Introduction
The European economy is the largest in the world. The economy consists of 740 million individuals from 50 nations. It has driven the global economy for more than five decades. The European economy contributes 30.2% of the world’s gross domestic product. However, the Nigerian economy has improved becoming the strongest in Africa. It has overtaken the European economy in some aspects. The economy of Europe is the largest in the western part of the globe. The Nigerian and European economies are comparable, but some components are different. The European economy is diverse because it focuses on consumption, finances, and facilities to middle-class individuals. Alternatively, Nigeria’s economy is consumer-driven. The economy has transformed from the traditional manufacturing industry. The Nigerian economy can be compared with that of European due to the changes in the production, development, and financial activities. Nigeria and Europe can collaborate for the development of the world economy.
Historical Evolution of the Nigerian and European Economic Model
Ojo developed the first economic model in Nigeria in 1972. The purpose of the economic structure was to provide inputs in the country for the achievement of medium-term goals for the NDP (National Development Plan). Therefore, Nigeria achieved the objectives for a particular period. The model was based on the Keynesian demand where exports, imports, investments, and consumption were influenced by internal factors (Central Bank of Nigeria, 2015). On the contrary, government expenditure and investments spending were influenced by external factors. Ojo expressed the economic model using two dynamic equations and the least squares regression technique. Further, Ojo derived the least expression of the economic structure and conducted probability tests (Central Bank of Nigeria, 2015). In 1973, the UNCTAD developed another economic structure. The agency used economic data of 1955 and 1966 to design the new economic structure (Central Bank of Nigeria, 2015). The economic model consisted of 37 expressions including 23 behavior and 14 same equations. Also, the economic structure had 46 variables where 10 were affected by external factors (Central Bank of Nigeria, 2015). The economic analysts used the OLS method to estimate the demand and supply for behavioral expressions. The model had weaknesses such as the absence of financial factors and poor estimation methods (Central Bank of Nigeria, 2015). There was a need to develop a new model to overcome the challenges.
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Consequently, the World Bank created an economic structure in 1974. The purpose of designing the new economic structure was to enhance growth that was related to the improvement of agriculture and oil trading activities. The system was based on the Keynesian approach where the agricultural and petroleum industries were affected by external activities (Central Bank of Nigeria, 2015). It had a two-gap model that contained investment or saving activities. Also, the model focused on import and export activities. The employment-income concept of the economic system facilitated the demand for jobs and income in every industry in the country (Central Bank of Nigeria, 2015). The system was complex, and there was a need for developing a new structure.
In 1977, Uwurajen developed a model which focused on providing inputs for the country to meet the medium-term goals. A Harrod-type production expression was applied in the model to reduce capital (Central Bank of Nigeria, 2015). From 1977 to 1985, Olofin designed a model to predict and improve macroeconomic factors. As a result, the Nigerian economy improved (Central Bank of Nigeria, 2015). In 2006, a new macroeconomic model was designed to forecast the economic activities of the second project of NEEDS. The system was based on the Keynesian approach of determination of earnings (Central Bank of Nigeria, 2015). In 2003, Iyoha designed a macroeconomic system that consisted of 5 industries expressed using 39 equations. The industries include the commercial sector, government, local spending, production, and global trade (Central Bank of Nigeria, 2015). The current model contains six blocks which include government, price, supply, demand, financial sector, and external factors. It contains 20 behavioral and 16 identical expressions (Central Bank of Nigeria, 2015). The model has been useful in facilitating economic development.
The first macroeconomic model in the European region was production-oriented. The nations focused on producing goods to achieve economic goals (Gill & Raiser, 2012). Subsequently, the countries introduced commercial facilities to improve the economy. European nations added innovation in the macroeconomic model to counter the competitors in the international market. The countries in the European region had to engage in trade to develop their currency value and economy (Gill & Raiser, 2012). The present economic model adopted in the European region comprises six factors which include trade, government, enterprise, finance, labor, and innovation. The growth model has facilitated the European nations to converge with the wealthy and high-income countries over the past five decades (Gill & Raiser, 2012). The development of the European economic system has facilitated growth.
Aspects of the Model
Nigeria has a mixed economy which uses the capitalist or communist approach. Most of the resources and property are owned by the government or public groups rather than individuals. The government has the authority to control the costs in the market by establishing price policies (Udah, 2009). The present macroeconomic model for Nigeria contains six building blocks which include external industry, aggregate demand, monetary, production, labor, and fiscal (Udah, 2009). The financial sector focuses on the establishment policies for regulating economic changes such as inflation or deflation. Nigeria is prone to economic fluctuations in spite of being the largest economy in Africa. Thus, the government or policymakers establish laws to regulate economic activities (Udah, 2009). The economic experts have to regulate the demand for goods because Nigeria uses the consumer-driven approach.
