The size and sustainability of the Nigerian current account deficits

Olumuyiwa S. Adedeji and Jagdish Handa ()
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Jagdish Handa: International Monetary Fund,USA

Journal of Developing Areas, 2008, vol. 41, issue 2, 1-25

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.

Keywords: Current Account Deficits; External Sustainability; Nigeria (search for similar items in EconPapers)
JEL-codes: F1 F41 (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:jda:journl:vol.41:year:2008:issue2:pp:1-25

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