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85-542: The member companies of Bank PHB Group included: On August 5, 2011, the Central Bank of Nigeria revoked the operating licence of BankPHB, along with those of Afribank and Spring Bank , as they had not shown capacity to recapitalize before the September 30, 2011 recapitalization deadline. Keystone Bank Limited was formed on August 5, 2011, by taking over all the assets (including subsidiaries) and liabilities of

170-631: A banking business in Nigeria, with specific procedures. The act prohibits anyone from operating a banking business in Nigeria without such a license. Additionally, the BOFIA empowers the Governor of the CBN to issue regulations, guidelines and policies to banks, specialized banks, and other financial institutions in Nigeria.  And to appoint officers to supervise and examine these institutions according to

255-443: A common division was between visible and invisible entries. Visible trade recorded imports and exports of physical goods (entries for trade in physical goods excluding services is now often called the merchandise balance ). Invisible trade would record international buying and selling of services, and sometimes would be grouped with transfer and factor income as invisible earnings. The term "balance of payments surplus" (or deficit –

340-521: A country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counterbalanced in other ways – such as by funds earned from its foreign investments (but not the investments themselves, since foreign investments are deficit items), by running down currency reserves or by receiving investments or loans from other countries. While the overall BoP accounts will always balance when all types of payments are included, imbalances are possible on individual elements of

425-408: A country with a significant balance of payments surplus would be more likely to expand imports, offering marketing opportunities for foreign enterprises, and less likely to impose foreign exchange restrictions. Third, balance of payments data can be used to evaluate the performance of the country in international economic competition. A country that is experiencing trade deficits year after year may be

510-409: A country's balance of payments data may signal the country's potential as a business partner for the rest of the world. A country grappling with a major balance of payments difficulty may not be able to expand imports from the outside world. Instead, the country may impose measures to restrict imports and discourage capital outflows in order to improve the balance of payments situation. On the other hand,

595-437: A deficit is simply a negative surplus) refers to the sum of the surpluses in the current account and the narrowly defined capital account (excluding changes in central bank reserves). Denoting the balance of payments surplus as BoP surplus, the relevant identity is The balance of payments takes into account payments for a country's exports and imports of goods , services , financial capital , and financial transfers . It

680-505: A desire to protect "infant industries" than to encourage a trade surplus ), capital controls were largely absent. A gold standard enjoyed wide international participation especially from 1870, further contributing to close economic integration between nations. The period saw substantial global growth, in particular for the volume of international trade which grew tenfold between 1820 and 1870 and then by about 4% annually from 1870 to 1914. BoP crises began to occur, though less frequently than

765-622: A few banks had failed. To curtail further failures and to prepare for indigenous control, in 1958, a bill for the establishment of the Central Bank of Nigeria was presented to the House of Representatives of Nigeria . The Central Bank of Nigeria Act No. 24, 1958 was published as chapter 30 of the 1958 edition of the Laws of Nigeria and Lagos. It was fully implemented on 1 July 1959, when the Central Bank of Nigeria came into full operation and remained

850-423: A fixed exchange rate system include a managed float where some changes of exchange rates are allowed, or at the other extreme a purely floating exchange rate (also known as a purely flexible exchange rate). With a pure float the central bank does not intervene at all to protect or devalue its currency , allowing the rate to be set by the market , the central bank's foreign exchange reserves do not change, and

935-670: A period of high global growth, known as the Golden Age of Capitalism . However, it came under pressure due to the inability or unwillingness of governments to maintain effective capital controls and due to instabilities related to the central role of the US dollar. Imbalances caused gold to flow out of the US and a loss of confidence in the United States' ability to supply gold for all future claims by US dollar holders resulted in escalating demands to convert US dollars, ultimately causing

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1020-410: A quarter or a year) and the outflow of money to the rest of the world. In other words, it is economic transactions between countries during a period of time. These financial transactions are made by individuals, firms and government bodies to compare receipts and payments arising out of trade of goods and services . The balance of payments consists of two primary components: the current account , and

1105-558: A signal that the country's domestic industries lack international competitiveness. While the BoP has to balance overall, surpluses or deficits on its individual elements can lead to imbalances between countries. In general there is concern over deficits in the current account. Countries with deficits in their current accounts will build up increasing debt or see increased foreign ownership of their assets. The types of deficits that typically raise concern are The Washington Consensus period saw

