Localization of industry is encouraged because of ________

Step 1: Analyze the question The question asks why the localization of industry is encouraged. Localization of industry means the concentration of firms of the same industry in one particular area or region, for example, the cocoa-processing cluster in Ibadan or the textile industry in Kano.

Step 2: Explain the concept When industries cluster in one location, they enjoy external economies of scale. These include:

• Availability of skilled labour
• Shared infrastructure such as roads, electricity, water, and communication
• Ready access to raw materials and markets
• Auxiliary and support services (banking, insurance, transport, repairs)
• Easy exchange of ideas and technology

Governments encourage this because the concentration of firms attracts and justifies infrastructural development in that area, and firms in turn benefit from the shared facilities.

Step 3: Evaluate the options

• A. Low interest charges on loans: Interest rates are determined by monetary policy and the money market, not by where industries are located. ✗
• B. Improvements in infrastructure: Clustering leads to the development and shared use of roads, power, water, and communication facilities. This matches the benefits of localization. ✓
• C. Low foreign exchange rate: This is a macroeconomic matter and has no direct link to industrial location. ✗
• D. High standard of living: This may be a long-term result of economic development in general, but it is not the direct reason for localization. ✗

Step 4: Answer The best answer is B. improvements in infrastructure.

Tip: For "localization of industry" questions, think of "cluster = shared facilities". Typical advantages include skilled labour, infrastructure, auxiliary services, and ready markets. Typical disadvantages include congestion, pollution, and vulnerability to regional shocks, such as when one industry collapses and the whole town suffers.