Answer to Question #59887 in Macroeconomics for bright asante

Question #59887
Explain how each of the following transactions enters the Nigerian balance of payments accounts. Indicate the specific component of the BOP account that is affected by each transaction. Discuss only the transactions described. Do not be concerned with possible offsetting transactions. a) The Nigerian government sells 20m barrels of oil to Ghana. b) The Central Bank of Nigeria sells dollars to and buys Niara from the US Federal Reserve. c) Guaranty Trust Bank Plc (Nigeria) receives interest on loans it has made to Ghanaian companies. d) A Nigerian Bank borrows from a Ghanaian bank. e) A Nigerian oil company buys insurance from a British insurance company to insure its oil rigs in the Niger Delta
Expert's answer
a) The Nigerian government sells 20m barrels of oil to Ghana, so exports increases and current account increases.
b) The Central Bank of Nigeria sells dollars to and buys Niara from the US Federal Reserve, so capital account decreases.
c) Guaranty Trust Bank Plc (Nigeria) receives interest on loans it has made to Ghanaian companies, so factor earnings increase and current account increases.
d) A Nigerian Bank borrows from a Ghanaian bank, so factor payments increase and current account decreases.
e) A Nigerian oil company buys insurance from a British insurance company to insure its oil rigs in the Niger Delta, so capital account decreases.

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