previous period or the beginning of the period t
Dt = Replacement expenditure
Kt – K t-1 which is the net investment is a net investment and its major focus in macro economics analysis.
CONCLUSION
The whole studies focused on investment, capital formation in the growth of our economy. In this case, implementation of proper investment and capital maximization will help in achieving the desired economic growth and a huge quantum GDP. I believe that every citizen will smile for the economic development of our dream

expected life-time income, and planning horizon in not 3-5years in Friedman’s model but rather his entire life time. The individual maximizes a household optimal utility function throughout his life time by saving “in fat years” to smooth out consumption in “lean years”.
An individual’s life time income and consumption pattern are depicted below:

From the above diagram, it shows that an individual will dissave in his youth and old age when his income is relatively low and will save during his middle age years when his income is high, due to family responsibility, his consumption may also be relatively high. However, Modiyiani and Brumberg were able to derive the result provided the interest rate is constant, the factor of proportionality between consumption and the individual’s present value or wealth or life time income is dependent solely on the age of the individual. They assume further that consumer hold expectation with certainty, interest rate is zero, and that the consumer starts work with zero asset, and plan to have zero assets at death. With these specifications, Modigiani and Brumberg derive the following result(s):
Ct = bW1 ————————————————- (1)
Ct = 1/((L-a)) (PV) —————————————— (2)
Equation (2) may be rewritten thus,
Ct = 1/((L-a)) Y1 + (N-a-1)/((L-a)) Y_t^a + 1/((L-a)) At – 1 ————– (3)
Equation (1) simply says that current consumption is assumed to be proportional to the present value of wealth. To define wealth properly, equation (2) and (3) emerged, where L, N and a are the length of individuals total life, working life and present age, all dated from the time he starts works. Yt is labour income, Y_t^a is expected future labour income and A1 is current asset holdings. An example of equation (2) immediately yields the result that the propensity to consume life-time income is unity.
Equation (3) which is the core equation from the life-cycle hypothesis which says that current consumption is a linear and homogenous future (labour) income and current asset holdings with coefficients depending on the age of the household. The important of this model is that, it was able to explain the observed wealth of the community i.e (Aggregate wealth-income ratio) without recourse to the bequest motive i.e “life cycle saver” who saves during his earning span and dissaves the entire amount during his retirement span.
In summary, the theories (AIH, RICH, RIA, AND L CH) indicate that consumption besides being a function of disposable income, is also a function of real wealth; and real wealth determines permanent income or the present value of total resources. The relative emphasis placed on current income and permanent or expected income means that the theories may have different policy implications within the ambit of fiscal and monetary policies. Given the prime position occupied by Mpc (Marginal Propensity to consume) among national income determinants, these deserve proper investigation and refined methods of analysis.
No: 2
THEORY OF INVESTMENT
Investment: Could be defined as not capital formation, hence, it refers to such capital expenditure on consumer durables, residential construction (buildings) and plants and machinery. In other word, it could be also defined to as the purchase of real tangible assets such as machines, factors or stocks of inventories which are used in the production of goods and services for future use.

Duesenberry’s Relative Income theory/hypothesis
Professor J. S. Duesenberry of Harvard University, in 1994 came up with a theory to explain the secular upward drift of the short run consumption functions and to reconcile them with the long run consumption function. What Duesemberry sort to provide answer was; make makes people with a given income increase their consumption over time? This, why the short run consumption functions shift up over time? He found his answer in psychological and sociological factors. He posited that:
(a) That an individual’s consumption and saving decisions are influenced by his social environment (Sociological factors). Thus, given a level of income, if he lives in environment dominated by the well to do in society than if he lives in less affluent area. Thus, people in Victoria Island in Lagos are like to spend more than those in some other areas like Ajegunle and Oshodi. Moreso, it makes for a proportional relationship between aggregate consumption and aggregate disposal income. The “determinant effect resulting from the high living standard of those with high income levels and the desire to keep up with the Joneses” constituted one way of explaining the cross sectional variation in APC.
The constancy of the APC in the long run though it varies in the short run could be seen thus. If we assume that average propensity to save d s/y depends on the present level of income Yt
relative to previous peak income (Yo),
Thus:
S/y = a + b (y/ yo) ————————————————- (1)
Since c/y = 1 – s/y ————————————————- (2)
then,
c/y = (1-a) –b (yt /yo) ———————————————- (3)
If income grows at a constant rate g, so that
yt = (1+g) yt-1 ——————————————————- (4)
If Yt-1 = Yo, then
Yt = (1 + g) yo ——————————————————- (5)
Substitute Equation (5) into Equation (3), gives
C/y = [(1-a) –b (1+g)] ———————————————– (6)
Hence, in the long run the Apc is constant and equal to the Mpc.
(b) That the consumption behavior of individuals exhibits a “ratchet effect during from the fact that people, having become used to a standard of living find it difficult to lower same even in the face of declining income. This is the psychological axiom of relative income hypothesis.
In addition, the direction of income change determines the relationship between Apc and Mpc in Duesenberry analysis of consumption behavior using the relative income hypothesis. These include:
(i) If income is rising and it is above previous income level, the Apc would be constant and it will be equal to Mpc.
(ii) If income is rising and is below previous income level, the Apc would fall and Mpc rises but less than Apc.
(iii) If current income falls below previous income level, the Apc rises and is more than Mpc.
(iv) If income grows at a constant rate, Apc would be constant rate, Apc would be constant also equals Mpc.
Furthermore, a major problem of Duesentaerry relative income hypothesis is the negation of the basic fundamentals of utility maximization and rationality effects nullified.
(3) Friedman’s Permanent income theory/hypothesis
According to Professor Milton Friedman of the University of Chicago, the main determinant of consumption expenditures is not current but “permanent income”. By permanent income, he means the average income which a household expects to earn over its planning horizon (planning horizon could be 3-5 years). Permanent income includes past, current and expected future income. Friedman’s theory of consumption may be summarized in these equations:
Cp = K(I, W. U)yp ——————————————— (1)
Y = Yp + YT —————————————————– (2)

No 8
What determines the efficiency and productivity of investment in a country both sectoral and overall?
By definition, efficiency and productivity of investment is a function of the return and total cost of an investment management structure subject to the judiciary and other constraints within which investor must operate. Institutional investors implement their investment policies through investment management structures. Efficiency and productivity of investment in a country both overall are below:
(1) Maximizing capital or income: An efficient and productive investment can be achieved through a maximum management of capital invested into the firm to avoid collapsing or economic waste. If judiciously managed or utilized ultimately, they will be efficient and high level of productivity of the investment but if not so they will not be nothing like efficiency or productivity of investment.
(2) Rational labour productivity: This contributes largely for the efficiency and productive of investment because cost of labour has a directly relationship with the success of any investment, if cost of labour is low the efficient and productivity of the investment will increase (high) but verse versa.
(3) Good governance: This is very crucial factors that determines the efficiency and productivity of investment in a country in bother sectoral because if government of any country is functional or delivering there will be high efficient and productivity of investment and everybody in the country will benefit it directly or indirectly because it will ultimately increase GDP or national output.
(4) Low level of corruption: This is very dangerous factor if not controlled or eliminated completely. It will mar the efficient and productivity of investment in a country in both sectoral and overall because the efficient and productivity can never be achieved but if controlled or eliminated sure there will be efficiency and high productivity of investment in both sectoral and overall.
(5) Allocation and policy decisions: It implies that the trustees or investors need to integrate or implement risks and other vital issues that concern the firm or company for high efficiency and productivity of such investment in both sectoral and overall.
(6) Adequate or steady electricity supply, infrastructure and good roads: This is a very essential factor that boosts the efficiency and productivity of investment both in sectoral and overall, if there exists a steady electricity supply the investment will grow and yield more profit which is the main aim of the investment.
(7) Quality accounting: This is important and necessary to increase efficiency and productivity of investment in sectoral and overall.

No 6
Why is it that some countries are able to attract a huge quantum of foreign direct investment over a long period of time?
(1) A business conducive environment to the investors: A country that has a conducive business environment is ultimately to attract more investors to their country than a country with unfriendly environment. Business friendly environment largely depends on good governance, rule of law, political will and infrastructure of the country and rules and regulations.
(2) Congenial climate: This is another factor that any investor has to consider before moving to any country to invest. However, at the same time, a country with/endowed with a good climate will ultimately attract more investors that’s sure than the other that do not have.
(3) Political stability/situation: This is very essential and credit to any country that their political situation is conducive/stable and thereby it’s obvious that foreign direct investors will move over to such a country than the opposite (country). It’s also a prime determinant for attracting foreign direct investment, the investors consider it very well to avoid economic waste or lost of their hard earned income.
(4) The availability of raw materials/resources: The investors deemed it right to consider this as also the factor that makes them to invest more in one country than the other where there is no availability of the raw materials that may be needed for their production cannot be considered to move on for investment in such a country.
(5) Cost of Labour/wages: This is important determinant that makes some country attract more foreign direct investment while other are starved of such, a rational investor consider this very well before progressing to any foreign direct investment because labour has a direct Relationship with the profit the investor is aiming to gain which is the sole aim of the investors and for their voice to be heard in enterprises (IMF) but this is secondary.
(6) Friendly tax, custom regulations and attractive packages: It is another factor or reason that some country gain/attract more investment than the other because any rational investor has to consider the tax, custom regulations of any country they want to move to for investment.
(7) Tolerable and moderate inflation and reasonably stable exchange rate: Here is a very big factor that foreign direct investors look into consideration before moving on to any country to invest because high inflation and unstable exchange rate is not friendly to any investor to put his/her hard earned capital/income to such

No 4
What is the optimal blend of national savings and foreign savings or external borrowing to finance the aggregate level of investment?
This suggests that the country has saved a specific amount in external account while in reality the deficit reflect a gap or excess demand in its foreign exchange transaction for a given period of time. National income account which is formally written as S – I = X – M where symbol S, I, X and M indicate respectively natural savings, total investment, export of goods and services and import of goods and services. If the left hand side of these identity which indicate the savings investment gap is in the negative, is invariably follows that, the right hand side, the foreign exchange gap would be in the negative as well and vice versa.
The identity highlights one of the most important behavioural relationships of an economy namely the current account deficit added to the national savings equal to the level of total investment. Finally, investment must be financed by some combination of private domestic savings, government savings (surplus) and foreign savings (foreign capital inflow).
No 5
What are the main determinant and principal deterrent to domestic investment and foreign investment (portfolio and direct)?
The main determinant for domestic and foreign Investment (portfolio and direct) are:
(1) Political and Economic condition: These are very important elements that contribute positively, for any investor to think for investment in any area or country both domestic and foreign investors consider it before investing to avoid story.
(2) Macro-economic stability: Here if macroeconomic system or stability like inflation, government, policy, exchange rate, interest rate is favourable and stable the investors will trup-in to invest and there will be no fear in them for come in and invest thereby increase the GDP by at least 8% and attract Economic development.
(3) Certainty in economic policies and other incentives: This is also another factor that enhances Domestic.
(4) Low tax and other incentives: These are important factors that determine domestic and foreign investment because if taxation is low and there is incentives

the final analysis is the function of investment of both current and past.
There is massive gap between the need for infrastructure. Investment around the world and the ability of Government which is the public sector to pay for those investments while the private sector should build, control and operates infrastructure project and subject to strict government oversight and regulation, can help to achieve the real growth rate. However, public sector should sets the groundwork to enable private investment and allow it to thrive and private sector should also try to be doing the necessary because both sectors are so important for each other for favourable or sound Economic growth or the real growth rate.

