Documents Used in Export and Import Trade for SS 3

Class: SS 3
Term: First Term
Week: 2
Age: 16 years
Duration: 45 minutes
Subject: Salesmanship
Topic: BASIC CONCEPT DOCUMENT USED IN EXPORT AND IMPORT
Subject Matter: Terms of payment; Balance of payment; Favourable and unfavourable balance of payment; Differentiate between balance of trade and balance of payment

Specific Objectives

By the end of the lesson, pupils/students should be able to:

Cognitive Domain

• Define terms of payment in export and import trade.
• Explain the concept of balance of payment.
• Describe what constitutes a favourable balance of payment.
• Describe what constitutes an unfavourable balance of payment.
• Differentiate between balance of trade and balance of payment.

Affective Domain

• Appreciate the importance of understanding international trade concepts.
• Participate actively in discussions about economic indicators.

Psychomotor Domain

• Accurately copy the board summary notes into their notebooks.

Social Domain

• Collaborate effectively during group discussions on trade concepts.

Reference Materials

The following resources were used in planning this lesson:

• 2025 Revised 9 Years Basic Education Curriculum
• Relevant State Unified Scheme of Work
• Salesmanship for Senior Secondary Schools, Book 3
• The HeadTeacher Scheme of work

Instructional Materials

The teacher will teach this lesson with the aid of:

• Whiteboard and markers
• Charts illustrating balance of payment components
• Handouts with definitions of key terms

Rationale for the Lesson

This lesson is important as it provides students with foundational knowledge of international trade finance, which is essential for understanding global economic interactions. Grasping terms of payment and balance of payments helps students comprehend how countries manage their financial transactions with the rest of the world. This knowledge is vital for anyone considering a career in business, economics, or international relations.

Prerequisite/Previous Knowledge

Students have a basic understanding of international trade, including the concepts of export and import, from their previous lessons.

Lesson Content/Board Summary

BASIC CONCEPT DOCUMENT USED IN EXPORT AND IMPORT

Terms of Payment in International Trade

Terms of payment refer to the conditions under which a seller will complete the sale of goods or services to a buyer. In international trade, these terms specify when and how a buyer will pay for goods imported from a seller in another country. Common terms include:

1. Cash in Advance: The buyer pays the seller before the goods are shipped. This offers maximum security to the seller.
2. Letter of Credit (LC): A bank guarantees payment to the seller on behalf of the buyer, provided the seller meets specified conditions. This provides security for both parties.
3. Documentary Collections: The seller’s bank sends shipping documents to the buyer’s bank with instructions to release the documents only upon payment or acceptance of a draft.
4. Open Account: The goods are shipped and delivered before payment is due, typically 30, 60, or 90 days. This is highly favourable to the buyer and requires a high level of trust.
5. Consignment: The seller ships goods to the buyer, but the seller retains ownership until the goods are sold to a third party. The buyer only pays the seller after selling the goods.

Balance of Payment (BOP)

The Balance of Payment (BOP) is a systematic record of all economic transactions between residents of a country and residents of other countries during a specific period, usually a year. It includes transactions involving goods, services, income, and financial capital. The BOP is divided into three main accounts:

1. Current Account: Records transactions related to goods, services, primary income (e.g., wages, interest, dividends), and secondary income (e.g., remittances, foreign aid).
2. Capital Account: Records transactions involving transfers of capital (e.g., debt forgiveness, transfer of ownership of fixed assets) and the acquisition/disposal of non-produced, non-financial assets.
3. Financial Account: Records transactions related to direct investment, portfolio investment, and other investments (e.g., loans, currency deposits).

The BOP always balances in theory because every international transaction has two sides (a debit and a credit), though statistical discrepancies often occur in practice.

Favourable and Unfavourable Balance of Payment

A country’s balance of payment can be described as favourable or unfavourable, particularly in relation to its current account balance:

1. Favourable Balance of Payment (BOP Surplus): This occurs when a country’s total receipts from other countries exceed its total payments to other countries over a period. A current account surplus indicates that the country is earning more from its exports and foreign investments than it is spending on imports and foreign obligations. This can lead to an accumulation of foreign exchange reserves.
2. Unfavourable Balance of Payment (BOP Deficit): This occurs when a country’s total payments to other countries exceed its total receipts from other countries over a period. A current account deficit means the country is spending more on imports and foreign obligations than it is earning. This often requires the country to borrow from abroad or draw down its foreign exchange reserves to finance the deficit.

Differentiating Between Balance of Trade and Balance of Payment

While both terms relate to international transactions, they cover different scopes:

1. Balance of Trade (BOT): This is the difference between a country’s total value of visible exports (goods) and its total value of visible imports (goods) over a specific period. It is a component of the current account.
   

   Formula: Balance of Trade = Value of Exports (Goods) – Value of Imports (Goods)

   A positive balance of trade is called a trade surplus, and a negative balance is called a trade deficit.

2. Balance of Payment (BOP): This is a much broader concept that records all economic transactions between a country and the rest of the world. It includes not only visible trade (goods) but also invisible trade (services), income flows, transfers, and capital/financial transactions. The balance of trade is just one part of the balance of payment.
   

   The BOP provides a comprehensive view of a country’s international economic position, encompassing all aspects of its financial dealings with other nations.

Teaching Methods/Instructional Techniques

Discussion, Explanation, Question and Answer, Guided Practice, Note-Taking

Instructional Procedures

Step 1: Introduction

Time: 5 minutes

Teaching Skill: Activating prior knowledge

Teacher’s Activity: The teacher greets the students and asks them to recall what they learned about international trade, exports, and imports in the previous lesson. The teacher then introduces the topic for the day, explaining that they will delve into how payments are made and how a country’s overall financial transactions with the world are recorded.