1190-449: A surplus for both accounts, but when this happens it always means something has been missed – most commonly, the operations of the country's central bank – and what has been missed is recorded in the statistical discrepancy term (the balancing item). An actual balance sheet will typically have numerous sub headings under the principal divisions. For example, entries under Current account might include: Especially in older balance sheets,

1275-488: A swing of opinion towards the view that there is no need to worry about imbalances. Opinion swung back in the opposite direction during the 2007–2008 financial crisis . Mainstream opinion expressed by the leading financial press and economists, international bodies like the IMF – as well as leaders of surplus and deficit countries – has returned to the view that large current account imbalances do matter. For instance, in 2020 during

1360-452: Is a factor in the demand and supply of a country's currency . For example, if outflows exceed inflows, then the demand for the currency in the domestic market is likely to exceed the supply in the foreign exchange market, all else being equal. One can thus infer that the currency would be under pressure to depreciate against other currencies. On the other hand, if inflows exceed outflows, then its currency would be likely to appreciate. Second,

1445-756: Is a leading member of the Alliance for Financial Inclusion . It is also one of the original 17 regulatory institutions to make specific national commitments to financial inclusion under the Maya Declaration during the 2011 Global Policy Forum held in Mexico. The CBN has ensured that all banks in Nigeria have uniform year-ends. The various commercial banks include Access Bank Plc, Citibank Nigeria Plc, Diamond Bank Plc, First Bank of Nigeria Plc, Guaranty Trust Bank Plc, Zenith Bank plc, Wema Bank, Stanbic IBTC Bank, Fidelity Bank, United Bank for Africa etc. In 2009,

1530-519: Is a standard library at the Headquarters and all other branches, it has information resources like journals , magazines , books of various fields of study can be used and the library is open for students, researchers and staff. In 1948, an inquiry under the leadership of G.D Paton was established by the colonial administration to investigate banking practices in Nigeria . Prior to the inquiry,

1615-443: Is called the current account as it covers transactions in the "here and now" – those that don't give rise to future claims. The capital account records the net change in ownership of foreign assets . It includes the reserve account (the foreign exchange market operations of a nation's central bank ), along with loans and investments between the country and the rest of world (but not the future interest payments and dividends that

1700-445: Is not a cryptocurrency per se but effectively build on the blockchain technology and available through the mobile applications eNaira Speed Wallet and eNaira Speed Merchant Wallet. At its launching by President Muhammadu Buhari on 25 October, the platform was joined by 33 banks and ₦500m worth of eNaira was minted. The introduction of the eNaira came a few months after the government had banned all cryptocurrencies. In June 2023,

1785-460: Is positive) by a specific amount if sources of funds (such as export goods sold and bonds sold) exceed uses of funds (such as paying for imported goods and paying for foreign bonds purchased) by that amount. There is said to be a balance of payments deficit (the balance of payments is said to be negative) if the former are less than the latter. A BoP surplus (or deficit) is accompanied by an accumulation (or decumulation) of foreign exchange reserves by

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1870-461: Is prepared in a single currency, typically the domestic currency for the country concerned. The balance of payments accounts keep systematic records of all the economic transactions (visible and non-visible) of a country with all other countries in the given time period. In the BoP accounts, all the receipts from abroad are recorded as credit and all the payments to abroad are debits. Since the accounts are maintained by double entry bookkeeping, they show

1955-432: Is simply an amount that accounts for any statistical errors and assures that the current and capital accounts sum to zero. By the principles of double entry accounting , an entry in the current account gives rise to an entry in the capital account, and in aggregate the two accounts automatically balance. A balance isn't always reflected in reported figures for the current and capital accounts, which might, for example, report

2040-412: Is sometimes misused by non-economists to mean just relatively narrow parts of the BoP such as the trade deficit , which means excluding parts of the current account and the entire capital account. Another cause of confusion is the different naming conventions in use. Before 1973 there was no standard way to break down the BoP sheet, with the separation into invisible and visible payments sometimes being