No 3
How do we define the sectoral priorities within the public and private sectors such that investment allocation generate sectoral growth rate to match the overall growth rate of the economy?
The public and private sector investment allocation generate sectoral growth rate that match the overall growth rate of economy such as allow markets to function. The public sector recognizes the power of markets to drive optimal behaviour among market participants The Plan priorities the use of the market as a means of resource allocation, where appropriate. However, the Plan also recognises the need to strengthen regulatory oversight to minimise market abuse.
Uphold core values. The public and private sector is rooted in the core values that define the Nigerian society. Economic Recovering Gross Profit has three broad strategic objectives that will help achieve the vision of inclusive growth outlined below: (1) restoring growth, (2) investing in our people, and (3) building a globally competitive economy.
Restoring Growth: To restore growth, the plan focuses on achieving macroeconomic stability and economic diversification. Macroeconomic stability will be achieved by undertaking fiscal stimulus, ensuring monetary stability and improving the external balance of trade. Similarly, to achieve economic diversification, policy focus will be on the key sectors driving and enabling economic growth, with particular focus on agriculture, energy and MSME led growth in industry, manufacturing and key services by leveraging science and technology. The revival of these sectors, increased investment in other sectors, less reliance on foreign exchange for intermediate goods and raw materials and greater export orientation will improve macroeconomic conditions, restore growth in the short term and help to create jobs and bring about structural change.
Investing in our People: Economic growth is beneficial for society when it creates opportunities and provides support to the vulnerable. The ERGP will invest in the Nigerian people by increasing social inclusion, creating jobs and improving the human capital base of the economy.
Social inclusion: The Federal Government will continue to provide support for the poorest and most vulnerable members of society by investing in social programmes and providing social amenities. Targeted programmes will reduce regional inequalities, especially in the North East and Niger Delta.
Job creation and youth empowerment: Interventions to create jobs are a core part of the ERGP, which aims to reduce unemployment and under-employment, especially among youth. The ERGP accordingly prioritizes job creation through the adoption of a jobs and skills programme for Nigeria including deepening existing N-Power programmes, and launching other public works programmes. The partnership for job creation will also focus on the policies required to support growth and diversification of the economy by placing emphasis on Made-in-Nigeria, public procurement which takes account of local content and labour intensive production processes. All initiatives under job creation would prioritize youth as beneficiaries.

Theories of Investment
1. The Accelerator Theory of Investment
2. The Flexible Accelerator Theory or Lags in Investment
3. The Profits Theory of Investment
4. Duesenberry’s Accelerator Theory of Investment
5. The Financial Theory of Investment
6. Jorgensons’ Neoclassical Theory of Investment
7. Tobin’s Q Theory of Investment
1. The Accelerator Theory of Investment:
The accelerator principle states that an increase in the rate of output of a firm will require a proportionate increase in its capital stock
2. The Flexible Accelerator Theory or Lags in Investment:
The flexible accelerator theory removes one of the major weaknesses of the simple acceleration principle that the capital stock is optimally adjusted without any time lag. In the flexible accelerator, there are lags in the adjustment process between the level of output and the level of capital stock.
3. The Profits Theory of Investment:
The profits theory regards profits, in particular undistributed profits, as a source of internal funds for financing investment. Investment depends on profits and profits, in turn, depend on income. In this theory, profits relate to the level of current profits and of the recent past.
4. Duesenberry’s Accelerator Theory of Investment:
J.S. Duesenberry in his book Business Cycles and Economic Growth presents an extension of the simple accelerator and integrates the profits theory and the acceleration theory of investment.
5. The Financial Theory of Investment:
The financial theory of investment has been developed by James Duesenberry. It is also known as the cost of capital theory of investment. The accelerator theories ignore the role of cost of capital in investment decision by the firm.
6. Jorgensons’ Neoclassical Theory of Investment:
Jorgenson has developed a neoclassical theory of investment. His theory of investment behaviour is based on the determination of the optimal capital stock. His investment equation has been derived from the profit maximisation theory of the firm.
7. Tobin’s Q Theory of Investment:
Nobel laureate economist James Tobin has proposed the q theory of investment which links a firm’s investment decisions to fluctuations in the stock market. When a firm finances its capital for investment by issuing shares in the stock market, its share prices reflect the investment decisions of the firm.
REFERENCES
Marvin Dumont (2018). Top 6 Factors That Drive Investment in China https://www.investopedia.com/articles/economics/09/factors-drive-investment-in-china.asp#ixzz5RNRW4eZJ
Perkins, D. H. (2001). Industrial and financial policy in China and Vietnam. In J.E and S. Yusuf (Eds.), Rethinking the Asian Miracle. New York, Oxford University Press.
Adepoju, A.A., Salau, A.S., &Obayelu, A.E., (2007). The Effects of External Debt Management on Sustainable Economic Growth and Development: Lessons from Nigeria, MPRA. Paper No. 2147.
Coe, David Theodore, Elhanan Helpman, and Alexander W. Hoffmaister. (1997). “North-South R&D Spillovers.” Economic Journal 107 (440): 134–49. doi:10.1111/1468-0297.00146
Erosa, Andrés, Tatyana Koreshkova, and Diego Restuccia. (2010). “How Important Is Human Capital? A Quantitative Theory Assessment of World Income Inequality.” Review of Economic Studies 77 (4): 1421–49. doi:10.1111/j.1467-937X.2010.00610.x.
Hsieh, Chang-Tai, and Peter J. Klenow. 2009. “Misallocation and Manufacturing TFP in China and India.” Quarterly Journal of Economics 124 (4): 1403–48. doi:10.1162/qjec.2009.124.4.1403.
Straub, Stéphane. 2008. “Infrastructure and Growth in Developing Countries : Recent Advances and Research Challenges.” 4460. World Bank Policy Research Working Paper. doi:10.1596/1813-9450-4460.
https://www.investopedia.com/terms/e/exante.asp#ixzz5RRbV7AaT

8. What determines the Efficiency and Productivity of Investment In a Country both Sectorial and Overall
1. Innovation: Creating new technologies leads to the development of high value-added activities and improves the performance of existing economic activities. Historically, a small number of countries have created new technologies, while many other countries have adopted the new technologies through adaptation, trade, and foreign direct investment (Coe, Helpman, and Hoffmaister 1997).
2. Education: Advancing knowledge and skills, with strong basic foundation and sufficient specialization, is necessary for adopting, attaining, and spreading new and better technologies, production processes, and outputs (Erosa, Koreshkova, and Restuccia 2010).
3. Market efficiency: Timely and effective allocation of human and physical capital enhances overall productivity, as inefficient firms exit markets, efficient firms grow, and new firms emerge (Hsieh and Klenow 2009).
4. Physical infrastructure: Transport, paved roads, telecommunication, stable electricity supply, access to improved water and sanitation, and other tangible infrastructure provide timely and cost-effective access to markets, and good physical environments for overall economic activities (Straub 2008).
5. Institutional infrastructure: High-quality institutions provide friendly environments and policies that lead to economic development. Governance and economic institutions are important components of institutions and their quality is generally associated with productivity.

6. Why is it that some Countries are able to attract a huge quantum of foreign direct Investment (FDI) while others remain starved of such Investment over a long period of time?
Foreign direct investment (FDI) represents capital invested in a country that provides manufacturing and service capabilities for both native consumers and world markets. FDI is instrumental in bringing goods and services to the global marketplace, and the influx of foreign investment not only displays investor confidence in the business and the geopolitical climate of the host country, such capital also links national economies.
The benefits of FDI flow to both the supplier of capital as well as to the host region. China is one country that has stepped up to capitalize on these benefits.
Several factors affect the amount of FDI that pours into a Country
Capital Availability
FDI is comprised of capital that an outside investor is willing to place (and risk) within a local region. Conditions in the global capital markets and general economic environment play a role in determining the flow of FDI into country. A thriving global economy, capital markets and business environment create large swaths of investable capital, a portion of which is converted to FDI. Large amounts of investable capital that proportionately overwhelm the number of sound local investment ideas can cause institutional, company and individual investors to invest their wealth in emerging and developing markets.
Competitiveness
A Countries attractiveness as a destination for investment capital rests on its development of infrastructure, resource availability (physical and labor), productivity and workforce skills, and the development of the business value chain. The level of maturation of these elements can make a country more attractive for FDI relative to other nations. Another component for attracting FDI involves the availability of low-cost, skilled employees who possess the necessary aptitudes, experience and proficiencies to create, manufacture, and provide goods and services that can compete in global markets.
Regulatory Environment
When a national government enacts and enforces rules and policies aimed at favoring state entities at the expense of privately held firms, such an environment can be detrimental to initiatives that aim to attract FDI. As such, the regulatory environment can either encourage or impede foreign direct investment in a country. Excessive regulations tend to hinder entrepreneurial and commercial activities, as managers and employees must spend more time and money to comply with rules and regulations.
Stability
Political and economic stability can facilitate an influx of FDI. Stability represents predictability and the opportunity for enterprises to gain better foresight into the future. Alternatively, constant social unrest, rioting, rebellions and social turmoil are settings not conducive to business. Economic instability can also contribute to hyperinflation, which can render the currency virtually obsolete.
Local Market and Business Climate
The most glaring aspect of a country is the sheer size of its population and market, and the prospects for growth that result from this size. The ability of enterprises -backed by foreign capital – to sell to a sizeable local market makes a country an attractive destination for FDI. 6. Openness to Regional and International Trade
Market openness serves several important roles in attracting FDI. Of critical importance is a business' ability to sell its products and services to both local and foreign markets. If a countries-based enterprises have limited or no access to foreign customers – particularly the United States, Western Europe,Japan and others -then the local market may not be enough to warrant a significant investment in money and energy

5. What are the main determinants and principle deterrent to Domestic Investment and Foreign Investment?
The determinants and principle deterrent to domestic investment and foreign investment are the following;
Agriculture
An impressive performance of the agricultural sector is of paramount importance. The majority of the population in India is engaged either in agriculture or in its allied activities and agriculture contributes considerably to the growth of the Indian economy. Some companies use agricultural raw materials as inputs, while others are suppliers of such inputs. Apart from this, it has been repeatedly observed in India that if the monsoon has been active, then the agricultural income rises. With the increasing agricultural income, the demand for industrial products and services also increases. Hence, the performance of agricultural sector has a great bearing on industrial production and corporate performance in our country.
Gross Domestic Product (GDP)
Thus, the GDP reflects the overall performance of the economy. Personal consumption expenditure, gross private domestic investment, government expenditure on goods and services, net export of goods and services are some of the important factors related to gross domestic product. A healthy growth rate of the GDP reflects the overall performance of the economy. A higher growth rate brings cheers to the stock market.

Savings and Investment
Savings and investments represent that portion of Gross National Product which is saved and invested. Essentially, capital formation is the function of savings and investment. Commercial banks mobilize the savings of people and make them available for productive ventures. Further, the stock market channelizes the savings of the investors into the corporate bodies. In other words, savings of the people are distributed over various financial assets like shares, deposits, debentures, mutual fund units etc. The pattern of savings and investment of the people significantly alters the trend in stock market. A higher level of savings and investment accelerates the pace of growth of the stock market.
Inflation
Inflation means the rise in prices. Inflation is a state in which the value of money is falling as prices are rising. As a result, higher rates of inflation erode purchasing power of consumers, thereby resulting in lower demand for products. Therefore, high rates of inflation affect the performance of companies adversely. So, an investor should carefully analyze the inflationary trend in the economy and study its impact on the performance of the company. While doing so, he must also foresee the inflationary trend that is likely to prevail for the foreseeable future.
Rates of interest
The rate of interest prevailing in the economy determines the cost and availability of credit to the companies. A lower interest rate means lower cost of finance for business organizations. With the declining cost of finance, the profitability of the companies increases. On the other hand, higher rate of interest increases cost of finance which in turn, results in higher cost of production. Higher cost of production leads to lower demand of products and lower profitability.

