The determinants of current account balance in an oil‐rich exporting country: the case of Nigeria

Abstract

Abstract This paper examines the determinants of current accounts balance in Nigeria with emphasis on oil‐related variables using the Johansen–Julius vector error correction estimation approach, the impulse response function and the variance decomposition analysis. The results showed that oil price, oil balance and oil revenue are positively related with the current account, with only oil wealth having a significant negative impact in the long run. We find that the impact of oil price on the current balance is only significant in the short run. The variance decomposition analysis indicated that the variance in the current account is better explained by shocks to itself followed by shocks to oil price, oil balance and fiscal balance.

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