2125-516: The British West African pounds that were circulating in Nigeria. The Central Bank of Nigeria is known for the blue color of its office building at different branches of the country. The CBN's early functions were mainly to act as the government's agency for the control and supervision of the banking sector, to monitor the balance of payments according to the demands of the federal government and to tailor monetary policy along

2210-510: The CBN Act of 1958 and commenced operations on 1 July 1959. The major regulatory objectives of the bank as stated in the CBN Act are to: maintain the external reserves of the country; promote monetary stability and a sound financial environment, and act as a banker of last resort and financial adviser to the federal government. The central bank's role as lender of last resort and adviser to

2295-592: The COVID-19 pandemic the Armenian current account deficit has increased from $ 0.7 billion to $ 1.3 billion. Some economists do, however, remain relatively unconcerned about imbalances and there have been assertions, such as by Michael P. Dooley, David Folkerts-Landau and Peter Garber, that nations need to avoid the temptation to switch to protectionism as a means to correct imbalances. Current account surpluses coincide with current account deficits of other countries,

2380-501: The European Exchange Rate Mechanism (ERM) by 1979. From the mid-1970s however, and especially in the 1980s and early 1990s, many other countries followed the US in liberalizing controls on both their capital and current accounts, in adopting a somewhat relaxed attitude to their balance of payments and in allowing the value of their currency to float relatively freely with exchange rates determined mostly by

2465-583: The United Nations System of National Accounts (SNA). The main difference in the IMF's terminology is that it uses the term "financial account" to capture transactions that would under alternative definitions be recorded in the capital account . The IMF uses the term capital account to designate a subset of transactions that, according to other usage, previously formed a small part of the overall current account. The IMF separates these transactions out to form an additional top level division of

2550-623: The World Economic Forum . On 14 June 2023, the Naira fell 23% in a day, to a rate of ₦600 to US$ 1, as the central bank abandoned its currency peg and allowed the naira to trade freely. The Senate of the Federal Republic of Nigeria confirmed the nomination of Dr Olayemi Cardoso as the 12th Governor of the Central Bank of Nigeria on 26 September 2023. The Central Bank of Nigeria (Establishment) Act 2007 affirms

2635-578: The capital account . The current account reflects a country's net income , while the capital account reflects the net change in ownership of national assets. Until the early 19th century, international trade was heavily regulated and accounted for a relatively small portion compared with national output. In the Middle Ages, European trade was typically regulated at municipal level in the interests of security for local industry and for established merchants. (Annual fairs would sometimes allow exceptions to

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2720-486: The central bank . Economics writer J. Orlin Grabbe warns the term balance of payments can be a source of misunderstanding due to divergent expectations about what the term denotes. Grabbe says the term is sometimes misused by people who aren't aware of the accepted meaning, not only in general conversation but in financial publications and the economic literature. A common source of confusion arises from whether or not

2805-419: The reserve account entry, part of the capital account , is included in the BoP accounts. The reserve account records the activity of the nation's central bank. If it is excluded, the BoP can be in surplus (which implies the central bank is building up foreign exchange reserves) or in deficit (which implies the central bank is running down its reserves or borrowing from abroad). The term "balance of payments"

2890-405: The 19th century due to the advantages of her geographical location, naval power, and economic ascendancy as the first nation to enjoy an Industrial Revolution . However, some, like Otto von Bismarck , viewed Great Britain's promotion of free trade as a way to maintain its dominant position. A view advanced by economists such as Barry Eichengreen is that the first age of Globalization began with

2975-401: The BoP accounts. Expressed with the IMF definition, the BoP identity can be written: The IMF uses the term current account with the same meaning as that used by other organizations, although it has its own names for its three leading sub-divisions, which are: The balance of payments is important in international financial management for the following reasons: First, the balance of payments

3060-419: The BoP, such as the current account , the capital account excluding the central bank's reserve account, or the sum of the two. Imbalances in the latter sum can result in surplus countries accumulating wealth, while deficit nations become increasingly indebted. The term "balance of payments" often refers to this sum: a country's balance of payments is said to be in surplus (equivalently, the balance of payments

3145-672: The Bretton Woods institutions (the International Monetary Fund and World Bank ) were set up to support an international monetary system , among capitalist economies , designed to encourage free trade while also offering states options to correct imbalances without having to deflate their economies. Fixed but flexible exchange rates were established, with the system anchored by the US dollar which alone remained convertible into gold. The Bretton Woods system ushered in

