WAEC Standard for Answering Balance of Payment.

The table below shows the composition of exports and imports of a hypothetical country.
            Use the information in the table to answer the questions that follow.


Exports
Amount
$
ImportsAmount
$
Crude oil120,000,000Rice and flour140,000,000
Groundnuts40,000,000Petroleum product80,000,000
Tourism45,000,000Vehicles and accessories50,000,000
Shipping & Insurance60,000,000Banking services60,000,000
Bauxite80,000,000Freight and insurance40,000,000
  1. Calculate the value of visible exports.
  2. Calculate the balance of trade for the country.
  3. List the items of invisible exports and imports.
  4. Calculate the current account balance of the country.
  5. Is the country developed or developing? Give one reason for your answer.

The question required the candidates to calculate the value of visible exports, balance of trade, current account balance of a country, list the items of invisible exports or imports of a country and determine if the country is developed or developing. Most candidates who attempted this question were able to calculate the value of visible exports and the current account balance but were unable to calculate the balance of trade and list the items of invisible export as they could not classify ‘bauxite’ as either visible export or import, hence they could not obtain the maximum mark.
The candidates were expected to provide the following answers to score higher marks.

(a)        Value of visible exports = crude oil + groundnuts + bauxite
= $120,000,000 + $ 40,000,000 + $ 80,000,000  = $ 240,000,000

(b)        Balance of trade = total value of visible exports  –  total value of visible imports
Visible exports = $240,000,000
Visible imports  = rice and flour + petroleum product + vehicles and
accessories
= $ 140,000,000 + $ 80,000,000 + $ 50,000,000

                                       = $ 270,000,000      
Balance of trade = $ 240,000,000 – $ 270,000,000
=  – $ 30,000,000                    

(c)        Invisible exports include tourism and shipping & insurance.
Invisible imports include banking services and freight & insurance.

(d)       Current account balance = value of total exports – value of  total  imports

= ($ 345,000,000) – ($ 370,000,0000)
=  – $ 25,000,000

(e)        The country is a developing oneThis is because:
(i)         its exports are made up  mainly of unprocessed primary products.
(ii)        its imports are made up mainly  of finished goods.               
(iii)       the value of imports exceeds exports.

Question

The trade figures for a West African country in a given year are outlined below.
Study the table and use the information given to answer the questions that follow:
           

  ITEM                                           
AMOUNT ($ m)
Export of cocoa
Export of crude oil
Import of motor vehicles
Import of plant and machinery
Shipping services on exports
Shipping services on imports
Insurance paid on exports
Insurance paid on imports
Expenditure on foreign tours
Expenditure by foreign tourists
Grants to other countries
Grants received
Loans from abroad
Foreign private investment
Investment abroad
200                                                     
950                                                       
250                                                         
450                                                        
220                                                        
180                                                          
45                                                          
60                                                        
140                                                          
80                                                           
70                                                        
300                                                        
550                                                       
200                                                         
350

Calculate:
(a)        balance of trade;
(b)        invisible balance;
(c)        current account balance;
(d)        capital account balance;
(e)        balance of payments.

The question required candidates to calculate the balance of trade, invisible balance, current account balance, capital account balance and balance of payments of a West African country. Most of the candidates who attempted this question could compute the value of balance of trade in the (a) part of the question but only few of them could distinguish between invisible balance and current account balance or capital account balance and balance of payments. Candidates scored relatively low marks in this question.

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