Import
and
Export
Group 3: Nwogu Jeremiah
IJEH Paula
What are we going to cover today?
Balance of Trade Terms of Trade
01 Introduction to Balance of
Trade
… 02
Monetary
Balance of Payment Movement
03 Introduction to Balance of
Payment
Analysis of Monetary
Movement
04
01
Balance of
Trade
Introduction to Balance of Trade
Before we dive in, what is Import and
Export?
Import
Export
- - -
Imports are the goods and services Imports lead to an outflow of Exports are goods and services that are
that are purchased from the rest of funds from the country since produced domestically, but then sold to
the world’s residents, rather than import transactions involve customers residing in other countries.
buying domestically produced items. payments to sellers residing Exports lead to an inflow of funds to the
in another country. sellers country since export export
translate tions involve selling domestic
goods and services to foreign buyers
Now, what is ‘Balance of
Trade’?
Balance of Trade (BOT) is the difference
between the values of a country’s exports
and the values of a country’s imports for a
given period. Balance of Trade is the largest
component of a country’s Balance of
Payments (BOP). Sometimes, the balance of
trade between a country’s goods and the
balance between its services are
distinguished as two separate figures. The
Balance pf Trade is also referred to as the
‘Trade of Balance’ , the ‘International Trade
Balance’, ‘The Commercial Balance’ or the
‘Net Exports’.
What are the types of Balance of
Trade?
Balance Surplus Balance Deficit
When the value of exports When the value of imports
exceeds the value of exceeds the value of exports.
imports. Indicates a country is buying
Indicates a country is selling more goods and services
more goods and services from abroad than it is selling.
abroad than it is buying. Example: A country heavily
Example: A country that reliant on importing
exports more cars and electronics while exporting
machinery than it imports. fewer goods.
What are the factors that affect
Balance of Trade?
Factors Implications
Fluctuations in currency value can A trade surplus can lead to a stronger
make exports cheaper or more currency and increased national income
Exchange Rates expensive for other countries. but may also provoke retaliatory tariffs.
Countries rich in natural resources A trade deficit can lead to borrowing
Natural often export them, affecting their from other countries and a weaker
trade balance. currency, but it might also reflect a
Resources thriving domestic economy importing
needed goods.
Foreign If trading partners have strong
economies, they may import more.
Economic
Situation
02
Terms of
Trade
…
So, what ‘Terms of
Trade’?
Terms of trade (TOT) is a measure of how much
imports an economy can get for a unit of
exported goods. For example, if an economy is
only exporting apples and only importing
oranges, then the terms of trade are simply the
price of apples divided by the price of oranges
— in other words, how many oranges can be
obtained for a unit of apples.
● Net Barter Terms of Trade(NBTOT)
The ratio of the index of export
prices to the index of import prices expressed
as percentage.
Formula: NBTOT=(Index of Export Prices/Index
of Import Prices) x 100
This means that, if a country’s export prices
rise while import prices remain constant, its
NBTOT improves
Other Terms of Trade
include;
● Gross Barter Terms of Trade(GBTOT) is the
ratio of the quantity of exports to the
quantity of imports
GBTOT= Qty of Exports/Qty of Imports
This means that if a country exports 50kg of
garri to imports 100kg of machinery, the
GBTOT is 2:1.
● Income Terms of Trade(ITOT) combines
the Net Barter Terms of Trade with the
volume of exports, reflecting the
purchasing power of exports
ITOT= NBTOT x Volume of Exports
This means that a country exporting oil sees
higher prices and increased output, improving
its ITOT.
Lastly…
● Single Factor Terms of Trade(SFTOT)
adjusts the NBTOT by factoring in
changes in productivity in the export
sector.
SFTOT= NBTOT/Productivity of Export
Sector
This means that, if a country improves its
manufacturing processes, the SFTOT might
indicate whether this productivity leads to
better trade terms.
● Commodity Terms of Trade(CTOT) reflects
the ratio of the price of a country’s
primary exports to the price of its primary
imports.
This means that a coffee-exporting country
experiences worsening CTOT if coffee prices
drop but machinery prices rise.
03
Balance of
Payment
Introduction to Balance of
Payment
So, what is ‘Balance of
Payment’?
Balance of Payment (BOP) can be defined as
comprehensive record of a country’s
economic transactions with the rest of the
world over a specific period. It provides
valuable insights into the economic health
and financial stability of a country by
showing how money flows in and out.
BOP Equilibrium; typically, surpluses in
one account leads to deficit in another. If
imbalances occur, it can be fixed through
measures such as, policy adjustments.
What are the components of BOP?
Current Capital
Account Account
Tracks the trade of Records capital
goods and services, transfers and
income and transfers. acquisition/disposal of
non-produced, non-
financial assets.
Financial Errors and
Account Omission
Tracks investments Balances issues that
flowing in and out of a may arise from
country. statistical and
recording errors.
04
Monetary
Movement
Analysis of Monetary Movement
Now, what is ‘Monetary
Movement’?
This is basically means to transfer small
amounts regularly, a payment plan can be
set up to protect against adverse currency
movements.
OR
A change in the value of a currency or
currencies.
Thanks
!
Any questions?
Research by: Nwogu Jeremiah
Compilation by: IJEH Paula
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Resources
● dictionary.cambridge.org
● www.indeed.com
● chatgpt.com
● en.wikipedia.org
● www.investopedia.com
● corporatefinanceinstitute.com
