Trade, Financial Liberalisation and Current Account Balance in Nigeria

This paper examines the individual and interactive impacts of trade and financial liberalization on Nigeria’s current account balance between 1986 and 2019. An autoregressive distributed lag technique is used to investigate the short- and long-run effects of the de facto measure of trade openness and the de jure measure of financial openness by Chinn-Ito on the current account. The finding suggests that financial liberalization, in particular, has an insignificant negative effect on the current account, whereas trade has a non-significant positive impact in the long-run. The interaction of the variables in the long-run produces significant positive influence on the account. The short-run effects show a positive impact of financial liberalization, whereas the interplay of the variables has a negative impact on the current account. The study concludes that the interaction of trade and financial liberalization is critical in improving the current account balance in Nigeria.

JEL classification: F32, F36, F62.