Nigeria regulates external factors by incorporating policies. External elements can only be controlled by establishing regulations to handle economic activities. The country is responsible for overseeing production activities. Nigeria produces oil, cement, food, rubber, plastic, and vehicles (Udah, 2009). Further, the country monitors the economic activities by establishing fiscal policies. Nigeria has fiscal policies to prevent inflation which affects the economic performance (Udah, 2009). The country has created labor laws to enhance employee productivity. The workers receive fair salaries and benefits such as leave allowance or health premiums (Udah, 2009). The Nigerian economy has developed by incorporating the building blocks and a mixed economic system.
Europe has a capitalist economic system. The European nations maintain economic growth by providing social-economic benefits to the citizens. The consumers influence the prices of products in the market. Also, the European economy has some socialist tendencies because the companies or states have to improve the social benefits of the citizens (Gill & Raiser, 2012). The European macroeconomic strategy comprises six elements which include trade, innovation, finance, labor, government, and enterprise (Gill & Raiser, 2012). The rich and weak economies in the European region have collaborated through trading activities. Consequently, the living standards and income in developing economies have improved. However, the trading activities of the poor nations have developed more than the organizational quality (Gill & Raiser, 2012). Secondly, Europe is the only region that provides all kinds of commercial facilities. The economies offer foreign direct investments, portfolio finances, and financial or non-financial FDI. The rich nations in Europe provide the financial services to the weak economies (Gill & Raiser, 2012). As a result, the economy of emerging nations improves.
The European nations have adopted the enterprise approach for economic development. The strategy focuses on the development of private corporations to facilitate economic growth. All private organizations are responsible for the stakeholder’s profits. However, private enterprises in the European economies are accountable for the social and environmental effects (Gill & Raiser, 2012). The fourth aspect in the European macroeconomic system is innovation. It is the responsibility of the European states to provide tertiary education to the citizens (Gill & Raiser, 2012). Further, the nations must enhance research and development activities for continuous innovation. Innovation increases healthy competition in the industry.
The European region has established strict labor laws to protect employees from exploitation. The workers perform the activities efficiently for economic development. The labor laws focus on protecting employees from abuse. Workers in the European region receive adequate wages and non-wage benefits (Gill & Raiser, 2012). The employees get paid leave, unemployment premiums, and pensions. The European government is efficient as compared to other nations in the world. The economies coordinate to enhance growth in the region (Gill & Raiser, 2012). The states enhance equality and security in the European region.
Current State of Economic Condition
Nigeria is an emerging economy in Africa through the development of finance, manufacturing, communication, and innovation industry. It is the most robust economy in Africa. The country re-developed the production industry in 2013 which facilitated economic improvement. Nigeria is the 27 th largest economy in the world basing on the nominal gross domestic product of $ 376.4 billion ("Nigeria Economy - GDP, Inflation, CPI and Interest Rate", 2018). I t is the 22 nd largest economy in the globe due to its high PPP (Purchasing Power Parity). The current gross domestic product for every citizen is $ 2,800. The GDP growth has increased to 2.1%, but the current inflation rate is 16.3%. Economic exporters predicted that the GDP could increase to 2.9% in 2020. Nigeria consists of 74 million workers in the employment sector ("Nigeria Economy - GDP, Inflation, CPI and Interest Rate", 2018) . The unemployment rate is 13.6% in spite of having many industries in the country. Nigeria earned $ 40.8 million from exporting products. The major export partners include Brazil, India, South Africa, Netherlands, and Spain. The country exports petroleum, aluminum, art crafts, vegetable products, leather, and tobacco ("Nigeria Economy - GDP, Inflation, CPI and Interest Rate", 2018) . Alternatively, the country incurred $ 35.24 billion on purchasing the imports. Nigeria imports vehicles, base metals, machinery, raw materials, and appliances. The primary import partners include Netherlands, Belgium, China, United States, and India ("Nigeria Economy - GDP, Inflation, CPI and Interest Rate", 2018) . In 2017, Nigeria earned revenue of $ 54.48 billion, but the expenses amounted to $ 31.16 billion. The country had acquired foreign reserves worth $ 42.8 billion by 2012 ("Nigeria Economy - GDP, Inflation, CPI and Interest Rate", 2018) . The per capita income has increased to 10% and the value of Nigerian currency exchanges at 360 Naira for one dollar ("Nigeria Economy - GDP, Inflation, CPI and Interest Rate", 2018) . Nigeria economy is growing despite the challenges in inflation or unemployment rates.
The European economy comprises of 740 million civilians from 50 countries. All the countries use the euro as the common currency. The nominal GDP for the European region was $ 22.9 trillion ("Europe Economy", 2018) . Europe contributes a third of the global gross domestic product. Further, it is the wealthiest and strongest economy in the world. The European economy was not affected by the global economic crisis of 2009. The assets of the economy are worth $ 33 trillion which is equivalent to one-third of the global wealth ("Europe Economy", 2018) . Out of the Fortune 500 corporations, 184 are located in Europe. The unemployment rate in the region is 10%, and the GDP has grown by 2.4% ("Europe Economy", 2018) . The earnings of every citizen in Europe are approximately $ 27,330. There are 3.7 million millionaires on the European continent ("Europe Economy", 2018) . Europe has high economic performance due to its unique macroeconomic model.