3. How do we define the sectorial priorities within the public and private sectors such that investment allocations generate sectorial growth rate to match the overall growth rate of the Economy?
Sectorial priorities are those most important things that require urgent attention in a particular sector of either private or public sectors such that their investments may generate a substantial amount of growth rate.
The top priorities ranked as “important” or “very important” among public agencies were: increasing productivity through increased efficiency, management of workforce talent, organizational ethics, and cost leadership.
Research on public sector management has considered how agencies identify priorities and how agencies’ priorities relate to their overall performance. As a great deal of this research has focused on strategies to increase productivity in the public sector , it is not surprising that nearly all state agencies in the States as Employers-of-Choice Survey also recognized this as a major priority. Increasing productivity through increased efficiency can be a critical strategy to meeting agency objectives.
The top priorities identified by private employers in the National Study were: productivity, managing the workforce effectively, expanding market niche, and cost leadership. Of these top four priorities, three of them (productivity, managing the workforce effectively, and cost leadership) were also among the top four priorities in the public sector.
Productivity has long been a focus for researchers in the private sector, a trend that will likely continue as organizations try to increase efficiency in the current economic climate. Notably, the respondents in the National Study also ranked increased productivity as their highest priority. When asked about potential opportunities to enhance organizational outcomes, respondents frequently cited improving productivity as one way to better overall performance.

UNIVERSITY OF NIGERIA, NSUKKA
FACULTY OF SOCIAL SCIENCE
DEPARTMENT OF ECONOMICS

AN ASSIGNMENT WRITTEN IN PARTIAL FULFILLMENT FOR THE REQUIREMENT OF THE COURSE: ECO 0511
(PROBLEM AND POLICIES OF ECONOMIC DEVELOPMENT)

BY
SORONNADI JOSHUA CHISOM
UNN/PG/PGD/2017/02612

LECTURER: DR. A. ORJI

JULY, 2018

1. What is the desired level of growth investment for an Economy to realize the target growth rate of real GDP?
The healthy GDP growth rate is one that is out stainable so that the economy stays in the expansion phase of the business cycle as long as possible GDP is the nation grow domestic product that the entire economic output for the past year the GDP growth rate is how much more the economy produced than in the previous quoits. The ideal rate is between 2 – 3 percent.
In a healthy economy, unemployment, and inflation are in balance. The natural rate of unemployment will be between 4.7 percent and 5.8 percent. The target inflation rate will be 2.0 percent.
You’d think the more growth the better. But a healthy GDP growth rate is like a body temperatures of 28.6 degrees. Obviously, if your temperature is lower than the ideal, you know you’re sick. If it’s too low, you’re next death. But a higher temperature can also mean you’re sick. If it’s over 100, you have a fever. If it’s above 104 degrees for any period, you’re death ill.
If the economy growth too slowly, or even contracts, it’s obviously not healthy. But if it grows too fast, that’s not ideal, either. If fact, if GDP growth starts spiking above 4 percent for several quartos, it usually mans these in an asst bubble. In the business cycle, the phase that follows expansion in the peak.
If nothing is done, the economy will go into a recession. That’s because when the economy grows too fast it overheats. There’s too much money choosing too few real growth opportunities. Invasion starts putting excess money into mediocre investments. When they low money, they panic thy start selling, casing more investments to have money. It doesn’t end until prices are low enough to stop madness and attract investors again.
For example. In the United States of America, the federal reserve in the nation’s central bank. It use monetary policy to keep the economy in the ideal zone. It raises interest rates if the economy is growing too fast, and lowers them if it’s growing too slowly the sedation to address the causes of the business cycle.

Examples
In 1999-2000, there were innovational exultances around high technology stocks. By 1999, U.S. GDP growth was 5.1 percent in the third quarter and a whopping 7.1 percent in the fourth quarter. In 2005- 2006, the asset bubble was in housing. The economy grew 4.3 percent in the fast quarter of 2006 during both bubbles GDP growth spiked above 3 percent for several quarters in a now
When GDP growth rate is above the ideal, it can cause inflation. During 1999-2000, U.S inflation was 2.7 percent- 3 percent. Between 2003- 2005, it was 3 percent to 4 percent. That’s well above the 2 percent target inflation rate.
Once the bubble laurite, the economy enters the contraction phase of the business cycle GDP growth usually falls off sharply and goes into negative territory, which signals a recessions. During 2008-2009, U. &. GDP contracted in five quarters. Between 2000-2002, it only now above 2percent in one quarter and shared in two quarters
Healthy Rate of Growth is 2 Percent to 3 Percent
Economists agree the optimal GDP growth rate is greater than 2 percent but less than 4 percent. In between the 2001 recession and the 2008 recessions the annual economic growth rate was healthy.
• 2.9 percent in 2003
• 3.8 percent in 2004
• 3.5 percent in 2005
• 2.9 percent in 2006
• 1.9 percent in 2007
During the 2008 recession, in the United States, GDP growth rates were abysmal. The troubles in housing had hophead to the inventions in montages lacked securities, as the financial cuss infected the sect of the economy.
• Q1 – 2.3 percent
• Q2 – 2.1 percent
• Q3 – 2.1 percent
• Q4 – 8.4 percent

real wealth; and real wealth determines permanent income or the present value of total resources. The relative emphasis placed on current income and permanent or expected income means that the theories may have different policy implications within the ambit of fiscal and monetary policies. Given the prime position occupied by Mpc (Marginal Propensity to consume) among national income determinants, these deserve proper investigation and refined methods of analysis.
(B) CLINICALLY AND CRITICALLY DISCUSS AND ANALYZE THE THEORY OF INVESTMENT
Investment: Could be defined as not capital formation, hence, it refers to such capital expenditure on consumer durables, residential construction (buildings) and plants and machinery. In other word, it could be also defined to as the purchase of real tangile assets such as machines, factors or stocks of inventories which are used in the production of goods and services for future use.
Theories of Investment seek to explain the investment behavior of business firms. They seek to tell us “when” firms should invest. The following are the theories:
(1) An Acceleration theory of investment: The accelerator theory of investment states that net investment is a function of changes in income. It explains net investment (Kt – Kt-1) as a function of growth in aggregate demand (y). Although the modern form of the acceleration hypothesis was forwarded by Clark in 1917, but the original idea was muted by Afflation in 1911. Two versions of the accelerator hypothesis exist.
(i) The Fixed/rigid Accelerator Hypothesis: This hypothesis assumes that the ratio of current desired capital stock ( to current output y(t) is fixed. Thus:
K = /y ——————————————————————- (1)
Cross multiplying equation (1), we have = Ky —————— (2)
Equation (2) shows a firm’s desired stock as a constant proportion of the output in the current period, where K is the factor of proportionality, which determines the stability or otherwise of the relationship. K depends on time period within which the analysis is carried out. The longer the time frame of analysis, the more the value of K tends to zero.
Weaknesses/shortcomings of the fixed Accelerator hypothesis

(2) The flexiable Accelerator or Capital stock Adjustment theory
The flexible accelerator theory of investment amends the rigid/fixed accelerator model. Theory states that firm in anyone period is only able to realize a fraction of the difference between the existing capital stock and the desired optimal capital stock that is K* – Kt-1 in other words,
– Kt-1 = (K* – Kt-1) ————————————————- (8)
Thus, net investment in any period may be only a fraction of the change in the desired capital stock. The basic flexible accelerator therefore
It = K* – ——————————————————— (9)
Where is the Adjustment parameter. It is the fraction of the change in the desired stock of capital that place each period. The value depends on factors such as the production capacity of the firm, conference in the production of higher output and ability to obtain the financial resources necessary to acquire replacement investment.
Types of Investment
(1) Fixed Investment
(2) Inventory Investment
(3) Replacement Investment

S/y = a + b (y/ yo) ————————————————- (1)
Since c/y = 1 – s/y ————————————————- (2)
then,
c/y = (1-a) –b (yt /yo) ———————————————- (3)
If income grows at a constant rate g, so that
yt = (1+g) yt-1 ——————————————————- (4)
If Yt-1 = Yo, then
Yt = (1 + g) yo ——————————————————- (5)
Substitute Equation (5) into Equation (3), gives
C/y = [(1-a) –b (1+g)] ———————————————– (6)
Hence, in the long run the Apc is constant and equal to the Mpc.
(b) That the consumption behavior of individuals exhibits a “ratchet effect during from the fact that people, having become used to a standard of living find it difficult to lower same even in the face of declining income. This is the psychological axiom of relative income hypothesis.
In addition, the direction of income change determines the relationship between Apc and Mpc in Duesenberry analysis of consumption behavior using the relative income hypothesis. These include:
If income is rising and it is above previous income level, the Apc would be constant and it will be equal to Mpc.
If income is rising and is below previous income level, the Apc would fall and Mpc rises but less than Apc.
If current income falls below previous income level, the Apc rises and is more than Mpc.
If income grows at a constant rate, Apc would be constant rate, Apc would be constant also equals Mpc.
Furthermore, a major problem of Duesentaerry relative income hypothesis is the negation of the basic fundamentals of utility maximization and rationality effects nullified.
(3) Friedman’s Permanent income theory/hypothesis
According to Professor Milton Friedman of the University of Chicago, the main determinant of consumption expenditures is not current but “permanent income”. By permanent income, he means the average income which a household expects to earn over its planning horizon (planning horizon could be 3-5 years). Permanent income includes past, current and expected future income. Friedman’s theory of consumption may be summarized in these equations:
Cp = K(I, W. U)yp ——————————————— (1)
Y = Yp + YT —————————————————– (2)
C = Cp + CT —————————————————- (3) and
P = P = 0 ——————————————————– (4)
YP YT CP CT YTCT
The first equation is the core of the equation. It hypothesized that consumption of a household is proportional to its permanent income. Note that K, the factor of proportionality implies that households consume about the same proportion of their permanent income notwithstanding (Yp). K is also a constant equals Mpc and Apc. The values of K depends on the rate of interest (i), the ratio of non-human wealth to permanent income (W) and U, a permanent variable for utility (a variable capturing the household’s taste and preferences for consumption versus additions of health). According to Friedman, K is a variable constant which vary with the household’s stage in the life cycle. The major problem with Friedman permanent income hypothesis is the elusive nature of the key variables. From experience, it is difficult to obtain a

WHAT DETERMINES THE EFFICIENCY AND PRODUCTIVITY OF INVESTMENT IN A COUNTRY BOTH SECTORAL AND OVERALL?
By definition, efficiency and productivity of investment is a function of the return and total cost of an investment management structure subject to the judiciary and other constraints within which investor must operate. Institutional investors implement their investment policies through investment management structures. Efficiency and productivity of investment in a country both overall are below:
(1) Maximizing capital or income: An efficient and productive investment can be achieved through a maximum management of capital invested into the firm to avoid collapsing or economic waste. If judiciously managed or utilized ultimately, they will be efficient and high level of productivity of the investment but if not so they will not be nothing like efficiency or productivity of investment.
(2) Rational labour productivity: This contributes largely for the efficiency and productive of investment because cost of labour has a directly relationship with the success of any investment, if cost of labour is low the efficient and productivity of the investment will increase (high) but verse versa.
(3) Good governance: This is very crucial factors that determines the efficiency and productivity of investment in a country in bother sectoral because if government of any country is functional or delivering there will be high efficient and productivity of investment and everybody in the country will benefit it directly or indirectly because it will ultimately increase GDP or national output.
(4) Low level of corruption: This is very dangerous factor if not controlled or eliminated completely. It will mar the efficient and productivity of investment in a country in both sectoral and overall because the efficient and productivity can never be achieved but if controlled or eliminated sure there will be efficiency and high productivity of investment in both sectoral and overall.
(5) Allocation and policy decisions: It implies that the trustees or investors need to integrate or implement risks and other vital issues that concern the firm or company for high efficiency and productivity of such investment in both sectoral and overall.
(6) Adequate or steady electricity supply, infrastructure and good roads: This is a very essential factor that boosts the efficiency and productivity of investment both in sectoral and overall, if there exists a steady electricity supply the investment will grow and yield more profit which is the main aim of the investment.