Pupils’ Activity: Students respond to questions about exports and imports and listen attentively to the introduction of the new topic.

Learning Point: Review of international trade

Step 2: Terms of Payment

Time: 8 minutes

Teaching Skill: Explanation/Illustration

Teacher’s Activity: The teacher explains the various terms of payment used in export and import trade, such as cash in advance, letter of credit, documentary collections, open account, and consignment. The teacher uses simple examples to illustrate each term and discusses their implications for both buyers and sellers.

Pupils’ Activity: Students listen, ask questions for clarification, and take brief notes as the teacher explains the different terms of payment.

Learning Point: Understanding payment terms

Step 3: Balance of Payment (BOP)

Time: 8 minutes

Teaching Skill: Concept explanation

Teacher’s Activity: The teacher defines Balance of Payment (BOP) as a record of all economic transactions between a country and the rest of the world. The teacher explains its main components: the current account, capital account, and financial account, providing examples of transactions that fall under each.

Pupils’ Activity: Students listen to the explanation of BOP and its components, asking questions to ensure they understand the concept.

Learning Point: Definition of Balance of Payment

Step 4: Favourable Balance of Payment

Time: 5 minutes

Teaching Skill: Explanation/Discussion

Teacher’s Activity: The teacher explains what a “favourable balance of payment” means, relating it to a BOP surplus where receipts exceed payments. The teacher discusses the positive implications for a country, such as increased foreign reserves.

Pupils’ Activity: Students listen and contribute to the discussion on the meaning and benefits of a favourable BOP.

Learning Point: Favourable BOP meaning

Step 5: Unfavourable Balance of Payment

Time: 5 minutes

Teaching Skill: Explanation/Discussion

Teacher’s Activity: The teacher explains what an “unfavourable balance of payment” means, relating it to a BOP deficit where payments exceed receipts. The teacher discusses the potential challenges and implications for a country, such as borrowing or depleting reserves.

Pupils’ Activity: Students listen and participate in the discussion on the meaning and challenges of an unfavourable BOP.

Learning Point: Unfavourable BOP meaning

Step 6: Differentiating Balance of Trade and Balance of Payment

Time: 5 minutes

Teaching Skill: Comparative analysis

Teacher’s Activity: The teacher guides students to differentiate between the balance of trade and the balance of payment. The teacher emphasizes that the balance of trade focuses only on visible goods, while the balance of payment is a comprehensive record of all international economic transactions.

Pupils’ Activity: Students actively participate in differentiating the two concepts, providing examples and asking clarifying questions.

Learning Point: Balance of trade vs. payment

Step 7: Evaluation/Review

Time: 5 minutes

Teaching Skill: Questioning/Assessment

Teacher’s Activity: The teacher evaluates the learning by asking the following questions:

1. What are two common terms of payment in international trade?
2. Define Balance of Payment (BOP).
3. When is a country said to have a favourable balance of payment?
4. State one key difference between balance of trade and balance of payment.

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Assessment of understanding

Step 8: Note-Taking

Time: 4 minutes

Teaching Skill: Guided Writing

Teacher’s Activity: The teacher guides pupils/students to copy the essential Board Summary notes on terms of payment, balance of payment, and the distinction between balance of trade and balance of payment into their notebooks.

Pupils’ Activity: Pupils/students copy the notes carefully into their notebooks.

Learning Point: Recording lesson content

Step 9: Conclusion

Time: 0 minutes

Teaching Skill: Consolidation

Teacher’s Activity: The teacher briefly reinforces the main ideas of the lesson, reminding students that understanding these concepts is crucial for comprehending global economic activities.

Pupils’ Activity: Students listen and prepare for the next lesson.

Learning Point: Lesson summary

Continuous Assessment/Further Study

Type: Homework

Instruction: Answer the following questions in your notebook:

1. Explain any three terms of payment used in export and import trade.
2. Discuss the components of a country’s Balance of Payment.
3. Why is it important for a country to maintain a favourable balance of payment?
4. Research and write a short paragraph on the current balance of payment status of Nigeria.

Lesson Keywords

• Terms of payment – Conditions for payment in trade.
• Balance of payment (BOP) – Record of all international economic transactions.
• Favourable balance – When international receipts exceed payments.
• Unfavourable balance – When international payments exceed receipts.
• Balance of trade (BOT) – Difference between visible exports and imports.
• Export – Sending goods/services to another country.
• Import – Bringing goods/services into a country.

Differentiation

For struggling learners, the teacher can provide simplified handouts with key definitions and examples, focusing primarily on the definitions of BOP and BOT. For advanced learners, the teacher can encourage them to research the impact of different terms of payment on trade risk and explore real-world examples of countries with persistent BOP deficits or surpluses.

Suggested Lesson Videos

For further understanding, search on YouTube for:
“Terms of payment in international trade SS3 Salesmanship”
“Balance of Payment explained for SS3 students”
“Difference between Balance of Trade and Balance of Payment”

Teacher Guide for Using This Lesson Plan

Before the lesson, ensure you have a clear understanding of each term of payment and the components of the balance of payment. Prepare visual aids like charts to help students grasp the concepts of BOP and BOT more easily. During the lesson, encourage active participation through questions and discussions, allowing students to articulate their understanding. Pay close attention to students’ ability to differentiate between balance of trade and balance of payment, as this is a common point of confusion. Guide students to copy the Board Summary notes accurately during the note-taking phase. For weaker learners, simplify explanations and provide more direct examples. Challenge faster learners with questions that require critical thinking about the economic implications of these concepts.