Macroeconomic Variables, Demographic Factors and Current Account Balance in Nigeria: A Causal Relationship

Abstract

This paper examines the effect of macroeconomic variables, demographic factors toward current account balance in Nigeria. It analyzed the connection between each of domestic savings and investment on current account balance by examining the role and direction of the selected demographic variables. The Toda-Yamamoto approach to causality was used to analyze the study. The result shows that the direction of causality was from both domestic saving and investment to current account balance. However, there is no reverse causation from the current account balance to domestic saving and investment. Thus, the selected demographic variables had no significant causation towards current account balance, investment, and domestic saving. The government needs to finance the desired investment through increased domestic saving without undue reliance on foreign resources

The Effect of Saving-Investment Nexus on Current Account Balance in Nigeria

“…Contrary were the determinants of current account within the scope of oil-related variables, and Olumuyiwa (2008) and Uneze & Ekor (2012), find that oil price, oil revenue, and oil balance as the determinants of current account. In another study, Adegboyega et al (2019) consider the causal relationships between macroeconomic factors, demographics, and current account balances in Nigeria, and shows that causality is not caused by current account balance, but by domestic saving and investment. Therefore, there was no big trigger for current equilibrium, spending and domestic saving of the selected demographic variables.…”