country than a country with unfriendly environment. Business friendly environment largely depends on good governance, rule of law, political will and infrastructure of the country and rules and regulations.
(2) Congenial climate: This is another factor that any investor has to consider before moving to any country to invest. However, at the same time, a country with/endowed with a good climate will ultimately attract more investors that’s sure than the other that do not have.
(3) Political stability/situation: This is very essential and credit to any country that their political situation is conducive/stable and thereby it’s obvious that foreign direct investors will move over to such a country than the opposite (country). It’s also a prime determinant for attracting foreign direct investment, the investors consider it very well to avoid economic waste or lost of their hard earned income.
(4) The availability of raw materials/resources: The investors deemed it right to consider this as also the factor that makes them to invest more in one country than the other where there is no availability of the raw materials that may be needed for their production cannot be considered to move on for investment in such a country.
(5) Cost of Labour/wages: This is important determinant that makes some country attract more foreign direct investment while other are starved of such, a rational investor consider this very well before progressing to any foreign direct investment because labour has a direct Relationship with the profit the investor is aiming to gain which is the sole aim of the investors and for their voice to be heard in enterprises (IMF) but this is secondary.
(6) Friendly tax, custom regulations and attractive packages: It is another factor or reason that some country gain/attract more investment than the other because any rational investor has to consider the tax, custom regulations of any country they want to move to for investment.
(7) Tolerable and moderate inflation and reasonably stable exchange rate: Here is a very big factor that foreign direct investors look into consideration before moving on to any country to invest because high inflation and unstable exchange rate is not friendly to any investor to put his/her hard earned capital/income to such country while those that have tolerable and moderate inflation and reasonable exchange rate attract more investment in their country.
(8) Technological progress/industrialization: This is also one of the factors that makes a country to attract more investment/investors than the other because investors are always looking at country that have innovation, improvement ideas, skills, machinery and steady electricity supply for the proper functionality of their investment but any country that are technologically weak, they are bound to be starved for a foreign direct investment.

1b No 7
WHAT ARE THE SHORT TERM AND LONG TERM (SHORT-RUN AND LONG-RUN) OF FINANCING GROSS INVESTMENT?
As the name suggests, Long term financing is a form of financing that is provided for a period of more than a year. Long term financing services are provided to those business entities that face a shortage of capital. There are various long term sources of finance.
It is different from short-term financing which is normally used to provide money that has to be paid back within a year. The period may be shorter than one year as well.

QUESTION (1B) NO 4

WHAT IS THE OPTIMAL BLEND OF NATIONAL SAVING AND FOREIGN SAVINGS OR EXTERNAL BORROWING TO FINANCE AGGREGATE INVESTMENT

This suggests that the country has saved a specific amount in external account while in reality the deficit reflect a gap or excess demand in its foreign exchange transaction for a given period of time. National income account which is formally written as S – I = X – M where symbol S, I, X and M indicate respectively natural savings, total investment, export of goods and services and import of goods and services. If the left hand side of these identity which indicate the savings investment gap is in the negative, is invariably follows that, the right hand side, the foreign exchange gap would be in the negative as well and vice versa.
The identity highlights one of the most important behavioural relationships of an economy namely the current account deficit added to the national savings equal to the level of total investment. Finally, investment must be financed by some combination of private domestic savings, government savings (surplus) and foreign savings (foreign capital inflow).

NO 5
WHAT ARE THE MAIN DETERMINANT AND PRINCIPAL DETERRENT TO DOMESTIC INVESTMENT AND FOREIGN INVESTMENT (PORTFOLIO AND DIRECT)?
The main determinant for domestic and foreign Investment (portfolio and direct) are:
(1) Political and Economic condition: These are very important elements that contribute positively, for any investor to think for investment in any area or country both domestic and foreign investors consider it before investing to avoid story.
(2) Macro economic stability: Here if macroeconomic system or stability like inflation, government, policy, exchange rate, interest rate is favourable and stable the investors will trup-in to invest and there will be no fear in them for come in and invest thereby increase the GDP by at least 8% and attract Economic development.
(3) Certainty in economic policies and other incentives: This is also anothe

ongoing projects and identifies new ones to be implemented by 2020 to improve the national infrastructure backbone. Given the huge capital layout required to address the massive infrastructure deficit in the country, the private sector is expected to play a key role in providing critical infrastructure, either directly or in collaboration with the Government under public private partnership (PPP) arrangements.
Improving the business environment: Nigeria’s difficult and often opaque business environment adds to the cost of doing business, and is a disincentive to domestic and foreign investors alike. Regulatory requirements must be more transparent, processing times must be faster, the overall economy must be more business-friendly. The ERGP will build on the efforts of the Presidential Enabling Business Environment Council (PEBEC) and track progress using the metrics of the World Bank’s Doing Business Report. The target is to achieve a top 100 ranking in the World Bank’s Doing Business index by 2020 (up from the current ranking of 169).
Promoting Digital-led growth: To make the Nigerian economy more competitive in the 21st century global economy, its industrial policy must be linked to a digital-led strategy for growth. The ERGP will build on The Smart Nigeria Digital Economy Project to increase the contribution from ICT and ICT-enabled activity to GDP. The overall goals of a digital-led strategy for growth centre on the establishment of an ICT ecosystem in Nigeria. This is enabled through significantly expanding broadband coverage, increasing e-government, and establishing ICT clusters, starting in the SEZs. Government will also drive a programme to build the skills in this sector, focusing on training IT Engineers in software development, programming, network development and cyber security.
Key Execution Priorities
To achieve the objectives of the ERGP, the key execution priorities, are
Stabilizing the macroeconomic environment
Achieving agriculture and food security
Ensuring energy sufficiency (power and petroleum products)
Improving transportation infrastructure
Driving industrialization focusing on Small and Medium Scale Enterprises key outcomes:
Stable Macroeconomic Environment: The inflation rate is projected to trend downwards from the current level of almost 19 per cent to single digits by 2020. It is also projected that the exchange rate will stabilize as the monetary, fiscal and trade policies are fully aligned. This outcome will be achieved through policies that seek to remove uncertainty in the exchange rate and restore investors’ confidence in the market.
Restoration of Growth: Real GDP is projected to grow by 4.6 percent on average over the Plan period, from an estimated contraction of 1.54 percent recorded in 2016. Real GDP growth is projected to improve significantly to 2.19 per cent in 2017, reaching 7 per cent at the end of the Plan period in 2020. The strong recovery and expansion of crude oil and natural gas production will result as challenges in the oil-producing areas are overcome and investment in the sector increases. Crude oil output is forecast to rise from about 1.8 mbpd in 2016 to 2.2 mbpd in 2017 and 2.5 mbpd by 2020. Relentless focus on electricity and gas will also drive growth and expansion in all other sectors.
Agricultural transformation and food security: Agriculture will continue to be a stable driver of GDP growth, with an average growth rate of 6.9 per cent over the Plan period. The Agricultural sector will boost growth by expanding

Question (1b) 3

How do we define the sectoral priorities within the public and private sectors such that investment allocation generate sectoral growth rate to match the overall growth rate of the economy.
The public and private sector investment allocation generate sectoral growth rate that match the overall growth rate of economy such as
Allow markets to function. The public sector recognizes the power of markets to drive optimal behaviour among market participants The Plan prioritises the use of the market as a means of resource allocation, where appropriate. However, the Plan also recognises the need to strengthen regulatory oversight to minimise market abuse.
Uphold core values. The public and private sector is rooted in the core values that define the Nigerian society . It requires all citizens and stakeholders to adhere to
The Econmic Recovering GP has three broad strategic objectives that will help achieve the vision of inclusive growth outlined above:
restoring growth,
investing in our people, and
Building a globally competitive economy.
Restoring Growth: To restore growth, the Plan focuses on achieving macroeconomic stability and economic diversification. Macroeconomic stability will be achieved by undertaking fiscal stimulus, ensuring monetary stability and improving the external balance of trade. Similarly, to achieve economic diversification, policy focus will be on the key sectors driving and enabling economic growth, with particular focus on agriculture, energy and MSME led growth in industry, manufacturing and key services by leveraging science and technology. The revival of these sectors, increased investment in other sectors, less reliance on foreign exchange for intermediate goods and raw materials and greater export orientation will improve macroeconomic conditions, restore growth in the short term and help to create jobs and bring about structural change.

Tobin’s Q Theory of Investment

Nobel laureate economist James Tobin has proposed the q theory of investment which links a firm’s investment decisions to fluctuations in the stock market. When a firm finances its capital for investment by issuing shares in the stock market, its share prices reflect the investment decisions of the firm.
Firm’s investment decisions depend on the following ratio, called Tobin’s q:
q = Market Value of Capital Stock/Replacement Cost of Capital
The market value of firm’s capital stock in the numerator is the value of its capital as determined by the stock market. The replacement cost of firm’s capital in the denominator is the actual cost of existing capital stock if it is purchased at today’s price. Thus Tobin’s q theory explains net investment by relating the market value of firm’s financial assets (the market value of its shares) to the replacement cost of its real capital (shares).
According to Tobin, net investment would depend on whether q is greater than (q>1) or less than 1 (q<1). If q> 1, the market value of the firm’s shares in the stock market is more than the replacement cost of its real capital, machinery etc.
The firm can buy more capital and issue additional shares in the stock market. In this way, by selling new shares, the firm can earn profit and finance new investment. Conversely, if q<1, the market value of its shares is less than its replacement cost and the firm will not replace capital (machinery) as it wears out.

The Profits Theory of Investment

The profit theory regards profits, in particular undistributed profits, as a source of internal funds for financing investment.
Investment depends on profits and profits, in turn, depend on income. In this theory, profits relate to the level of current profits and to the recent past.
If total income and total profits are high, the retained earnings of firms are also high, and vice versa. Retained earnings are of great importance for small and large firms when the capital market is imperfect because it is cheaper to use them.
Thus if profits are high, the retained earnings are also high. The cost of capital is low and the optimal capital stock is large. That is why firms prefer to reinvest their extra profit for making investments instead of keeping them in banks in order to buy securities or to give dividends to shareholders. Contrariwise, when their profits fall, they cut their investment projects. This is the liquidity version of profits theory.

The Duesenberry’s Accelerator Theory of Investment

J.S. Duesenberry in his book Business Cycles and Economic Growth presents an extension of the simple accelerator and integrates the profits theory and the acceleration theory of investment.
Duesenberry has based his theory on the following propositions:
(1) Gross investment starts exceeding depreciation when capital stock grows.
(2) Investment exceeds savings when income grows.
(3) The growth rate of income and the growth rate of capital stock are determined entirely by the ratio of capital stock to income. He regards investment as a function of income (Y), capital stock (K), profits (π) and capital consumption allowances (R). All these are independent variables and can be represented as
I = f(Y t-1, Kt-1, πt-1, Rt)
Where ‘t’ refers to the current period and (t-1) to the previous period. According to Duesenberry, profits depend positively on national income and negatively on capital stock.
π=aY- bK
Taking account of lags, this becomes
π₁=aYt-1– b Kt-1
Where ‘t’ refers to profits during period t, Yt-1 and Kt-1 are income and capital stock of the previous period respectively and a and b are constants. Capital consumption allowances are expressed as
R, = kKt-1
The above equation shows that capital consumption allowances are a fraction (k) of capital stock (K t-1).

