Ten numbers defined Nigeria’s economy in 2001 when BusinessDay Newspapers commenced operations.
These numbers include the Gross Domestic Product (GDP) 3 percent, inflation rate (18%), exchange rate (N135.5k/$), Monetary Rediscounted Rate (MRR) currently Monetary Policy Rate (MPR) 16.5 percent, price of oil ($25.5), and gross international reserves $9.87 million.
Other numbers included gross domestic debt (21.5% of GDP), total revenues and grants (47.8% of GDP), Cash Reserve Requirement (CRR) 21.5 percent, and GDP per capita ($294).
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The first publication of BusinessDay in 2001 featured one of the macroeconomic numbers in a story titled “Banks reject foreign exchange requests,” written by Oluwole Elisha. The story exposed how banks rejected requests for foreign exchange from their customers as a demand management approach by the Central Bank of Nigeria (CBN) through the banks.
GDP 3.0%
BusinessDay rolled out its first weekly edition two decades ago when Nigeria’s economy or real GDP was growing at 3.0 percent in 2001 compared with 3.8 percent growth in the corresponding year of 2000, data from the International Monetary Fund (IMF) stated.
The IMF noted in its Article IV of 2001 that Nigeria experienced a rebound in economic activity in 2000, spurred by increased public spending of the windfall gains stemming from higher oil prices and by a buoyant oil sector.
Real GDP was estimated to have grown by 3.8 percent in 2000. Notwithstanding a sharp pick-up in activity in the non-oil sector, overall growth was projected to slow to 3 percent in 2001, owing in part to a reduction in Nigeria’s OPEC oil production quota by more than 9 percent during the first quarter of 2001. At the same time, increased public spending stoked inflationary pressures.
Inflation rate 18%
Inflation, measured by the 12-month increase in the consumer price index, rose to 18 percent in March 2001 from 0.2 percent in December 1999.
Exchange rate N135.5k/$ (black market)
Exchange rate regime, which was a managed float with no pre-announced target, stood at N113.2k per dollar at the Inter-Bank Foreign Exchange Market (IFEM) as of May 2001.
At the Nigeria Inter-Bank Foreign Exchange (NIFEX) or open interbank market, naira per dollar stood at N113.5k. The parallel market rate (naira per dollar) was N135.5k/$.
In response to the pressures in the exchange market stemming from expansionary fiscal policy, the CBN reverted to the pre-reform (i.e. pre-October 1999) system of selling foreign exchange in the Inter-bank Foreign Exchange Market (IFEM) at a fixed rate, except for step adjustments in mid-December 2000 and early-April 2001 that devalued the naira by 10 percent.
Consequently, the differential widened between the IFEM rate and the open inter-bank market – where banks trade among themselves at freely negotiated exchange rates – and with the parallel rate, and at the time of intensified pressures in April 2001 had reached 15 percent and 20 percent, respectively. In the parallel market, the naira lost about 30 percent of its value between December 1999 and May 2001. As very large amounts of foreign exchange were sold to deal with these pressures, foreign reserves have increased only modestly during the first five months of 2001, notwithstanding continued high foreign exchange inflows from oil.
$25.5 per barrel oil price
The price of crude oil at the time was $25.5 per barrel, which was lower than $28.5 per barrel in 2000. Nigeria is the largest producer of sweet oil in OPEC.
According to the IMF fiscal policy, management of the windfall gains from the substantial oil price increases, in particular, played a key role in economic developments in 2000 and 2001. These gains – defined as oil revenue in excess of $20 per barrel (so-called excess proceeds) – amounted to $4 billion (10% of GDP) in 2000 and are projected at $3.7 billion (9.6% of GDP) in 2001.
On account of the constitution adopted in 1999, that gave state and local governments full and automatic right to their shares of oil revenues, almost one half of the excess proceeds that accrued in 2000 was distributed to sub-federal governments in the second half of 2000, and the remainder in the first quarter of 2001.
MRR 16.5%
The Monetary Rediscounted Rate (MRR), which is currently the Monetary Policy Rate (MPR), was tightened by the CBN in early 2001. The MRR was raised in three steps by 2.5 percentage points to 16.5 percent (accompanied by increases in interest rates on treasury bills and CBN certificates).
Gross international reserves $9.87m
Nigeria’s gross international reserves stood at $9.87 million in 2001, higher than $9.40 million in the corresponding year. Foreign reserves have increased only modestly during the first five months of 2001, notwithstanding continued high foreign exchange inflows from oil.
CRR 21.5%
The Cash Reserve Requirement was raised by 2.5 percentage points to 21.5 percent, and the liquid asset ratio increased to 40 percent from 35 percent. As a result of these measures, market interest rates rose to between 30 and 40 percent in late April and May from about 17-20 percent in early 2001.
Gross domestic debt (21.5% of GDP)
Nigeria’s gross domestic debt or debt-to-GDP ratio, the metric comparing a country’s public debt to its GDP, fell to 21.5 percent of GDP in 2001 from 28.0 percent in the year 2000.
Total revenues and grants (47.8% of GDP)
Total revenues and grants rose to 47.8 percent of GDP in 2001 from 46.1 percent in 2000.
GDP per capita ($294)
Nigeria’s GDP per capita, which is a metric that breaks down a country’s economic output per person and is calculated by dividing the GDP of a country by its population, dropped from $319 in 2000 to $294 in 2001.
