AN ANALYSIS OF DEVELOPMENTS IN NIGERIAN BALANCE OF PAYMENT (1995 – 1999).
ABSTRACT
This study, an analysis of development in Nigerian balance of payment (1995–1999), was carried out to determine whether Nigeria has been paying her wages internationally and to examine the statement in order to determine what recent developments have occurred in Nigerians’ foreign trade and other transactions with the rest of the world.
The information was gathered through the literary technique, which included diverse publications, textbooks, newspapers, magazines, and journals. Oral interviews were also employed to obtain information from some government officials (staff).
Although it was discovered that the export receipts were sufficient to pay for imports and clear some international commitments that became due during the period, the reality remains that the economic managers did not have a significant amount of control over the foreign exchange resources.
However, it was advised that if the government had not undertaken debt management techniques during that time period, there would have been more years of deficits in the balance of payment situation than the four years recommended.
CHAPITRE ONE
1.0 BACKGROUND
In an era when advancements in travel and communication technology have reduced the entire world to what can best be described as a global village and the barriers that had previously separated one country from the other appear to have been reduced to the bare minimum, economic relationships between nations can be established with little or no difficulty.
As a result, there is a constant flow of resources across borders. The continuity of the flow of resources necessitates accounting; the balance of payment statement is the means by which the reckoning is carried out, and it is a summary of a country’s international transactions.
The trade balance (merchandise exports minus merchandise imports), current account balance (trade, services, and transfers), and capital accounts balance are the key components of that activity. Because the amount of naira paid must match the amount received, the net sum of these balances must equal zero.
It is also reasonable to derive that the number of possible “balances” in the balance of payment statement is equal to the number of possible account groups in that statement. Balances determined on the basis of certain accounts in the balance of payments give an indication of how specific economic sectors contribute to the country’s economic standing in the international market.
For example, an examination of a surplus in the merchandise trade account can reveal the contribution of that country’s net export of products to the acquisition of external purchasing power. The most common rationale for determining “a balance” in the balance of payment is to comprehend the net market pressures affecting the international value and availability of the currency during (1995 – 1999).
Finally, the balance of payment numbers indicate the quantity of international flows on a retrospective basis.
Thus, when the reserves accounts are included, the supply of exchange equals the demand for exchange, just as “debits equal credit” if we wish to utilize the balance of payment as a tool to gauge exchange market pressures; we must look to the future.
At the current exchange rates, we can only see an imbalance between supply and demand for foreign exchange emerging.
Governments may opt to give the monies required to achieve balance at the current exchange rate, or they may allow the exchange rate to vary in order to bring the forces of supply and demand into balance. International monetary agreements that correct trade imbalances.
1.1 THE STUDY’S BACKGROUND
The purpose of this study is to examine current movements in Nigeria’s balance of payments in order to assess if the country was able to pay her way internationally between 1995 and 1999, as well as whether the monetary and exchange rate policies implemented were effective.
The core data for this study will be gathered through interviews with Central Bank of Nigeria (CBN) and top ranking personnel, while secondary data will be gathered by extensive research in CBN as well as other libraries, books, journals, and other publications. Further deductive logic will be applied to reach a conclusion.
1.2 PROBLEM STATEMENT
Given the importance of the balance of payments statement as a source of information for Nigerian economic managers and other interested users, there is a compelling need to regularly evaluate the statement with the goal of determining:
1. Whether the nation pays her wages globally, that is, whether the nation is paying for commodities, drawing down her foreign reserves, accruing foreign obligations, or receiving gifts and donations.
2. Is the country borrowing or lending money to the rest of the world?
3. How effective are the different policy initiatives I have in place to address international payment imbalances?
These are the issues that our study seeks to investigate.
1.3 STUDY OBJECTIVES
1. With regard to the topics mentioned in the preceding section, this researcher proposes to gather, collate, and analyze data on Nigeria’s balance of payment position from 1995 to 1999.
2. It is also the researcher’s objective to critically study the statement in order to determine what recent advancements have occurred in Nigerian foreign trade and other interactions with the rest of the globe.
3. This researcher will specifically try to determine whether Nigeria has been paying her wages worldwide.
Furthermore, whether or not the various policy packages have been effective will be thoroughly studied.