3230-622: The CBN fired the CEOs and executive directors of 5 Nigerian banks ( Afribank , FinBank Nigeria , Intercontinental Bank , Oceanic Bank and Union Bank of Nigeria ) for mismanagement of loans and over-reliance on the CBN. In 2014, the President Goodluck Jonathan suspended the governor of the CBN Sanusi Lamido Sanusi on grounds of financial recklessness. In April 2021, the Central Bank of Nigeria fired

3315-399: The US to end the convertibility of the US dollar into gold, thus ending the Bretton Woods system. The 1945–71 era saw approximately 24 BoP crises and no twin crisis for advanced economies, with emerging economies seeing 16 BoP crises and just one twin crisis. The Bretton Woods system came to an end between 1971 and 1973. There were attempts to repair the system of fixed exchanged rates over

3400-481: The accumulation of foreign exchange or, at that time, precious metals, made countries wealthier, and so countries favored exporting their own goods to run balance of payments surpluses. This viewpoint prevails in England's Treasure by Foreign Trade (1664) by Thomas Mun . Economic growth remained at low levels in the mercantilist era; average global per capita income is not considered to have significantly risen in

3485-438: The affairs of the three major expatriate commercial banks in order to forestall any bias against indigenous borrowers and consumers. By 1976, the federal government had acquired 40% of equity in the three largest commercial banks. The bank's slow reaction to curtail inflation by financing huge deficits of the federal government has been one of the sore points in the history of the central bank. Coupled with its failure to control

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3570-433: The balance of payments accounts are always balanced. Sources of funds for a nation, such as exports or the receipts of loans and investments , are recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign countries, are recorded as negative or deficit items. When all components of the BoP accounts are included they must sum to zero with no overall surplus or deficit. For example, if

3655-451: The balance of payments is always zero. The current account shows the net amount of a country's income if it is in surplus, or spending if it is in deficit. It is the sum of the balance of trade (net earnings on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors) and unilateral transfers. These items include transfers of goods and services or financial assets between

3740-430: The banking industry was largely uncontrolled. The G.D. Paton report, an offshoot of the inquiry became the cornerstone of the first banking legislation in the country: the banking ordinance of 1952. The ordinance was designed to prevent non-viable banks from mushrooming and to ensure orderly commercial banking. The banking ordinance triggered rapid growth in the industry, and with growth also came disappointment. By 1958,

3825-445: The burgeoning trade arrears in 1983, the country was left with huge trade debts totaling $ 6 billion. Governors of the Central Bank since independence: The Central Bank was instrumental in the growth and financial credibility of Nigerian commercial banks by making sure that all the financial banks operating in the country had a capital base (required reserves). This helped to ensure that bank customers just did not bear losses alone, in

3910-404: The context of BoP and international monetary systems, the reserve asset is the currency or other store of value that is primarily used by nations for their foreign reserves. BoP imbalances tend to manifest as hoards of the reserve asset being amassed by surplus countries, with deficit countries building debts denominated in the reserve asset or at least depleting their supply. Under a gold standard,

3995-405: The country or by providing foreign currency funds to the foreign exchange market to match any international outflow of funds, thus preventing the funds flows from affecting the exchange rate between the country's currency and other currencies. Then the net change per year in the central bank's foreign exchange reserves is sometimes called the balance of payments surplus or deficit. Alternatives to

4080-424: The demands of the federal budget . A key instrument of the bank was to initiate credit limit legislation for bank lending. The initiative was geared to make credit available to neglected national areas such as agriculture and manufacturing . By the end of 1979, most of the banks did not adhere to their credit limits and favoured a loose interpretation of CBN's guidelines. The central bank did not effectively curtail

4165-420: The dictates of the governor. Also, Section 5 of the BOFIA empowers the CBN to revoke the license of any bank for stipulated reasons. Balance of payments In international economics , the balance of payments (also known as balance of international payments and abbreviated BOP or BoP ) of a country is the difference between all money flowing into the country in a particular period of time (e.g.,

