ISSN 1957-2968 CENTRAL BANK OF NIGERIA Economic and Financial Review Volume 44 December 2006 Number 4 SECTION I: ADDRESSES PRESENTED AT THE SEMINAR Welcome Address by Mr. E.O Alilonu Branch Controller, Central Bank of Nigeria, Calabar Special Remarks by Mr. C.N.O Mordi Ag. Director of Research and Statistics, Central Bank of Nigeria, Abuja Keynote Address by Dr. Obadiah Mailafia Deputy Governor, Economic Policy, Central Bank of Nigeria, Abuja SECTION II : PAPERS PRESENTED AT THE SEMINAR Capital Account Liberalization: Reflections on Theory and Policy Obadiah Mailafia, Ph. D Globalization and Capital Account Liberalization T. Ademola Oyejide Capital Account Liberalization: The ECOWAS Experience M.O. Ojo, Ph.D Capital Account Liberalization: What Options for Developing Economies? Biodun Adedipe, Ph.D Capital Account Liberalization: Experience from the Emerging Market Economies Professor Mike I. Obadan Capital Account Liberalization in Nigeria: Problems and Prospects Ayodele F. Odusola, Ph. D Sequencing Capital Account Liberalization Bright Okogu and Phillip Osafo-Kwaako Capital Account Liberalization: The Way Forward for Nigeria Sam Omoruyi Central Bank of Nigeria ECONOMIC AND FINANCIAL REVIEW Volume 44, No. 4, December 2006 EDITORIAL COMMITTEE Editor-in-Chief C.N.O.Mordi Managing Editor B.S. Adebusuyi Editor Associate Editors Dr. (Mrs.) S. Alade C. M.Anyanwu Dr. A. Englama Dr. S. I. Doguwa A. O. Adenuga Aims and Scope The Economic and Financial Review is published four times a year in March, June, September and December by the Research and Statistics Department of the Central Bank of Nigeria. The Review contains articles on research undertaken at the Bank, in particular, and Nigeria, in general, mainly on policy issues both at the macroeconomic and sectoral levels in the hope that the research would improve and enhance policy choices. Its main thrust is to promote studies and disseminate research findings, which could facilitate achievement of these objectives. Comments on or objective critiques of published articles are also featured in the review. The views and interpretation contained in the articles published in the Review are those of the authors and do not necessarily represent the views and policies of the Central Bank of Nigeria. Correspondence Correspondence regarding the journal and articles should be addressed to the Director of Research and Statistics Department, Editor-in-Chief, CBN Economic and Financial Review, Central Bank of Nigeria, P.M.B.0187, Garki, Abuja. Subscription Rates Subscription to the Central Bank of Nigeria Economic and Financial Review is available without charge to institutions, corporations, embassies, and development agencies. Individuals can send written request for any particular edition of interest also without charge. Articles may be reprinted, reproduced, published, abstracted, and distributed in their entirety on condition that the author and sourcethe Central Bank of Nigeria as well as the Economic and Financial Revieware duly credited. Notes to Contributors Information on manuscript submission is provided on the last and inside back cover of the Review. © 2006, Central Bank of Nigeria ISSN 1957-2968 Central Bank of Nigeria Economic and Financial Review Volume 44/4 December 2006 CENTRAL BANK OF NIGERIA EEccoonnoommiicc aanndd FFiinnaanncciiaall RReevviieeww Volume 44 December 2006 Number 4 CONTENTS Page PROCEEDINGS OF THE 2006 IN-HOUSE SEMINAR ON “ CAPITAL ACCOUNT LIBERALIZATION: ISSUES, PROBLEMS, AND PROSPECTS” FOR CBN EXECUTIVE STAFF. SECTION I - ADDRESSES PRESENTED AT THE SEMINAR Welcome Address by E. O. Alilonu .. .. .. .. .. .. 1 Branch Controller, Central Bank of Nigeria, Calabar. Special Remarks by C. N. O. Mordi .. .. .. .. .. .. 3 Ag. Director of Research and Statistics, Central Bank of Nigeria, Abuja. Keynote Address by Obadiah Mailafia, Ph. D .. .. .. .. .. 7 Deputy Governor (Policy), Central Bank of Nigeria, Abuja. SECTION II - PAPERS PRESENTED AT THE SEMINAR Capital Account Liberalization: Reflections on Theory and Policy Obadiah Mailafia, Ph. D .. .. .. .. .. .. .. 11 Globalization and Capital Account Liberalization Prof. T. Ademola Oyejide .. .. .. .. .. .. .. 31 Capital Account Liberalization: The ECOWAS Experience M. O. Ojo, Ph. D .. .. .. .. .. .. .. .. 47 Capital Account Liberalization: What Options for Developing Economies Biodun Adedipe, Ph. D .. .. .. .. .. .. .. 63 Capital Account Liberalization: Experience from the Emerging Market Economies Prof. Mike I. Obadan .. .. .. .. .. .. .. .. 89 Capital Account Liberalization in Nigeria: Problems and Prospects Ayodele Festus Odusola, Ph. D .. .. .. .. .. .. 117 Sequencing Capital Account Liberalization Bright Okogu and Philip Osafo-Kwaako .. .. .. .. .. 157 Capital Account Liberalization: The Way Forward for Nigeria Sam. Omoruyi .. .. .. .. .. .. .. .. 