CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND OF THE STUDY

Ever before the origin of what is called money toady, the dominant form of exchange was barter in the primitive societies.  Barter can be defined as the exchange of goods for goods or exchange of services for services, for example;

i.            If a farmer had cocoa, but wanted groundnut, he had to look for someone who had groundnut and that person with groundnut must want cocoa.

ii.           When you agree to do a job for your neighbour does for you, the two of you are bartering, for instance Grace platting Ca-Sandra’s hair, and Ca-Sandra platting Grace’s hair can be regarded as bartering.

But a successful barter transaction required what is called a double coincidence of wants because it was difficult to find one who had what you wanted and wanted what you had.

For instance, it might be difficult for the cocoa farmer to search for the groundnut farmer for exchange of groundnut and secondly, how was the cocoa farmer sure that the groundnut farmer would like to trade her groundnut for cocoa.

These were also other problems of barter that necessitated the origin of money.

1.          Indivisibility:- Most of the goods to be exchanged could not be divided into convenient sizes before exchange i.e yam and plantain.

2.          Portability:- Most goods were bulky and had to be carried about with difficulty in search of those who wanted them.

3.          Durability:- Most goods were difficult to store as wealth or value because of perishable nature e.g cassava, oranges, yam etc.

4.          Deferred Payment:- Barter made deferred payment difficult for it did not guarantee the item paid back to be identical size, state and quality as the one borrowed.

5.          Exchange Rate:- The determination of the rate of exchange between two commodities was a problem under barter.

6.          Self Sufficiency:- Specialization of labour was limited because barter system encouraged self-sufficiency.

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