Life Cycle Hypothesis

Life cycle hypothesis is another important attempt to explain the difference between cyclical short-run consumption function and secular long-run consumption function. It has been developed by Franco Modigliani, Albert Ando and later by Brumberg – called the life cycle hypothesis or MBA approach. It is said that life cycle hypothesis is similar to PIH developed by Friedman.
Although, the two approaches are similar in principal yet they are different in certain respects. Friedman’s version of PIH has gained more attention in recent years. In the Friedman’s approach a consumer unit is assumed to determine its standard of living on the basis of expected returns from its resources over its life time. These returns are expected to be constant from year to year, though in actual practice some fluctuation would result over time with changes in the anticipated amount of capital resources.
The life cycle hypothesis states the income consumption relationship as:
Ct = KVt
where Ct is the current consumption by an individual, K is the factor of proportionality and Vt is the present value of the resources accruing to the individual over the rest of his life. The total resources available to the individual over his entire life span are the sum of individuals net worth at the end of the proceeding period plus his income during the current period from the non-property sources plus the total of the discounted values of the non-property incomes expected in the future time periods.

THE CONCEPT OF CONSUMPTION

Consumption is a major concept in Economics and is also studied in many other social sciences. Economists are particularly interested in the relationship between consumption and income, as modeled with the consumption function: C = a + bYd.
Different schools of economists define consumption differently. According to mainstream economists, only the final purchase of goods and services by individuals constitutes consumption, while other types of expenditure – in particular, fixed investment, intermediate consumption, and government spending – are placed in separate categories. Other economists define consumption much more broadly, as the aggregate of all economic activity that does not entail the design, production and marketing of goods and services.
Simply put, consumption can be described as the final purchase of goods and services by individuals.

THEORIES OF CONSUMPTION

There are many different theories on income and consumption behaviour. Some of the more mainstream concepts in consumption theory are discussed below:

Keynesian Theory and Real Income

One of the most popular and well-known theories is the Keynesian theory, offered by economist John Maynard Keynes. This theory states that current real income is the most important determinant of consumption in the short run. Simply said, you spend according to how much income you have coming in. This is the basis for most consumption theory.
The term 'real' that is used in describing income refers to how your income is affected by inflation, or the natural rise in prices of goods and services. So to elaborate, if your income went up five percent in a year, but the price of goods or inflation went up five percent also, your real income remained flat. You can't really buy or consume any more goods than you could before.

Absolute Income Hypothesis

The basic tenet of the absolute income theory is that the individual consumer determines what fraction of his current income he will devote to consumption on the basis of the absolute level of that income. Other things being equal, a rise in his absolute income will lead to a decrease in the fraction of that Income devoted to consumption.
According to absolute income theory (AIT) the level of consumption expenditures depends on the absolute level of income, with APC declining as the level of income increases. Since the level of national income grows over time, the AIT concludes that the APC should diminish continuously. As such, according to AIT, the consumption-income relationship is non-proportional.

What are the short term and long term consequences of financing gross investment from foreign debt rather than foreign direct investment?
Foreign debt (or external debt) is the total debt a country owes to foreign creditors, complemented by internal debt owed to domestic lenders. The debtors can be the government, corporations or citizens of that country. The debt includes money owed to private commercial banks, other governments, or international financial institutions such as the International Monetary Fund (IMF) and World Bank.
The negative impact of external debt on Nigeria economic growth hardly come to the mind of the policy makers at the point of contracting the loan. Loan or borrowing to fund gaps in government revenue has become norm in Sub-Saharan Africa especially in Nigeria.
Nigeria external debt can be traced back to 1958 when 28 million US dollars was contracted from the World Bank for railway construction.
The first major external borrowing of one (1) billion US dollars referred to as Jumbo loan was contracted from the International Capital Market (ICM) in 1978 increasing the total debt to 2.2 billion U.S dollars.
Ever since then, Nigeria external debt keeps on rising from one government to the other.
It is interesting to note that large volume of external debt does not necessarily leads to slow economic growth; it is a nation’s inability to meet its debt service payments fueled by inadequate knowledge on the nature, structure and magnitude of the debt in question that slow down the economy.
Countries like Japan has a very large volume of external debt profile but at the same time has large volume of external reserves in US dollar.
High debt service burden resulting from improper management of the nation borrowing and wealth has the following daring consequences:
Fall in aggregate demand in the nation over time
Increase in poverty and hunger especially in the rural areas
Increases in the profile of unemployment among youths who are the most vulnerable
Fall in the economic growth resulting to economic recession
Religion, Political and socioeconomic crisis in the country as every part of the country feels neglected
Poor investment platform and environment where business thrives.

What are the main determinants and principal determinants to domestic investment and the foreign investment (portfolio and foreign direct investment)?

Domestic investment is made by the citizens of a country. It is an investment in the companies and products of someone’s own country rather than in those of foreign countries. Real domestic investment in the economy is an acceptable way of increasing capital formation in the economy thus increasing productivity, output and economic growth. It is expenditure made to increase the total capital stock in an economy.
Below are the main determinants of domestic investment:
Gross Domestic Product (GDP)
The rate of private sector output
Availability of credit to the private sector
Cost of financing, that is, rate of interest
The rate of household savings
Monetary policy
Fiscal policy
Political atmosphere
Foreign investment on the other hand involves capital flow from one country to another, granting extensive ownership stakes in domestic companies and assets. Foreign investment denotes that foreigners have an active role in management as a part of their investment. It can be made by individuals, but are most often endeavours pursued by companies and corporations with substantial assets looking to extend their reach. As globalization increases, more and more companies have branches in countries around the world. For some companies, opening new manufacturing and production plants in a different country is attractive because of the opportunities of cheaper production, labour and lower or fewer taxes.
Foreign investment can be classified into two: Foreign Direct Investment (FDI) and Portfolio Investment.
Foreign direct investments (FDIs) are the physical investment and purchases made by a company in a foreign country, typically by opening plants and buying buildings, machines, factories and other equipment in the foreign country. These types of investments find a far greater deal in favour, as they are generally considered long-term investment and help booster the foreign country’s economy.
Portfolio investments involve corporations, financial institutions and private investors buying stakes or positions in foreign companies that trade on a foreign stock exchange.
Thus, while foreign direct investment takes the form of ‘real’ capital formation, portfolio investment is just the purchase of securities or acquisition of financial assets. In the case of foreign direct investment, the supplier of foreign capital such as Multinational Corporation actually operates the business. But portfolio investment just helps finance a business, and host country (i.e., the capital receiving country) manages and run the enterprise.
The main determinants of foreign investment are:
The market size
Political atmosphere
Infrastructural base
GDP growth rate
Tax system
Relative labour endowment
Regional trade agreement
These factors will to a very large extent determine the degree of foreign investment in a country.

What is the desired level of gross investment for an economy to realize the target growth rate of real GDP?
Real Gross Domestic Product is the macroeconomic measure of the value of economic output adjusted for price changes.
Real GDP growth rate on the other hand measures how fast the economy is growing. It does it by comparing one quarter of the country’s GDP to the previous quarter.
The GDP growth rate is driven by the four components of GDP. The main driver of GDP growth is personal consumption. This includes the critical sector of retail sales. The second component is business investment, including construction and inventory levels. Government expenditure is the third driver of growth. Its largest categories are Social Security benefits, defense spending and Medicare benefits. The fourth component is net trade.
The GDP growth rate is the most important indicator of economic health. It changes during the four phases of the business cycle: peak, contraction, trough, and expansion.
When the economy is expanding, the GDP growth rate is positive. If it is growing, so will businesses, jobs and personal income. But if it expands beyond 3-4 percent, then it could hit the peak. At that point, the bubble bursts and economic growth stalls. If it is contracting, then businesses will hold off investing in new purchases, they will delay hiring new employees until they are confident the economy will improve. Those delays further depress the economy. Without jobs, consumers have less money to spend. If the GDP growth rate turns negative, then the country’s economy is in recession. With negative growth, GDP is less than the quarter or year before. It will continue to be negative until it hits a trough. That is the month things starts to turn around. After the trough, GDP turns positive again.
From the analysis above, it could be observed that the desired level of gross investment for an economy to realize the target growth rate of real GDP will be that investment level that will keep the economy on the expansion phase. This is because after the phase of expansion, the economy could hit the peak, and at that phase, the bubble bursts and economic growth stalls. At this point, the primary aim of investment would have been defeated.

How is the ex-ante investment to be apportioned between the public and private sector to help achieve the real growth rate?
The public sector is otherwise known as the government (sector). It is the portion of the economy composed of all levels of government controlled enterprises. Simply put, public sector is the segment of the economy under the control of the government. It does not include private companies, voluntary organizations, and households.
The private sector on the other hand is the part of a country’s economic system that is run by individuals and companies, rather than the government. Most private sector organizations are run with the intention of making profit.
The abiding myth of mainstream economics is that governments should minimize their role in the economy. More so, there is a popular saying that government does not have business doing business. They should however perform their statutory regulatory roles and also engage in investment in social infrastructure and social security. If all these are done, it will help boost the effectiveness of the private sector which should be saddled with the responsibility of investing in capital stock.

Types of Investment
(1) Fixed Investment
(2) Inventory Investment
(3) Replacement Investment
Investment can also be classified as
(a) Autonomous Investment: Is the investment which is independent of income. It is fixed. It is also interest rate invariant.

(b) Induced Investment: It is that investment that depends on the level of income. If income goes up, the investment may also go up and verse versa.

 
Factors that determines Investment/Determinant of Investment
(1) Expected rate of net profit: Profit hope to realize investment
(2) Current Rate of Interest: Users cost of capital- percentage increase will discourage the investors and investment will fall completely.
(3) Government policies: This is very crucial to consider before establishing or intending to venture into any kind of investment because high taxes depress the expected net profit but subsides enhance expected rate. Hence, Tax is a cost to business. High cooperate profit taxes translate to low retained earnings by firms and vice versa.
(4) Expectation of businessmen:
(5) Acquisition, maintenance and operating costs: If the above goes up the profit will be low thereby investment will be discouraged and vice versa.

It is the second component of the Keynesian model of Income.
Y = C = 1
It = Kt – K t-1 + Dt
Where
It = Gross Investment in period t
Kt = Current capital stock at period t
K t-1 = Capital stock at previous period or the beginning of the period t
Dt = Replacement expenditure
Kt – K t-1 which is the net investment is a net investment and its major focus in macro economics analysis.

