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The size and sustainability of the Nigerian current account deficits

Author

Listed:
  • Olumuyiwa S. Adedeji
  • Jagdish Handa

    (International Monetary Fund,USA
    McGill University,Canada)

Abstract

This paper uses two different criteria -- a set of macroeconomic indicators and the intertemporal model of the current account -- to examine the excessiveness and sustainability of Nigerian current account deficits over the period 1960-2003. Our analysis shows excessive reliance on oil revenues, misperception of temporary increases in oil prices as permanent ones and structural weaknesses of the economy resulting in unsustainable current account deficits and external crisis, necessitating the adoption of the Structural Adjustment Program in 1986. However, both the macroeconomic indicators and the intertemporal model point to an improved current account position over the past decade. The paper also presents empirical results from the application of the Present Value Model of the Current Account (PYMCA) to Nigeria. Comparison of the estimated optimal and actual current account balances shows several years with excessive current account deficits. Further, these excessive current account deficits were driven by consumption tilting.

Suggested Citation

  • Olumuyiwa S. Adedeji & Jagdish Handa, 2008. "The size and sustainability of the Nigerian current account deficits," Journal of Developing Areas, Tennessee State University, College of Business, vol. 41(2), pages 1-25, January-M.
    • Handle: RePEc:jda:journl:vol.41:year:2008:issue2:pp:1-25
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    File URL: http://muse.jhu.edu/journals/jda/summary/v041/41.2adedeji.html
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    Cited by:

    1. Tahir Mukhtar & Aliya H. Khan, 2016. "The Current Account Deficit Sustainability: An Empirical Investigation for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(4), pages 397-419.

    More about this item

    Keywords

    Current Account Deficits; External Sustainability; Nigeria;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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