An Analysis of The Determinants of Current Account in Nigeria (1981-2022)

This paper investigated the determinants of current account in Nigeria. Auto Regressive Distributed Lag (ARDL) approach was used to analyse annual time series data from 1981 to 2022. The findings showed that age dependency ratio, real effective exchange rate, broad money supply, interest lending rate and gross domestic product annual growth rate were the main determinants of current account in the long run. Gross domestic product and broad money supply are positive determinants of current account in the short run but investment with age dependency ratio as negative determinants of current account in the short. The short run result indicates that any disequilibrium in the model is corrected at -216% adjustment speed annually implying that the system will adjust farther from the equilibrium than back to it, a worsening of the error in future. The diagnostic result suggests that the explanatory variables account for 98% of the variations in determining the current account. Thus, the government should work on policies that will encourage savings and domestic investment, provide job opportunities for the growing dependent populace as well as efficient monetary policies that will improve and sustain the current account.