The first equation is the core of the equation. It hypothesized that consumption of a household is proportional to its permanent income. Note that K, the factor of proportionality implies that households consume about the same proportion of their permanent income notwithstanding (Yp). K is also a constant equals Mpc and Apc. The values of K depends on the rate of interest (i), the ratio of non-human wealth to permanent income (W) and U, a permanent variable for utility (a variable capturing the household’s taste and preferences for consumption versus additions of health). According to Friedman, K is a variable constant which vary with the household’s stage in the life cycle. The major problem with Friedman permanent income hypothesis is the elusive nature of the key variables. From experience, it is difficult to obtain a measure of permanent income and consumption since they are subject to changes overtime due to expectation and past experience.
(4) Modiylian’s Life-Cycle (time) hypothesis/theory
The life-time income hypothesis also called the “life cycle” theory was advanced by F. Modigliani and R. E. Brumberg in 1954. According to them, an individual consumption depends not primarily on current income but rather on expected life-time income, and planning horizon in not 3-5years in Friedman’s model but rather his entire life time. The individual maximizes a household optimal utility function throughout his life time by saving “in fat years” to smooth out consumption in “lean years”.
An individual’s life time income and consumption pattern are depicted below:

From the above diagram, it shows that an individual will dissave in his youth and old age when his income is relatively low and will save during his middle age years when his income is high, due to family responsibility, his consumption may also be relatively high. However, Modiyiani and Brumberg were able to derive the result provided the interest rate is constant, the factor of proportionality between consumption and the individual’s present value or wealth or life time income is dependent solely on the age of the individual. They assume further that consumer hold expectation with certainty, interest rate is zero, and that the consumer starts work with zero asset, and plan to have zero assets at death. With these specifications, Modigiani and Brumberg derive the following result(s):
Ct = bW1 ————————————————- (1)
Ct = 1/((L-a)) (PV) —————————————— (2)
Equation (2) may be rewritten thus,
Ct = 1/((L-a)) Y1 + (N-a-1)/((L-a)) Y_t^a + 1/((L-a)) At – 1 ————– (3)
Equation (1) simply says that current consumption is assumed to be proportional to the present value of wealth. To define wealth properly, equation (2) and (3) emerged, where L, N and a are the length of individuals total life, working life and present age, all dated from the time he starts works. Yt is labour income, Y_t^a is expected future labour income and A1 is current asset holdings. An example of equation (2) immediately yields the result that the propensity to consume life-time income is unity.

Question (3)
CLINICALLY AND CRITICALLY DISCUSS AND ANALYZE
(A) THE THEORIES OF CONSUMPTION
Due to the crucial or vital role of consumption in the size of a nation’s aggregate income (national income), through its impact on employment and other macro-economic variables, a lot of theories have been propounded to explain the causes and behavior of consumption in both the short and long run. These include:
(1) Keyne’s Absolute income hypothesis: Keynes postulated that the propensity to consume was a functional relationship between a given level of real (current) income and the expenditure on consumption out of that given level of income. Thus, C = A + byd.
The propensity to consume represented by b is now more commonly known as the consumption function which is stable. Keynes hypothesized that the shape of the consumption curve is upward sloping, with a slop between zero and unity. Keynes proposition was based on “Fundamental psychological law” which states that men are disposed to increase their consumption as their income rises; but not as much as the increase in their income.
Keynes asserted that this psychological law applied to any modern community. From this it follows that the marginal propensity to consume (MPC) would lie between zero and one, Keynes further conjectured that the MPC would fail as income rises. This clearly means that the average propensity of national consumed, will decline with increases in total income.

The major assumptions underlying Keyne’s theory consumption function are as follows:
(a) Current consumption is a stable, positive function of current income, that’s C = Co + Cyd ——————————- (1)
(b) The MPC is less in the short run than in the long run. So, and increase in consumption will be smaller than an increase in disposable inc.
(c) In the long run, a smaller proportion of income will be consumed as income increases, and hence, the MPC will be less than the average propensity to consumed (APC).
(d) At low levels of disposable income, consumption will exceed income (MPC>1).
(e) Changes in the stock of their wealth will directly affect household level of consumption. However, early attempts to verify the assumptions (characteristics) of Keynes theory/hypothesis produced results which seemed to support some of the features while others are refuted, which culminated in the development of alternative theory to explain consumption behaviours.
(2) Duesenberry’s Relative Income theory/hypothesis
Professor J. S. Duesenberry of Harvard University, in 1994 came up with a theory to explain the secular upward drift of the short run consumption functions and to reconcile them with the long run consumption function. What Duesemberry sort to provide answer was; make makes people with a given income increase their consumption over time? This, why the short run consumption functions shift up over time? He found his answer in psychological and sociological factors. He posited that:

Gross investment do not account for depression and for that it is very rational for a country to invest on it, even if it required foreign debt or borrowing because it will be beneficial in both short and long run rather than foreign direct because in foreign direct the enterprisers or investors will hijack the whole profit back to their country and leave some to their host country.
Provide capital for funding the operations. This helps in adjusting the cash flow. For many small businesses, it is necessary to secure additional funds to cover expenses, or to take the next step in growing the business. Before determining the best type of loan for the business, however, it is important to clearly outline what kind of need the loan will fulfill. Ascertaining what the money will be used for will help the borrowing business to choose the best way to finance their need. Short term loans are a lending option that work for many businesses that experience seasonal revenue fluctuations, or that otherwise require a small, quick loan to cover expenses that will be repaid in projected revenue in under a year.
Most short-term financing options are tied directly to immediate sales; they are relatively easy to qualify for as long as the business has a positive cash flow or outstanding invoices to use as collateral. Short-term loans are rarely secured with a larger asset. As a consequence, however, they are usually more expensive in terms of fees, interest rates and APR than longer-term loans, and are generally available for smaller amounts than secured loans. Short-term financing is not a recommended option for significant investments in the company – such as renting or purchasing new space – due to shorter payback periods, lower loan amounts and more expensive financing. For businesses that need additional capital for short-term inventory purchases or experience seasonal spikes in revenue, however, short-term loans are a viable option.
Short-term financing options have more frequent payments than longer-term financing –repayments are often taken out of daily sales, or require repayment within 30 to 90 days. In comparison, longer-term loans are usually a fixed amount paid off at regular intervals, such as biweekly or monthly.
There are several short-term financing models to choose from: a business line of credit, merchant cash advances, and accounts receivable financing.

(1b) No 6
WHY IS IT THAT SOME COUNTRIES ARE ABLE TO ATTRACT A HUGE QUANTUM OF FOREIGN DIRECT INVESTMENT OVER A LONG PERIOD OF TIME?
(1) A business conducive environment to the investors: A country that has a conducive business environment is ultimately to attract more investors to their country than a country with unfriendly environment. Business friendly environment largely depends on good governance, rule of law, political will and infrastructure of the country and rules and regulations.
(2) Congenial climate: This is another factor that any investor has to consider before moving to any country to invest. However, at the same time, a country with/endowed with a good climate will ultimately attract more investors that’s sure than the other that do not have.
(3) Political stability/situation: This is very essential and credit to any country that their political situation is conducive/stable and thereby it’s obvious that foreign direct investors will move over to such a country than the opposite (country). It’s also a prime determinant for attracting foreign direct investment, the investors consider it very well to avoid economic waste or lost of their hard earned income.
(4) The availability of raw materials/resources: The investors deemed it right to consider this as also the factor that makes them to invest more in one country than the other where there is no availability of the raw materials that may be needed for their production cannot be considered to move on for investment in such a country.
(5) Cost of Labour/wages: This is important determinant that makes some country attract more foreign direct investment while other are starved of such, a rational investor consider this very well before progressing to any foreign direct investment because labour has a direct Relationship with the profit the investor is aiming to gain which is the sole aim of the investors and for their voice to be heard in enterprises (IMF) but this is secondary.
(6) Friendly tax, custom regulations and attractive packages: It is another factor or reason that some country gain/attract more investment than the other because any rational investor has to consider the tax, custom regulations of any country they want to move to for investment.
(7) Tolerable and moderate inflation and reasonably stable exchange rate: Here is a very big factor that foreign direct investors look into consideration before moving on to any country to invest because high inflation and unstable exchange rate is not friendly to any investor to put his/her hard earned capital/income to such country while those that have tolerable and moderate inflation and reasonable exchange rate attract more investment in their country.
(8) Technological progress/industrialization: This is also one of the factors that makes a country to attract more investment/investors than the other because investors are always looking at country that have innovation, improvement ideas, skills, machinery and steady electricity supply for the proper functionality of their investment but any country that are technologically weak, they are bound to be starved for a foreign direct investment.

QUESTION (1B) NO 4

WHAT IS THE OPTIMAL BLEND OF NATIONAL SAVING AND FOREIGN SAVINGS OR EXTERNAL BORROWING TO FINANCE AGGREGATE INVESTMENT

This suggests that the country has saved a specific amount in external account while in reality the deficit reflect a gap or excess demand in its foreign exchange transaction for a given period of time. National income account which is formally written as S – I = X – M where symbol S, I, X and M indicate respectively natural savings, total investment, export of goods and services and import of goods and services. If the left hand side of these identity which indicate the savings investment gap is in the negative, is invariably follows that, the right hand side, the foreign exchange gap would be in the negative as well and vice versa.
The identity highlights one of the most important behavioural relationships of an economy namely the current account deficit added to the national savings equal to the level of total investment. Finally, investment must be financed by some combination of private domestic savings, government savings (surplus) and foreign savings (foreign capital inflow).

NO 5
WHAT ARE THE MAIN DETERMINANT AND PRINCIPAL DETERRENT TO DOMESTIC INVESTMENT AND FOREIGN INVESTMENT (PORTFOLIO AND DIRECT)?
The main determinant for domestic and foreign Investment (portfolio and direct) are:
(1) Political and Economic condition: These are very important elements that contribute positively, for any investor to think for investment in any area or country both domestic and foreign investors consider it before investing to avoid story.
(2) Macro-economic stability: Here if macroeconomic system or stability like inflation, government, policy, exchange rate, interest rate is favourable and stable the investors will trup-in to invest and there will be no fear in them for come in and invest thereby increase the GDP by at least 8% and attract Economic development.
(3) Certainty in economic policies and other incentives: This is also another factor that enhances Domestic.
(4) Low tax and other incentives: These are important factors that determine domestic and foreign investment because if taxation is low and there is incentives or subsides you will see thousands of investors for both domestic and foreign will be competing to invest because they have seen that they are going to make it in the long-run.
(5) Cost of Production: This is also a pre-requisite which many investors consider before they can think of moving on or investing in any country, both domestic and foreign investors consider this very paramount to know if its high or low, however, if its low they will invest but if not so it will scare or push them out from investing.

• Building a Globally Competitive Economy: Restoring Nigeria’s economic growth and laying the foundations for long-term development requires a dynamic, agile private sector that can innovate and respond to global opportunities. The ERGP aims to tackle the obstacles hindering the competitiveness of Nigerian businesses, notably poor or non-existent infrastructural facilities and the difficult business environment. It will increase competitiveness by investing in infrastructure and improving the business environment.
Investing in infrastructure: The ERGP emphasizes investment in infrastructure, especially in power, roads, rail, ports and broadband networks. It builds on ongoing projects and identifies new ones to be implemented by 2020 to improve the national infrastructure backbone. Given the huge capital layout required to address the massive infrastructure deficit in the country, the private sector is expected to play a key role in providing critical infrastructure, either directly or in collaboration with the Government under public private partnership (PPP) arrangements.
Improving the business environment: Nigeria’s difficult and often opaque business environment adds to the cost of doing business, and is a disincentive to domestic and foreign investors alike. Regulatory requirements must be more transparent, processing times must be faster, the overall economy must be more business-friendly. The ERGP will build on the efforts of the Presidential Enabling Business Environment Council (PEBEC) and track progress using the metrics of the World Bank’s Doing Business Report. The target is to achieve a top 100 ranking in the World Bank’s Doing Business index by 2020 (up from the current ranking of 169).
Promoting Digital-led growth: To make the Nigerian economy more competitive in the 21st century global economy, its industrial policy must be linked to a digital-led strategy for growth. The ERGP will build on The Smart Nigeria Digital Economy Project to increase the contribution from ICT and ICT-enabled activity to GDP. The overall goals of a digital-led strategy for growth centre on the establishment of an ICT ecosystem in Nigeria. This is enabled through significantly expanding broadband coverage, increasing e-government, and establishing ICT clusters, starting in the SEZs. Government will also drive a programme to build the skills in this sector, focusing on training IT Engineers in software development, programming, network development and cyber security.
Key Execution Priorities
To achieve the objectives of the ERGP, the key execution priorities, are
Stabilizing the macroeconomic environment
Achieving agriculture and food security
Ensuring energy sufficiency (power and petroleum products)
Improving transportation infrastructure
Driving industrialization focusing on Small and Medium Scale Enterprises key outcomes:
Stable Macroeconomic Environment: The inflation rate is projected to trend downwards from the current level of almost 19 per cent to single digits by 2020. It is also projected that the exchange rate will stabilize as the monetary, fiscal and trade policies are fully aligned. This outcome will be achieved through policies that seek to remove uncertainty in the exchange rate and restore investors’ confidence in the market.

