Nigeria depends signicantly on oil exports for its foreign exchange earnings. The sharp decline in global oil prices in 2015 and 2016, therefore, hampered foreign exchange supply in the country, whilst demand remained strong. This put signicant pressure on the nation’s exchange rate. The CBN maintained a xed exchange rate of Ö197:US$1 for the rst half of 2016, defending the Naira with a signicant portion of the country’s foreign reserves.
The CBN’s Monetary Policy Rate (MPR) was the principal instrument used in controlling the direction of interest and ination rates in the economy in 2016. In January 2016, the Monetary Policy Committee (MPC) of the CBN reduced the rate from its 2015 level of 13 percent to 11 percent. However, it was increased to 12 percent in March 2016, and 14 percent in June 2016. Throughout the second half of 2016, the MPC maintained the MPR at 14 percent in order to control inationary pressure amid foreign exchange scarcity.
The increase in MPR in 2016, amongst other factors, resulted in an uptick in the interest rates charged by deposit money banks during the year, with the prime lending rate and maximum lending rate averaging 16.87% and 27.29%, respectively 6 . The high interest rates in the country have continued to stie business and economic growth, especially in the real sector of the economy. In respect of external sector statistics, FDI and FPI continued to dwindle in 2016, relative to prior years. This is largely attributable to the depressed state of the economy and Nigeria’s foreign exchange challenges.
The 2016 Budget of Change had a total expenditure outlay of Ö6.06 trillion, and was anchored on an average crude oil price of $38 per barrel, oil production of 2.2 mbpd and an exchange rate of Ö197:US$1. The projected decit was Ö2.2 trillion or negative 2.14 percent of GDP. The implementation of the budget was expected to ensure real GDP growth of 4.3 percent, whilst keeping ination rate at 9.81 percent. Sadly, this was not to be, as the above economic indices clearly show. As at 30 September 2016, the FG had achieved only 75 percent of its target revenue and 79 percent of its target expenditure, compared to the 2015 revenue and expenditure implementation rates of 80% and 94%, respectively. The under-achievement of the 2016 Budget was generally due to late passage of the Appropriation Bill, revenuegeneration challenges, and government bureaucracy and inefciencies. These issues need to be addressed swiftly and decisively by the FG if the 2017 Budget of Economic Recovery and Growth will be more than a buzzword.