1.4 QUESTIONS FOR RESEARCH
1. What was the general trend in Nigeria’s balance of payment during the study period?
2. Were export proceeds sufficient to cover imports and international obligations throughout the period?
3. What policy measures were implemented to address balance-of-payment difficulties during the study period, and how effective were they?
4. Did exchange rate depreciation caused by foreign exchange market operations encourage exports?
5. Did the devaluation of the currency discourage imports?
6. Did Nigeria borrow from or lend to the international community throughout the study period?
7. Did economic deregulation increase capital inflows or outflows?
8. During the study period, how effective was monetary policy in addressing international payment imbalances?
9. Which is a better alternative for Nigeria: exchange control/import licensing or the foreign exchange market as a mechanism for foreign exchange allocation?
1.5 HYPOTHESIS OF RESEARCH
In determining the analysis of development in Nigerian balance of payment, we hypothesize the following hypothesis in evaluating this research effort.
From 1995 to 1999.
The hypothesis is written in both null (Ho) and alternative forms (Hi).
Ho: The country in question was unable to pay her salaries internationally between 1995 and 1999.
Hello: Between 1995 and 1999, the country was allowed to pay her salary globally.
Ho: Monetary and exchange rate policies were ineffective.
Hello: The monetary and exchange rate policies implemented were successful.
1.6 THE STUDY’S SIGNIFICANCE
This study is notable since it sought to examine recent changes in Nigeria’s balance of payments. This work is critical in light of the significant economic issues that this country has had to deal with as a result of a bad balance of payments coupled with effective policies.
If completely digested, the study will provide useful knowledge and guidance to many organizations in numerous ways. A owing to the economy’s managers for the effectiveness or ineffectiveness of monetary and exchange rate policies un addressing Nigeria’s balance of payment concerns.
It will give international investors insight into the viability of the Nigerian economy. It will provide citizens a better grasp of how the economy is governed and what they should expect from the government.
The study will, in particular, give the authorities with a good understanding of the effectiveness of the previous administration’s programs, which will serve as a reference for future policy initiatives.
1.7 STUDY SCOPE AND LIMITATIONS
The purpose of this study was to examine recent developments in Nigeria’s balance of payment from 1995 to 1999.
a. For a study of this sort to be relevant to numerous parties at the same time, suitable statistics to measure, for example:
i. The impact of foreign trade and transactions on the country’s national income.
ii. To assess the impact of tax and tariff adjustments on foreign commerce, etc.
The scarcity of accurate national data is well known in Nigeria. Even when they are available, the quantity, quality, and turnover of the supply are significant issues. Because this researcher did not have access to suitable statistics for the type of analysis described above, he did not attempt to measure the indices mentioned above.
b. Another issue that arose while performing this research was distinguishing the influence of one policy measure from that of others. For example, during the study period, different policy measures such as income, trade, and fiscal policies were all aimed at the balance of payments at some point.
As a result, even the most rigorous analytical technique cannot disentangle the maze of interdependence and give success or failure to any policy measure with a time-space dimension. This researcher used a global lump sum approach to evaluate the effects of various policy changes on the balance of payments.
c. Another significant limitation was the scarcity of books and related literature on the subject published by Nigerians. As a result of this restriction, excessive reliance was placed on official publications and foreign sources.
d. The uncooperative attitude of some academic personnel at some universities and government officials who were sought for assistance was a fourth and arguably the most limiting obstacle faced.
In several situations, administrators and lecturers demonstrated astounding ignorance of the subject topic.
In other circumstances, they were unwilling to cooperate, and government publications were widely used as a result.
1.8 TERM DEFINITION
Unless otherwise noted, all terms and expressions used in this study endeavor will be assigned their ordinary interpretations.
However, the following words must be understood:
BALANCE OF PAYMENT: A systematic record of economic transactions for a certain period between inhabitants and non-residents of an economy.
These transactions include the supply and receipt of real resources – commodities, services, and income – as well as changes in claims on and liabilities to the rest of the world.
MONETARY POLICY: The management of the increase and contraction of the volume of money in circulation in order to achieve specific specified national objectives.
EXCHANGE RATE POLICY include selecting a foreign exchange management system and defining the specific rate at which foreign exchange transactions will take place.
EFFECTIVENESS is defined as the achievement of pre-determined objectives
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AN ANALYSIS OF DEVELOPMENTS IN NIGERIAN BALANCE OF PAYMENT (1995 – 1999).
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