QUESTION NO (1b) 2
HOW IS THE EX-ARTE INVESTMENT TO BE APPROPRIATED BETWEEN THE PUBLIC AND PRIVATE SECTOR TO HELP ACHIEVE THE REAL GROWTH RATE?
Ex-arte is a phrase meaning “before the event”. Example is used mostly in commercial world, where result of a particular action or series of actions, forecast advance (or intended). The real growth in an economy is critically dependent on the existing stock of capital and net accumulation in the stock through current investment. Since the stock of capital at one point of time is the output of the stream of investment made in the past, therefore, the growth rate of an economy in the final analysis is the function of investment of both current and past.
There is massive gap between the need for infrastructure. Investment around the world and the ability of Government which is the public sector to pay for those investments while the private sector should build, control and operates infrastructure project and subject to strict government oversight and regulation, can help to achieve the real growth rate. However, public sector should sets the groundwork to enable private investment and allow it to thrive and private sector should also try to be doing the necessary because both sectors are so important for each other for favourable or sound Economic growth or the real growth rate.

Question (1b) 3

How do we define the sectoral priorities within the public and private sectors such that investment allocation generate sectoral growth rate to match the overall growth rate of the economy.
The public and private sector investment allocation generate sectoral growth rate that match the overall growth rate of economy such as
1. Allow markets to function. The public sector recognizes the power of markets to drive optimal behaviour among market participants The Plan prioritises the use of the market as a means of resource allocation, where appropriate. However, the Plan also recognises the need to strengthen regulatory oversight to minimise market abuse.
2. Uphold core values. The public and private sector is rooted in the core values that define the Nigerian society. It requires all citizens and stakeholders to adhere to
The Economic Recovering GP has three broad strategic objectives that will help achieve the vision of inclusive growth outlined above:
a) restoring growth,
b) investing in our people, and
c) Building a globally competitive economy.
• Restoring Growth: To restore growth, the Plan focuses on achieving macroeconomic stability and economic diversification. Macroeconomic stability will be achieved by undertaking fiscal stimulus, ensuring monetary stability and improving the external balance of trade. Similarly, to achieve economic diversification, policy focus will be on the key sectors driving and enabling economic growth, with particular focus on agriculture, energy and MSME led growth in industry, manufacturing and key services by leveraging science and technology. The revival of these sectors, increased investment in other sectors, less reliance on foreign exchange for intermediate goods and raw materials and greater export orientation will improve macroeconomic conditions, restore growth in the short term and help to create jobs and bring about structural change.

Types of Investment
(1) Fixed Investment
(2) Inventory Investment
(3) Replacement Investment
Investment can also be classified as
(a) Autonomous Investment: Is the investment which is independent of income. It is fixed. It is also interest rate invariant.

(b) Induced Investment: It is that investment that depends on the level of income. If income goes up, the investment may also go up and verse versa.

FACTORS THAT DETERMINE INVESTMENT
(1) Expected rate of net profit: Profit hope to realize investment
(2) Current Rate of Interest: Users cost of capital- percentage increase will discourage the investors and investment will fall completely.
(3) Government policies: This is very crucial to consider before establishing or intending to venture into any kind of investment because high taxes depress the expected net profit but subsides enhance expected rate. Hence, Tax is a cost to business. High cooperate profit taxes translate to low retained earnings by firms and vice versa.
(4) Expectation of businessmen:
(5) Acquisition, maintenance and operating costs: If the above goes up the profit will be low thereby investment will be discouraged and vice versa.
It is the second component of the Keynesian model of Income.
Y = C = 1
It = Kt – K t-1 + Dt
Where It = Gross Investment in period t
Kt = Current capital stock at period t
K t-1 = Capital stock at previous period or the beginning of the period t
Dt = Replacement expenditure
Kt – K t-1 which is the net investment is a net investment and its major focus in macro economics analysis.

(4) Modiylian’s Life-Cycle (time) hypothesis/theory
The life-time income hypothesis also called the “life cycle” theory was advanced by F. Modigliani and R. E. Brumberg in 1954. According to them, an individual consumption depends not primarily on current income but rather on expected life-time income, and planning horizon in not 3-5years in Friedman’s model but rather his entire life time. The individual maximizes a household optimal utility function throughout his life time by saving “in fat years” to smooth out consumption in “lean years”.
An individual’s life time income and consumption pattern are depicted below:

From the above diagram, it shows that an individual will dissave in his youth and old age when his income is relatively low and will save during his middle age years when his income is high, due to family responsibility, his consumption may also be relatively high. However, Modiyiani and Brumberg were able to derive the result provided the interest rate is constant, the factor of proportionality between consumption and the individual’s present value or wealth or life time income is dependent solely on the age of the individual. They assume further that consumer hold expectation with certainty, interest rate is zero, and that the consumer starts work with zero asset, and plan to have zero assets at death. With these specifications, Modigiani and Brumberg derive the following result(s):
Ct = bW1 ————————————————- (1)
Ct = 1/((L-a)) (PV) —————————————— (2)
Equation (2) may be rewritten thus,
Ct = 1/((L-a)) Y1 + (N-a-1)/((L-a)) Y_t^a + 1/((L-a)) At – 1 ————– (3)
Equation (1) simply says that current consumption is assumed to be proportional to the present value of wealth. To define wealth properly, equation (2) and (3) emerged, where L, N and a are the length of individuals total life, working life and present age, all dated from the time he starts works. Yt is labour income, Y_t^a is expected future labour income and A1 is current asset holdings. An example of equation (2) immediately yields the result that the propensity to consume life-time income is unity.
Equation (3) which is the core equation from the life-cycle hypothesis which says that current consumption is a linear and homogenous future (labour) income and current asset holdings with coefficients depending on the age of the household. The important of this model is that, it was able to explain the observed wealth of the community i.e (Aggregate wealth-income ratio) without recourse to the bequest motive i.e “life cycle saver” who saves during his earning span and dissaves the entire amount during his retirement span.
In summary, the theories (AIH, RICH, RIA, AND L CH) indicate that consumption besides being a function of disposable income, is also a function of real wealth; and real wealth determines permanent income or the present value of total resources. The relative emphasis placed on current income and permanent or expected income means that the theories may have different policy implications within the ambit of fiscal and monetary policies. Given the prime position occupied by Mpc (Marginal Propensity to consume) among national income determinants, these deserve proper investigation and refined methods of analysis.

(2) Duesenberry’s Relative Income theory/hypothesis
Professor J. S. Duesenberry of Harvard University, in 1994 came up with a theory to explain the secular upward drift of the short run consumption functions and to reconcile them with the long run consumption function. What Duesemberry sort to provide answer was; make makes people with a given income increase their consumption over time? This, why the short run consumption functions shift up over time? He found his answer in psychological and sociological factors. He posited that:
(a) That an individual’s consumption and saving decisions are influenced by his social environment (Sociological factors). Thus, given a level of income, if he lives in environment dominated by the well to do in society than if he lives in less affluent area. Thus, people in Victoria Island in Lagos are like to spend more than those in some other areas like Ajegunle and Oshodi. Moreso, it makes for a proportional relationship between aggregate consumption and aggregate disposal income. The “determinant effect resulting from the high living standard of those with high income levels and the desire to keep up with the Joneses” constituted one way of explaining the cross sectional variation in APC.
The constancy of the APC in the long run though it varies in the short run could be seen thus. If we assume that average propensity to save d s/y depends on the present level of income Yt
relative to previous peak income (Yo),
Thus:
S/y = a + b (y/ yo) ————————————————- (1)
Since c/y = 1 – s/y ————————————————- (2)
then,
c/y = (1-a) –b (yt /yo) ———————————————- (3)
If income grows at a constant rate g, so that
yt = (1+g) yt-1 ——————————————————- (4)
If Yt-1 = Yo, then
Yt = (1 + g) yo ——————————————————- (5)
Substitute Equation (5) into Equation (3), gives
C/y = [(1-a) –b (1+g)] ———————————————– (6)
Hence, in the long run the Apc is constant and equal to the Mpc.
(b) That the consumption behavior of individuals exhibits a “ratchet effect during from the fact that people, having become used to a standard of living find it difficult to lower same even in the face of declining income. This is the psychological axiom of relative income hypothesis.
In addition, the direction of income change determines the relationship between Apc and Mpc in Duesenberry analysis of consumption behavior using the relative income hypothesis. These include:
(i) If income is rising and it is above previous income level, the Apc would be constant and it will be equal to Mpc.
(ii) If income is rising and is below previous income level, the Apc would fall and Mpc rises but less than Apc.
(iii) If current income falls below previous income level, the Apc rises and is more than Mpc.
(iv) If income grows at a constant rate, Apc would be constant rate, Apc would be constant also equals Mpc.
Furthermore, a major problem of Duesentaerry relative income hypothesis is the negation of the basic fundamentals of utility maximization and rationality effects nullified.

No 8
What determines the efficiency and productivity of investment in a country both sectoral and overall?
By definition, efficiency and productivity of investment is a function of the return and total cost of an investment management structure subject to the judiciary and other constraints within which investor must operate. Institutional investors implement their investment policies through investment management structures. Efficiency and productivity of investment in a country both overall are below:
(1) Maximizing capital or income: An efficient and productive investment can be achieved through a maximum management of capital invested into the firm to avoid collapsing or economic waste. If judiciously managed or utilized ultimately, they will be efficient and high level of productivity of the investment but if not so they will not be nothing like efficiency or productivity of investment.
(2) Rational labour productivity: This contributes largely for the efficiency and productive of investment because cost of labour has a directly relationship with the success of any investment, if cost of labour is low the efficient and productivity of the investment will increase (high) but verse versa.
(3) Good governance: This is very crucial factors that determines the efficiency and productivity of investment in a country in bother sectoral because if government of any country is functional or delivering there will be high efficient and productivity of investment and everybody in the country will benefit it directly or indirectly because it will ultimately increase GDP or national output.
(4) Low level of corruption: This is very dangerous factor if not controlled or eliminated completely. It will mar the efficient and productivity of investment in a country in both sectoral and overall because the efficient and productivity can never be achieved but if controlled or eliminated sure there will be efficiency and high productivity of investment in both sectoral and overall.
(5) Allocation and policy decisions: It implies that the trustees or investors need to integrate or implement risks and other vital issues that concern the firm or company for high efficiency and productivity of such investment in both sectoral and overall.
(6) Adequate or steady electricity supply, infrastructure and good roads: This is a very essential factor that boosts the efficiency and productivity of investment both in sectoral and overall, if there exists a steady electricity supply the investment will grow and yield more profit which is the main aim of the investment.
(7) Quality accounting: This is important and necessary to increase efficiency and productivity of investment in sectoral and overall.