4250-429: The early 2000s and growing year by year. Some economists such as Kenneth Rogoff and Maurice Obstfeld began warning that the record imbalances would soon need to be addressed from as early as 2001, but it was not until about 2007 that their concerns began to be accepted by the majority of economists. Under a fixed exchange rate system, a central bank accommodates those flows by buying up any net inflow of funds into

4335-479: The eight years leading up to 2007, "three-quarters of the foreign currency reserves accumulated since the beginning of time have been piled up". In contrast to the changed approach within the emerging economies, US policy makers and economists remained relatively unconcerned about BOP imbalances. In the early to mid-1990s, many free market economists and policy makers such as U.S. Treasury secretary Paul O'Neill and Fed Chairman Alan Greenspan went on record suggesting

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4420-637: The essays Of Money and Of the Balance of Trade , Hume argued that the accumulation of precious metals would create monetary inflation without any real effect on interest rates. It is the foundation of what is known in modern economic studies as the quantity theory of money , the neutrality of money and the consideration of interest rates not as a monetary phenomenon, but a real one. Adam Smith built on this foundation. He accused mercantilists of being anti-free trade and confusing money with wealth. David Ricardo based his arguments on Say's law , developing

4505-424: The establishment of a body known as the Central Bank of Nigeria. The act also states the fundamental objects of the bank, which include the sole power to issue notes and coins, maintain an external reserve for Nigeria, and generally supervise the entire banking system in Nigeria. The Banks and Other Financial Institutions Act, 2020 , empowers the Governor of the CBN to issue a license to anyone wanting to start

4590-403: The event of bank failures. However, this policy led to the failure of some Nigerian commercial banks; some banks could not meet the new capital base requirements, which was 25,000,000,000.00 Naira at the time. Those banks that could not meet the new capital base requirements had to fold up, while some that could not come up with the money on their own, had to merge with other banks in order to raise

4675-648: The federal government has sometimes pushed it into murky political controversies. After the end of colonial rule, the desire of the government to become proactive in the development of the economy became visible, especially after the end of the Nigerian civil war , the bank followed the government's desire and took a determined effort to supplement any show shortfalls, credit allocations to the real sector. The bank became involved in lending directly to consumers, contravening its original intention to work through commercial banks in activities involving consumer lending. However,

4760-486: The gold standard around 1925. But surplus countries didn't "play by the rules", sterilising gold inflows to a much greater degree than had been the case in the pre-war period. Deficit nations such as Great Britain found it harder to adjust by deflation as workers were more enfranchised and unions in particular were able to resist downwards pressure on wages. During the Great Depression most countries abandoned

4845-424: The gold standard, but imbalances remained an issue and international trade declined sharply. There was a return to mercantilist type " beggar thy neighbour " policies, with countries competitively devaluing their exchange rates, thus effectively competing to export unemployment. There were approximately 16 BoP crises and 15 twin crises (and a comparatively very high level of banking crises). Following World War II,

4930-442: The growing US deficit was not a major concern. While several emerging economies had intervened to boost their reserves and assist their exporters from the late 1980s, they only began running a net current account surplus after 1999. This was mirrored in the faster growth for the US current account deficit from the same year, with surpluses, deficits and the associated buildup of reserves by the surplus countries reaching record levels by

5015-502: The heart of the imbalance is China's desire to keep the value of the yuan stable against the dollar. Usually, a rising trade surplus leads to a rising value of the currency. A rising currency would make exports more expensive, imports less so, and push the trade surplus towards balance. China circumvents the process by intervening in exchange markets and keeping the value of the yuan depressed." According to economics writer Martin Wolf , in

5100-421: The home country and the rest of the world. Private transfer payments refer to gifts made by individuals and nongovernmental institutions to foreigners. Governmental transfers refer to gifts or grants made by one government to foreign residents or foreign governments. When investment income and unilateral transfers are combined with the balance on goods and services, we arrive at the current account balance. It

5185-471: The immediate aftermath of the Bretton Woods collapse, countries generally tried to retain some control over their exchange rate by independently managing it, or by intervening in the foreign exchange market as part of a regional bloc, such as the Snake which formed in 1971. The Snake was a group of European countries who tried to retain stable rates at least with each other; the group eventually evolved into