Europe has a high GDP than Nigeria due to the high income earned by the countries. For instance, Nigeria focuses on producing products that generate low income. Europe focuses on producing machines and offering financial services that are profitable. The GDP growth of Europe is higher than that of Nigeria. Also, Europe has a high household income of $ 27,330 as compared to Nigeria which is $ 2,800. The difference in the macroeconomic trends causes variation in economic performance.
Differences in Regulations, Property Ownership, and Approaches to International Trade
Nigeria has developed regulations to control inflation rates and establish changes in the economy. The Central Bank of Nigeria has created strict monetary policies to counter inflation and low investments. Thus, the Nigerian government has created standard exchange rates to hedge the currency due to the economic fluctuations. For example, 112 Naira is equivalent to a dollar (Central Bank of Nigeria, 2015). The state has allowed CBN, oil corporations, and banks to conduct trading activities using the standard rates. The public access foreign currency in parallel markets. The government has allowed corporations to acquire domiciliary accounts in independent banks. The CBN has to release about 200 million to the market to regulate the flow of money in the market (Central Bank of Nigeria, 2015). The Nigerian government has established policies to encourage the development of the private industry and the adoption of a market-oriented approach in the economy. The state is still working on establishing price policies to reduce the losses of producing and importing petroleum (Central Bank of Nigeria, 2015). The Land Act of 1978 regulates property ownership in the country. The government has control over land ownership, usage, and improvement. As a result, the private industry cannot develop due to government control on possession of the property. The development projects are few in the country because the state controls all the activities (Central Bank of Nigeria, 2015). Nigeria trades with foreign nations, but the state has imposed tariffs to mitigate the effects of economic fluctuations. Nigeria hedges its currency against the dollar to sustain profits in times of economic changes (Central Bank of Nigeria, 2015). The government controls the economic activities in the country which limits their potential.
Alternatively, Europe has established a standard exchange rate between the euro and a nation’s currency. The currencies of the countries will not fluctuate in case of a crisis after pegging. Property is privately or publicly owned in Europe. The states do not control property ownership because they give the citizens the freedom to own land or houses ("Europe Economy", 2018) . Europe has created a union to facilitate trade in the continent and international allies. Some European nations have joined the World Trade Organization to engage in trading activities ("Europe Economy News | Wall Street Journal", 2018) . The European nations encounter minor trade disagreements, but they solve using the treaties established by the unions. The region does not impose strict trade laws or tariffs to regulate trading activities ("Europe Economy News | Wall Street Journal", 2018) . Europe has the highest economic performance due to favorable policies and minimum government control.
Findings, Policy Recommendations, and Future Improvements
The first finding is that the government controls the macroeconomic trends in the country. The state can develop policies that can regulate economic activities. Regions with favorable government regulations conduct trading activities efficiently. Secondly, the kind of macroeconomic model influences the economic performance in the country. A country should incorporate a macroeconomic strategy that meets the present economic conditions. Thirdly, the type of a country’s economy affects economic efficiency. For instance, the capitalist system increases the income in a country as compared to the mixed or market-driven methods.
Nigeria needs to improve the economy by creating policies that encourage the free flow of goods. The government should eliminate strict economic laws and tariffs to encourage citizens to participate in international trade. Nigeria should change the macroeconomic model and adopt the European strategy. The country should incorporate the growth approach that focuses on innovation and provision of financial facilities. Europe needs to adjust the trade and financial activities to reduce the risks and delays in economic development. The states should motivate the emerging economies to adopt the enterprise method and innovation techniques. The changes will increase competition among the businesses, and weak economies will improve. Europeans will afford the high living standards after the development of economic activities.
References
Central Bank of Nigeria. (2015). Macro-econometric Model of the Nigerian Economy. Retrieved from https://www.cbn.gov.ng/out/2015/rsd/macroeconometric%20model%20of%20the%20nigerian%20economy.pdf
Europe Economy. (2018). Retrieved from https://www.cnbc.com/europe-economy/
Europe Economy News | Wall Street Journal. (2018). Retrieved from https://www.wsj.com/news/types/europe-economy
Gill, I. S., & Raiser, M. (2012). Golden growth: Restoring the lustre of the European economic model . World Bank Publications. Retrieved from http://www.worldbank.org/en/region/eca/publication/golden-growth
Nigeria Economy - GDP, Inflation, CPI and Interest Rate. (2018). Retrieved from https://www.focus-economics.com/countries/nigeria
Udah, E. B. (2009). A dynamic macroeconomic model of the Nigerian economy with emphasis on the monetary sector. South African Journal of Economic and Management Sciences , 12 (1), 28-47. Retrieved from http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S2222-34362009000100003