No 6
Why is it that some countries are able to attract a huge quantum of foreign direct investment over a long period of time?
(1) A business conducive environment to the investors: A country that has a conducive business environment is ultimately to attract more investors to their country than a country with unfriendly environment. Business friendly environment largely depends on good governance, rule of law, political will and infrastructure of the country and rules and regulations.
(2) Congenial climate: This is another factor that any investor has to consider before moving to any country to invest. However, at the same time, a country with/endowed with a good climate will ultimately attract more investors that’s sure than the other that do not have.
(3) Political stability/situation: This is very essential and credit to any country that their political situation is conducive/stable and thereby it’s obvious that foreign direct investors will move over to such a country than the opposite (country). It’s also a prime determinant for attracting foreign direct investment, the investors consider it very well to avoid economic waste or lost of their hard earned income.
(4) The availability of raw materials/resources: The investors deemed it right to consider this as also the factor that makes them to invest more in one country than the other where there is no availability of the raw materials that may be needed for their production cannot be considered to move on for investment in such a country.
(5) Cost of Labour/wages: This is important determinant that makes some country attract more foreign direct investment while other are starved of such, a rational investor consider this very well before progressing to any foreign direct investment because labour has a direct Relationship with the profit the investor is aiming to gain which is the sole aim of the investors and for their voice to be heard in enterprises (IMF) but this is secondary.
(6) Friendly tax, custom regulations and attractive packages: It is another factor or reason that some country gain/attract more investment than the other because any rational investor has to consider the tax, custom regulations of any country they want to move to for investment.
(7) Tolerable and moderate inflation and reasonably stable exchange rate: Here is a very big factor that foreign direct investors look into consideration before moving on to any country to invest because high inflation and unstable exchange rate is not friendly to any investor to put his/her hard earned capital/income to such country while those that have tolerable and moderate inflation and reasonable exchange rate attract more investment in their country.
(8) Technological progress/industrialization: This is also one of the factors that makes a country to attract more investment/investors than the other because investors are always looking at country that have innovation, improvement ideas, skills, machinery and steady electricity supply for the proper functionality of their investment but any country that are technologically weak, they are bound to be starved for a foreign direct investment.

No 4
What is the optimal blend of national savings and foreign savings or external borrowing to finance the aggregate level of investment?
This suggests that the country has saved a specific amount in external account while in reality the deficit reflect a gap or excess demand in its foreign exchange transaction for a given period of time. National income account which is formally written as S – I = X – M where symbol S, I, X and M indicate respectively natural savings, total investment, export of goods and services and import of goods and services. If the left hand side of these identity which indicate the savings investment gap is in the negative, is invariably follows that, the right hand side, the foreign exchange gap would be in the negative as well and vice versa.
The identity highlights one of the most important behavioural relationships of an economy namely the current account deficit added to the national savings equal to the level of total investment. Finally, investment must be financed by some combination of private domestic savings, government savings (surplus) and foreign savings (foreign capital inflow).

No 3
How do we define the sectoral priorities within the public and private sectors such that investment allocation generate sectoral growth rate to match the overall growth rate of the economy?
The public and private sector investment allocation generate sectoral growth rate that match the overall growth rate of economy such as allow markets to function. The public sector recognizes the power of markets to drive optimal behaviour among market participants The Plan priorities the use of the market as a means of resource allocation, where appropriate. However, the Plan also recognises the need to strengthen regulatory oversight to minimise market abuse.
Uphold core values. The public and private sector is rooted in the core values that define the Nigerian society. Economic Recovering Gross Profit has three broad strategic objectives that will help achieve the vision of inclusive growth outlined below: (1) restoring growth, (2) investing in our people, and (3) building a globally competitive economy.
Restoring Growth: To restore growth, the plan focuses on achieving macroeconomic stability and economic diversification. Macroeconomic stability will be achieved by undertaking fiscal stimulus, ensuring monetary stability and improving the external balance of trade. Similarly, to achieve economic diversification, policy focus will be on the key sectors driving and enabling economic growth, with particular focus on agriculture, energy and MSME led growth in industry, manufacturing and key services by leveraging science and technology. The revival of these sectors, increased investment in other sectors, less reliance on foreign exchange for intermediate goods and raw materials and greater export orientation will improve macroeconomic conditions, restore growth in the short term and help to create jobs and bring about structural change.
Investing in our People: Economic growth is beneficial for society when it creates opportunities and provides support to the vulnerable. The ERGP will invest in the Nigerian people by increasing social inclusion, creating jobs and improving the human capital base of the economy.

No 8
What determines the efficiency and productivity of investment in a country both sectoral and overall?
By definition, efficiency and productivity of investment is a function of the return and total cost of an investment management structure subject to the judiciary and other constraints within which investor must operate. Institutional investors implement their investment policies through investment management structures. Efficiency and productivity of investment in a country both overall are below:
(1) Maximizing capital or income: An efficient and productive investment can be achieved through a maximum management of capital invested into the firm to avoid collapsing or economic waste. If judiciously managed or utilized ultimately, they will be efficient and high level of productivity of the investment but if not so they will not be nothing like efficiency or productivity of investment.
(2) Rational labour productivity: This contributes largely for the efficiency and productive of investment because cost of labour has a directly relationship with the success of any investment, if cost of labour is low the efficient and productivity of the investment will increase (high) but verse versa.
(3) Good governance: This is very crucial factors that determines the efficiency and productivity of investment in a country in bother sectoral because if government of any country is functional or delivering there will be high efficient and productivity of investment and everybody in the country will benefit it directly or indirectly because it will ultimately increase GDP or national output.
(4) Low level of corruption: This is very dangerous factor if not controlled or eliminated completely. It will mar the efficient and productivity of investment in a country in both sectoral and overall because the efficient and productivity can never be achieved but if controlled or eliminated sure there will be efficiency and high productivity of investment in both sectoral and overall.
(5) Allocation and policy decisions: It implies that the trustees or investors need to integrate or implement risks and other vital issues that concern the firm or company for high efficiency and productivity of such investment in both sectoral and overall.
(6) Adequate or steady electricity supply, infrastructure and good roads: This is a very essential factor that boosts the efficiency and productivity of investment both in sectoral and overall, if there exists a steady electricity supply the investment will grow and yield more profit which is the main aim of the investment.
(7) Quality accounting: This is important and necessary to increase efficiency and productivity of investment in sectoral and overall.

No 6
Why is it that some countries are able to attract a huge quantum of foreign direct investment over a long period of time?
(1) A business conducive environment to the investors: A country that has a conducive business environment is ultimately to attract more investors to their country than a country with unfriendly environment. Business friendly environment largely depends on good governance, rule of law, political will and infrastructure of the country and rules and regulations.
(2) Congenial climate: This is another factor that any investor has to consider before moving to any country to invest. However, at the same time, a country with/endowed with a good climate will ultimately attract more investors that’s sure than the other that do not have.
(3) Political stability/situation: This is very essential and credit to any country that their political situation is conducive/stable and thereby it’s obvious that foreign direct investors will move over to such a country than the opposite (country). It’s also a prime determinant for attracting foreign direct investment, the investors consider it very well to avoid economic waste or lost of their hard earned income.
(4) The availability of raw materials/resources: The investors deemed it right to consider this as also the factor that makes them to invest more in one country than the other where there is no availability of the raw materials that may be needed for their production cannot be considered to move on for investment in such a country.
(5) Cost of Labour/wages: This is important determinant that makes some country attract more foreign direct investment while other are starved of such, a rational investor consider this very well before progressing to any foreign direct investment because labour has a direct Relationship with the profit the investor is aiming to gain which is the sole aim of the investors and for their voice to be heard in enterprises (IMF) but this is secondary.
(6) Friendly tax, custom regulations and attractive packages: It is another factor or reason that some country gain/attract more investment than the other because any rational investor has to consider the tax, custom regulations of any country they want to move to for investment.
(7) Tolerable and moderate inflation and reasonably stable exchange rate: Here is a very big factor that foreign direct investors look into consideration before moving on to any country to invest because high inflation and unstable exchange rate is not friendly to any investor to put his/her hard earned capital/income to such country while those that have tolerable and moderate inflation and reasonable exchange rate attract more investment in their country.
(8) Technological progress/industrialization: This is also one of the factors that makes a country to attract more investment/investors than the other because investors are always looking at country that have innovation, improvement ideas, skills, machinery and steady electricity supply for the proper functionality of their investment but any country that are technologically weak, they are bound to be starved for a foreign direct investment.

No 4
What is the optimal blend of national savings and foreign savings or external borrowing to finance the aggregate level of investment?
This suggests that the country has saved a specific amount in external account while in reality the deficit reflect a gap or excess demand in its foreign exchange transaction for a given period of time. National income account which is formally written as S – I = X – M where symbol S, I, X and M indicate respectively natural savings, total investment, export of goods and services and import of goods and services. If the left hand side of these identity which indicate the savings investment gap is in the negative, is invariably follows that, the right hand side, the foreign exchange gap would be in the negative as well and vice versa.
The identity highlights one of the most important behavioural relationships of an economy namely the current account deficit added to the national savings equal to the level of total investment. Finally, investment must be financed by some combination of private domestic savings, government savings (surplus) and foreign savings (foreign capital inflow).
No 5
What are the main determinant and principal deterrent to domestic investment and foreign investment (portfolio and direct)?
The main determinant for domestic and foreign Investment (portfolio and direct) are:
(1) Political and Economic condition: These are very important elements that contribute positively, for any investor to think for investment in any area or country both domestic and foreign investors consider it before investing to avoid story.
(2) Macro-economic stability: Here if macroeconomic system or stability like inflation, government, policy, exchange rate, interest rate is favourable and stable the investors will trup-in to invest and there will be no fear in them for come in and invest thereby increase the GDP by at least 8% and attract Economic development.
(3) Certainty in economic policies and other incentives: This is also another factor that enhances Domestic.
(4) Low tax and other incentives: These are important factors that determine domestic and foreign investment because if taxation is low and there is incentives or subsides you will see thousands of investors for both domestic and foreign will be competing to invest because they have seen that they are going to make it in the long-run.
(5) Cost of Production: This is also a pre-requisite which many investors consider before they can think of moving on or investing in any country, both domestic and foreign investors consider this very paramount to know if its high or low, however, if its low they will invest but if not so it will scare or push them out from investing.
(6) Potential domestic market: This is very important tool or determine for both domestic and foreign investors consider or look into before they can make a move. At the same time country that investors see that they have high sales in their country ultimately it will attract more investors than the other example of such country is China, Vietman and India. These are major three countries that attract more investors than the other countries. It’s simply because market sales in their countries more than other countries.
(7) Labour regulation, work, ethics: A country where labour regulation permits a continuous or fixed labour, such a country attracts both domestic and foreign investments and investors in a huge quantum.

No 3
How do we define the sectoral priorities within the public and private sectors such that investment allocation generate sectoral growth rate to match the overall growth rate of the economy?
The public and private sector investment allocation generate sectoral growth rate that match the overall growth rate of economy such as allow markets to function. The public sector recognizes the power of markets to drive optimal behaviour among market participants The Plan priorities the use of the market as a means of resource allocation, where appropriate. However, the Plan also recognises the need to strengthen regulatory oversight to minimise market abuse.
Uphold core values. The public and private sector is rooted in the core values that define the Nigerian society. Economic Recovering Gross Profit has three broad strategic objectives that will help achieve the vision of inclusive growth outlined below: (1) restoring growth, (2) investing in our people, and (3) building a globally competitive economy.
Restoring Growth: To restore growth, the plan focuses on achieving macroeconomic stability and economic diversification. Macroeconomic stability will be achieved by undertaking fiscal stimulus, ensuring monetary stability and improving the external balance of trade. Similarly, to achieve economic diversification, policy focus will be on the key sectors driving and enabling economic growth, with particular focus on agriculture, energy and MSME led growth in industry, manufacturing and key services by leveraging science and technology. The revival of these sectors, increased investment in other sectors, less reliance on foreign exchange for intermediate goods and raw materials and greater export orientation will improve macroeconomic conditions, restore growth in the short term and help to create jobs and bring about structural change.
Investing in our People: Economic growth is beneficial for society when it creates opportunities and provides support to the vulnerable. The ERGP will invest in the Nigerian people by increasing social inclusion, creating jobs and improving the human capital base of the economy.