IMF Paper: Trade Restrictions Boost Current Accounts

A paper titled “The Impact of Trade Payment Restrictions and Capital Controls on External Sector Balances,” authored by Adam Jakubik, Effie Karfaki, Tobias Krahnke, Wenjie Li, Anita Tuladhar, and Chenyu Xu, reveals that trade payment restrictions can strengthen countries’ current account positions. The paper discusses how capital controls influence exchange rates differently based on whether they target capital inflows or outflows.

Controls on capital inflows are positively associated with current account positions, while restrictions on outflows weaken the current account. The study also identifies a transmission mechanism through exchange rates, with inflow controls linked to real currency depreciation and outflow controls to real appreciation.

The Central Bank of Nigeria (CBN) projects that Nigeria’s current account balance will strengthen further, with a surplus expected to rise to $18.81 billion by 2026, representing 11.16% of GDP. In 2025, President Bola Tinubu announced a ban on foreign goods and services procurement by MDAs where local alternatives exist.