Nigeria discovered oil 50 years ago and is now the world's sixth biggest oil exporter. The recent increase in global oil prices has had a very large positive effect on the country's balance of trade and has also improved the country's terms of trade. Lagos is the largest city in Nigeria, with a population of over 20 million, and has undergone a successful economic transformation in recent years. It has used the private sector to become the most productive and dynamic part of Nigeria's economy. The owner of one of Nigeria's largest companies has stressed the enormous economic progress that the country has made in recent years: “I'm a great believer in Nigeria because the opportunities here are enormous." His company's success shows what private enterprise can achieve in a mixed economy especially if it is provided with the right incentives by the government. Most Nigerian entrepreneurs are operating in Lagos and entrepreneurship has certainly played a key role in the modern Lagos economy. Start-up initiatives have been encouraged and the need to be innovative has been increasingly recognised, leading to the development of new goods, services and markets. The city is the centre of thriving music, fashion, film and technology industries that have significant influence throughout Africa. A 'free trade zone' on the edge of Lagos has been established where private sector firms pay no business taxes to the government and there are now numerous start-up enterprises that are thriving. The government aims to lower costs, reduce bureaucracy and make the economy more flexible and efficient with the hope of boosting trade. The zone is located next to a deep sea port and has good road connections with both the rest of Nigeria and other countries in the region. Lagos is an important transport hub, with three major ports and West Africa's most important international airport. In 2016 the output of Lagos was valued at US136 billion while Nigeria's total national output was valued at US405 billion. A former governor of the Nigerian central bank, has stated: “Since 2000, Lagos has been transformed. In terms of an improved infrastructure and a supportive economic environment, the government has given firms a greater opportunity to thrive." Source: Adapted from The Financial Times, 26 March 2018

1. (a)Calculate the percentage of Nigeria's national output that is accounted for by Lagos.[1]
2. (b)Distinguish between a country's balance of trade and its terms of trade.[3]
3. (c)Explain the contribution of the factor enterprise to the successful economic transformation of Lagos.[4]
4. (d)(i)Explain why 'free trade zones' (FTZ) can be considered a supply-side policy.[2]
5. (d)(ii)Explain how measures to reduce protection through policies such as 'free trade zones' encourage specialisation and the development of comparative advantage in Nigeria.[4]
6. (e)Discuss whether government intervention to encourage private sector firms, in a mixed economy such as Nigeria, is always likely to be successful.[6]