185 Welcome Address E. O. Alilonu The Governor, ably represented by, Deputy Governor, Economic Policy, Dr. O. Mailafia Departmental Directors, Executives of the Bank, Distinguished Ladies and Gentlemen t is with great pleasure that I on behalf of the Management and Staff of the Central Bank of Nigeria, Calabar Branch, warmly welcome you all to the Iancient city of Calabar, the capital of Cross River State for the 2006 Research and Statistics Department Executive Seminar. We are grateful to God Almighty for journey mercies granted all of you and wish you fruitful deliberations and peaceful stay in the Canaan City. The choice of Calabar for this year's seminar is very appropriate. The ancient city is serene, clean and her people very hospitable. Since the seminar is a forum for exchange of ideas and brainstorming, Calabar is an ideal choice for this type of exercise. I am quite aware that your stay this time around is bound to be short. Nonetheless, you can still make out time to visit some places of interest. There are quite a number of interesting sites within Calabar and its environs. Tinapa, Africa's premier free trade resort is worthy of visit. It might also interest you to know that the National Museum which holds the relics of the historic African slave trade, information about the great kings of Old Calabar and the great arts and customs of the Efik people is a stone throw from here. Please permit me at this juncture to mention the importance of the annual Executive Seminar which has become the bedrock for a number of socio- economic policies and reform agenda in the Central Bank of Nigeria and the nation. The theme of this year's seminar 'Capital Account Liberalization: Central Bank of Nigeria Economic and Financial Review Volume 44/4 December 2006 1 2 Central Bank of Nigeria Economic and Financial Review December 2006 Issues, Problems and Prospects' is indeed very auspicious as it comes on the heels of the recapitalization of deposit money banks. The onus therefore falls upon this great gathering to discuss exhaustively and come up with adequate policy recommendations for management. I am convinced that this team of highly informed executives of the Bank is more than capable of handling this assignment. I wish to commend the Management of the Bank for sustaining this seminar. My appreciation also goes to the Research & Statistics and Human Resources Departments for maintaining the executive policy in their respective annual calendar of events. It has always provided the highest conglomeration of executives in a single programme of the Bank. Once again, I want to thank the organizers on the choice of Calabar as the venue of this year's seminar. I wish you all a fruitful deliberation and a very pleasant stay in Calabar. Thank you and God bless. Special Remarks C.N.O. Mordi * Deputy Governor, Economic Policy Director, Human Resources Department Branch Controllers Distinguished Resource Persons and Participants Ladies and Gentlemen t is my honour and privilege to make this special remark at the opening ceremony of the 14th edition of the annual in-house Executive Seminar Iorganized by the Research and Statistics Department, in collaboration with the Human Resources Department. This annual event was conceived as a forum to enhance the intellectual and professional competence of the staff in the executive cadre of the Research & Statistics Department and their colleagues from within and outside the Policy Directorate of the Bank. Indeed, the expectation was that, by so doing, they would be better placed to impact more positively on policy making process and content. The theme of this year's seminar, 'Capital Account Liberalization: Issues, Problems and Prospects' is particularly apt because the greatest challenge facing our country today is how to grow the economy and reduce poverty. Meeting this challenge is particularly difficult if we have to rely solely on domestic resources, given the low rate of savings and, hence, the attendant savings-investment gap. Against this background, it becomes crucial to try and attract foreign resources into the economy to fill the gap. The imperative for attracting and retaining external resources, either by external borrowing or investment inflows, is to formulate a consistent and an appropriate mix of financial, monetary, trade, fiscal and exchange rate policies, etc,. Given the country's recent experience with external debt burden, external borrowing has * Mr. Mordi is the Ag. Director of Research and Statistics, Central Bank of Nigeria, Abuja Central Bank of Nigeria Economic and Financial Review Volume 44/4 December 2006 3 4 Central Bank of Nigeria Economic and Financial Review December 2006 become a 'hard-to-sell' option.