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5270-399: The indebtedness of the latter therefore increasing. According to Balances Mechanics by Wolfgang Stützel this is described as surplus of expenses over revenues. Increasing imbalances in foreign trade are critically discussed as a possible cause of the 2007–2008 financial crisis . Many Keynesian economists consider the existing differences between the current accounts in the eurozone to be

5355-461: The laying of transatlantic telegraph cables in the 1860s, which facilitated a rapid increase in the already growing trade between Britain and America. Though Current Account controls were still widely used (in fact all industrial nations apart from Great Britain and the Netherlands actually increased their tariffs and quotas in the decades leading up to 1914, though this was motivated more by

5440-399: The loans and investments yield; those are earnings and will be recorded in the current account). If a country purchases more foreign assets for cash than the assets it sells for cash to other countries, the capital account is said to be negative or in deficit. The term "capital account" is also used in the narrower sense that excludes central bank foreign exchange market operations: Sometimes

5525-479: The market. Developing countries who chose to allow the market to determine their exchange rates would often develop sizable current account deficits, financed by capital account inflows such as loans and investments, though this often ended in crises when investors lost confidence. The frequency of crises was especially high for developing economies in this era – from 1973 to 1997 emerging economies suffered 57 BoP crises and 21 twin crises. Typically but not always

5610-458: The money. This policy helped solidify the commercial banks of Nigeria and made it impossible for individuals or organizations without financial stability to operate a bank in the country. Today Nigeria has one of the most advanced financial sectors in Africa, with most of its commercial banks having branches in other countries. The Central Bank is active in promoting financial inclusion policy and

5695-480: The next few years, but these were soon abandoned, as were determined efforts for the U.S. to avoid BoP imbalances. Part of the reason was displacement of the previous dominant economic paradigm – Keynesianism – by the Washington Consensus, with economists and economics writers such as Murray Rothbard and Milton Friedman arguing that there was no great need to be concerned about BoP issues. In

5780-573: The now defunct BankPHB, whose commercial banking license had been revoked on the same day. Following the revocation of the banking licence and takeover of BankPHB, the Nigeria Stock Exchange placed the Group's shares on technical suspension and finally delisted on September 5, 2011. Central Bank of Nigeria The Central Bank of Nigeria (CBN) is the central bank and apex monetary authority of Nigeria established by

5865-429: The panic among foreign creditors and investors that preceded the crises in this period was triggered by concerns over excess borrowing by the private sector , rather than by a government deficit. For advanced economies, there were 30 BoP crises and 6 banking crises. A turning point was the 1997 Asian financial crisis , where unsympathetic responses by western powers caused policy makers in emerging economies to re-assess

5950-468: The policy was an offspring of the indigenization policy at the time. Nevertheless, the government through the central bank has been actively involved in building the nation's money and equity centres, forming securities regulatory boards, and introducing treasury instruments into the capital market. The bank has thirty-six branches each in the 36 states of the federation and the headquarters in FCT. The Library

6035-613: The president of CBN, Godwin Emefilele was arrested by the Nigerian State Security Service and removed from his position at the CBN following a previous arrest attempt in December 2022 for "financing terrorism, fraudulent activities, and economic crimes of national security dimension." This was after claims that Emefiele was waging a war on cash under a directive from the International Monetary Fund and

6120-408: The prevalence of short term loan maturities. Most loans given out by commercial banks were usually set within a year. The major policy to balance this distortion in the credit market was to create a new Bank of Commerce and industry, a universal bank. However, the new bank did not fulfill its mission. Another policy of the bank in concert with the intentions of the government was direct involvement in

6205-619: The primary statute governing the CBN until its repeal by the Central Bank of Nigeria Act No.24, 1991. In April 1960, the Bank issued its first treasury bills . In May 1961, the Bank launched the Lagos Bankers Clearing House, which provided licensed banks a framework in which to exchange and clear checks rapidly. By 1 July 1961, the Bank had completed issuing all denominations of new Nigerian notes and coins and redeemed all of

6290-601: The principal de facto reserve. Global reserves rose sharply in the first decade of the 21st century, partly as a result of the 1997 Asian Financial Crisis , where several nations ran out of foreign currency needed for essential imports and thus had to accept deals on unfavourable terms. The International Monetary Fund (IMF) estimates that between 2000 and mid-2009, official reserves rose from $ 1,900bn to $ 6,800bn. Global reserves had peaked at about $ 7,500bn in mid-2008, then declined by about $ 430bn as countries without their own reserve currency used them to shield themselves from

