Document Type

Annual Report

Publication Title

Central Bank of Nigeria Annual Report and Statement of Accounts for the Year Ended 31st December, 1966

Abstract

CBN Annual Report and Statement of Accounts for 1966 discussed the economic performance of Nigeria with emphasis on inflation rate, GDP growth, exchange rate stability, banking sector performance, monetary policy, financial stability, fiscal policy, and regulatory updates. The state of the Nigerian economy in 1966 was dictated mainly by the social and political uncertainties that engulfed the country beginning in 1965. The country experienced mounting political problems in 1965, which, by the fourth quarter of that year, had become an important factor in the future investment plans of the business community. A growing burden of external debt and the slow-down in the rate of receipt of external developmental assistance also contributed to the decline in the rate of public sector investment in many of these countries. There was an estimated 9 percent expansion in world trade to $370 million at the close of 1966. This rate of growth compared with 8.6 percent in 1965. By contrast, international means of payments rose by 1.7 percent during the year compared with 2.0 percent in 1965. The monetary policy tool employed by the Bank to achieve these objectives was the 'guideline', involving the placing of a ceiling on the rate of expansion of commercial bank advances over a given period. The guideline was also designed to create relative credit scarcity and to lead, therefore, to credit rationing. By establishing sectoral preferences for commercial bank advances, the Bank sought to bring about a reallocation of loans and advances away from those sectors where they were employed primarily to finance imports of less essential consumer goods to the productive sectors. The economy itself was strong. Agriculture's contribution to the GDP continued to be dominant. The growth rate of the GOP (at 1957 prices) was estimated to have fallen from about 5.5 percent in 1965 to between three and four percent. One notable achievement in the year was recorded in the external sector. Export surplus was maintained throughout the first ten months of the year. Although the inflow of new foreign capital slowed down. Although caution in private spending affected general economic activity, consumption suffered the most from the reduction in expenditure. Available estimates of production show that the industrial sector consistently registered substantial annual growth rates since 1962, ranging between 15 and 20 percent. The high rate of performance, however, did not appear to have been maintained in 1966. Manufacturing activity was at a higher level during the first six months of 1966 than in the corresponding period of 1965. Orders and deliveries of most of the companies that participated in the year-end business activity survey were also reported to have been higher than in the corresponding period of 1965. The moderation in the tempo of commercial activities brought about by the policy of credit restraint pursued by the Central Bank and supported by Government policy measures since the later part of 1964, turned contractive in 1966 under the impetus of reduced farm incomes, and subsequent political and social disturbances. Commercial bank credit also fell relative to 1965. Despite the disruption in business activity, the banking system remained calm. Despite the problems of the year, the financial system continued its organic growth. The Central Bank's branch at Enugu started functioning during the year, and the building of additional branches in Benin and Kaduna was in progress. The long-planned amalgamation of the Bank of Wes Africa Limited and Standard Bank Limited was concluded. The fusion gave rise to a new bank, the Standard Bank of West Africa Limited. On a seasonally adjusted basis, the movement of money supply in 1966 was more strongly upward than in 1965. Currency outside banks declined by only £7.2 million during the seven-month down-swing, compared with £13.9 million in 1965. The movement of the banking system's credit was generally downward in the first eight months of the year. There was, however, a reversal of this movement beginning in September. The Nigerian money and capital markets experienced increased activity in 1966. More treasury bills than in 1965 were issued and were available to market operators. There were no changes in the movements of interest rates usually reported to the Central Bank by the commercial banks. The financial resources of the Federal and Regional Governments were under extraordinary pressure in 1966. The pressures came from many directions: on the Federal level, the public debt servicing burden rose steeply-about 57.0 percent above the level in 1965. Nearly 48 percent of the increase was accounted for by external payments, the largest of which was the £6.8 million 3~ percent 1966 Exchequer Loan, which was liquidated on 1st October 1966. Only £1.6 million of this amount had accrued to the Sinking Fund by the maturity date of the loan.

First Page

1

Last Page

89

Publication Date

12-31-1966

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