important of foriegn trade transaction

important of foriegn trade transaction

important of foriegn trade to the economic development of a country.

foriegn trade is also called international or intercountry trade.

Foriegn trade is a trade between two or more countries.

Nigeria is one of the country that likely engages in foriegn trade transaction as Nigerian traders knows the important of foriegn trade

types of foriegn trade.

there are three types of foriegn trade which are, import trade, export trade and entrepot trade.

  • Import trade. import trade is a transaction that involves buying goods from other countries and bring it to your home country.

example of import trade includes, Nigerian traders buying motor and machine from others part of the world and importing to Nigeria where the will now sell it and make profit.

  • export trade. export trade involves a transaction where goods are being moved out from the producer country to other countries.

the goods producing country is the export country.

example of export trade includes, distribution of crude oil from Nigeria to other parts of Africa, here Nigeria is the exporter.

  • entrepot trade. entrepot trade means buying goods from other countries and then later resell it to another country after the goods has undergone certain conditions.

china imports unrefined crude oil from Nigeria and resell it to other countries including Nigeria after the refining process. this is example of an entrepot trade system.

reasons for foriegn trade transaction.

the need for foriegn trade arises as no country can produce all the goods needed in the nation due to some of this following reasons.

  • availability of mineral resources.

the world is made up of numerous mineral resources, this resources is distributed natural to different parts of the world.

raw material for production of some goods and services were available in some parts while unavailable in others.

here the need for foriegn exchange transaction arise as the country that lack raw material for those products and are in demand for those products have to purchase it from where it’s available.

  • lack of development.

poorly developed countries find it difficult to properly utilizes the available raw material in their country, many countries depends on china, Japan and America for some products which they can produce from their own countries but lack of technical known how and poor development will bring a barrier to their efforts.

  • Natural disasters.

countries that encountered natural disasters like earthquake and flooding may find it difficult to provide goods that can reach the demands of the people, the need for international trades arise here.

after an emergency situation like war, the need for foriegn trade arise as the people may experience famine if care is not taking

important of foriegn trade.

foriegn trade is of great important, there are numerous advantages of international trades which made almost all the countries in the world to engages in foriegn trade.

some of the benefits of foriegn trade includes

  1. to provide the availability of products in all parts of the world.
  2. foriegn trade helps to maintain availability of products in all parts of the world, foriegn traders were on research daily, looking for countries they can export their products to.
  3. it maintain division of labor.
  4. foriegn trade provide division of labor between all countries e.g countries like china and Japan are the best producers of products like motor and machine parts, telephone, and computer devices. this countries also depends on other countries for other goods which they can’t produce sufficiently like food materials and crude oil.
  5. international co-operation and understanding.
  6. foriegn trade enhance cooperation and understanding between different countries in the world, peoples of different nations and tribe come together and share knowledge and understanding during foriegn trade transaction .
  7. foriegn exchange helps a country to face any natural calamity. after a natural calamity like flood, earthquake, hurricane, drought and war, the affected country would be able to sustain their needs through foriegn trade transaction, as there will be a serious damages to the agricultural industries of the nation, there only means to succeed is through foriegn trade.
  8. it enhance great varieties of goods and services.
  9. international trade enhance availability of different varieties of products, here , consumers will pick the best for their choices as there is many varieties of goods in the market.
  10. world Peace.foriegn trade transaction promotes world Peace through the peaceful transactions between different countries of the world.
  11. foriegn trade transaction helps people to learn the nature and culture of people from other countries which will help them to leave peaceful with them
  12. provision employment opportunity.

foriegn trade provides employment opportunity through many ways, directly or indirectly.

foreign trade is one of the primary source of employment opportunity, foriegn traders primarily depends on this transaction for their living, manufacturer of goods both industrial and agricultural products directly or indirectly depends on foriegn trade transaction in their business.

efficiency in production.

foriegn trade transaction makes a country to the production of their home made products efficiently as they will strive to attain to the needs of other countries which depends on them.


factor affecting foriegn trade transaction.

there are numerous factors that are affecting the transaction between different countries, some of the factor includes


political factor.

when the people in power are enemies, there will be a problem for foreign traders as the president may order the closing of border from their country to their enemies countries resulting in quench to foriegn exchange transaction between the two countries.


security issue.

security issue is one of the factor that affect foriegn trade transaction, countries with low security system or high rate insecurity case will find it difficult to trade with other highly secured country as the secured country will be in fear of any security issue outbreak.

this is the reason Nigeria closed there border between Niger as the high rate of banditry in niger became so alarming.


Protection against diseases and infection.

a responsible country will close The borderline between any country that records a case of diseases outbreak or they carry out tests to confirm negativity of the diseases before you can cross the border.

this is done to maintain the health and safety of the people in the country.

the case of Corona virus outbreak is an example for this, you can see as all the countries in the whole world works hard to ensuring a safe health conditions to their peoples, case like this tremendously affect foriegn exchange transaction.

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