6375-490: The principal divisions. The IMF have their own standards for BoP accounting which is equivalent to the standard definition but uses different nomenclature, in particular with respect to the meaning given to the term capital account . The International Monetary Fund (IMF) use a particular set of definitions for the BoP accounts, which is also used by the Organisation for Economic Co-operation and Development (OECD), and

6460-454: The reserve account is classified as "below the line" and so not reported as part of the capital account. Expressed with the broader meaning for the capital account , the BoP identity states that any current account surplus will be balanced by a capital account deficit of equal size – or alternatively a current account deficit will be balanced by a corresponding capital account surplus: The balancing item , which may be positive or negative,

6545-399: The reserve asset for all members of the standard is gold. In the Bretton Woods system, either gold or the U.S. dollar could serve as the reserve asset, though its smooth operation depended on countries apart from the US choosing to keep most of their holdings in dollars. Following the ending of Bretton Woods, there has been no de jure reserve asset, but the US dollar has remained by far

6630-511: The root cause of the Euro crisis , for instance Heiner Flassbeck , Paul Krugman or Joseph Stiglitz . There are conflicting views as to the primary cause of BoP imbalances, with much attention on the US which currently has by far the biggest deficit. The conventional view is that current account factors are the primary cause – these include the exchange rate, the government's fiscal deficit, business competitiveness, and private behaviour such as

6715-415: The standard regulations.) Beginning in the 16th century, mercantilism became the dominant economic theory influencing European rulers. Local trade regulations were replaced by national rules aiming to harness the countries' economic output. Measures to promote a trade surplus (such as tariffs ) were generally favored. The prevailing orthodoxy of the mercantilist age was the (now discredited) notion that

6800-797: The theory of comparative advantage , which remains the dominant theory of growth and trade in modern economics. After victory in the Napoleonic wars Great Britain began promoting free trade, unilaterally reducing its trade tariffs. Hoarding of gold was no longer encouraged, and in fact Britain exported more capital as a percentage of its national income than any other creditor nation has since. Great Britain's capital exports further helped to correct global imbalances as they tended to be counter cyclical, rising when Britain's economy went into recession, thus compensating other states for income lost from export of goods. According to historian Carroll Quigley , Great Britain could afford to act benevolently in

6885-426: The whole 800 years leading up to 1820, and is estimated to have increased on average by less than 0.1% per year between 1700 and 1820. With very low levels of financial integration between nations and with international trade generally making up a low proportion of individual nations' GDP, BOP crises were very rare. The mercantilist dogma was attacked first by David Hume , then Adam Smith and David Ricardo . In

6970-661: The whole board of the First Bank of Nigeria which was in a «grave financial condition». In July 2021, CBN announced that it had ended the sales of foreign exchange (forex) to bureau de change operators. Following the announcement, all forex sales were to go directly to commercial banks. That same month the Bank’s governor, Godwin Emefiele, said that Nigeria would launch its own cryptocurrency, called "e-naira," in October, which

7055-415: The willingness of consumers to go into debt to finance extra consumption. An alternative view, argued at length in a 2005 paper by Ben Bernanke , is that the primary driver is the capital account, where a global savings glut caused by savers in surplus countries, runs ahead of the available investment opportunities, and is pushed into the US resulting in excess consumption and asset price inflation. In

7140-515: The wisdom of relying on the free market; by 1999 the developing world as a whole stopped running current account deficits while the U.S. current account deficit began to rise sharply. This new form of imbalance began to develop in part due to the increasing practice of emerging economies, principally China, in pegging their currency against the dollar, rather than allowing the value to freely float. The resulting state of affairs has been referred to as Bretton Woods II . According to Alaistair Chan, "At

7225-422: Was to be the case for the remainder of the 20th century. From 1880 to 1914, there were approximately eight BoP crises and eight twin crises – a twin crisis being a BoP crisis that coincides with a banking crisis. The favorable economic conditions that had prevailed up until 1914 were shattered by the first world war, and efforts to re-establish them in the 1920s were not successful. Several countries rejoined

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