Reviving The Nigeria Economy (1): The Structural Adjustment Programme (SAP)

By Farouk Ayorinsola Obisanya

After independence in 1960, many people believed that Nigeria would attain quick economic development and national transformation. Sadly, this later appeared to be a wishful thought and the dream which is taking much time as expected is still unfulfilled with some minds believing the dream is now an illusion.
The Nigeria agriculture was neglected after the oil boom in the 1970s – in 1971 Nigeria was the world’s seventh largest petroleum producer – brought ample foreign exchange earnings, which enabled the country to meet her financial obligations. As a result, there was expansion in the flow of foreign reserves from oil exports, and the government was encouraged to kick-start capital-intensive projects. However, in 1978, Nigeria’s revenue from oil declined – there was sudden reduction in demand for it – until it was expedient to borrow to bridge the domestic resource gap, support balance of payments and finance project that will accelerate economic development. Then, there came a rise in deficits – government spending exceeds revenue generated. Nigeria witnessed a major debt crisis from the early 1980s – the most serious in its history since its incorporation into the world capitalist system at the turn of the century. Although, it was not the first debt crisis. At independence, Nigeria’s external debt was N82.4 million. It increased to N435.2 million in 1965 and N489 million in 1970.
.
Nigeria relied heavily on oil exports because of the easy cash it generated. By mid 1980s, economic malaise was apparent everywhere. The country was in recession. Nigeria returns to the World Bank and other donor agencies’ investment project were very low, and many of these capital-intensive projects failed to generate a positive rate of return. The infrastructures deteriorated as a result of lack of maintenance; health and education indicators increased quantitatively but reduced qualitatively below the minimum global standards.
.
In order to revive the ailing economy, the Ibrahim Babangida military regime came up with the Structural Adjustment Programme (SAP) between 1986 - 1988 with the support of the International Monetary Fund (IMF). The IMF engineered SAP to addressing the issues raised from some of the provisions of the Nigeria Indigenization Policy which shut doors against foreign investors. Howbeit, it was supposed to last two years but it lasted seven years (1986 – 1993). SAP consist of loans provided by the International Monetary Fund (IMF) and the World Bank to countries that experienced economic crises. It is to reduce country’s fiscal imbalances in order to adjust the economy to long-term growth. Also, it is to allow the economy of a developing country to become more market oriented. In Nigeria, SAP was simply an attempt to revive the nation’s economy and free Nigerian farmers and businessmen from the tyranny and oppression of both the marketing board and bureaucrats in the ministry of trade who, fleeced Nigerians through racketeering in import license. SAP was a comprehensive economic restructuring programme which emphasized increased reliance on market forces. The reform focused on structural changes, monetary policy, interest rate administration and foreign exchange management. The policy also provided for empowerment of domestic businesses through the National Economic Reconstruction Fund (NERFUND).
.
To implement SAP, the government adopted some measures which were: achievement of realistic exchange rate policy hitherto administratively fixed, and liberalization of external trade and payment system; appropriate pricing policies in all sectors with greater reliance on market forces and reduction in complex administrative controls and; further rationalization and restructuring of public expenditures.
.
In September 1986, the government introduced a second-tier foreign exchange market (SFEM) in which had the naira depreciating by 66% (N1.56 = US $1) and declined further in 1987. The naira continued depreciating after the relaxation of fiscal policy early in 1988. In 1989, the government was able to unify foreign exchange markets with the naira depreciating but external deficit reduced. Instead of SAP narrowing the gap, the government’s fiscal operations disappointingly resulted in an average deficit GDP ratio of 9.2%. Also, non-debt and debt service showed that the latter rose rapidly at the expense of the former, to the detriment of real economic growth. Non-debt expenditure increased from N6, 759.4 million in 1986 to N41, 946.0 million in 1992. Debt service increased from N8,902.1 million in 1986 to N65,777.3 million in 1992. 
.
SAP was accompanied by falling real wages, the redistribution of income from urban to rural areas, and reduced health, education, and social spending. There was privatization of state-owned industries and resources. The condemnation of privatization is that resources are transferred to private hands with the goal of private accumulation in turn replaced public prosperity. The decrease in spending on social programs contributed to often clamorous domestic unrest, such as Muslim-Christian riots in Kaduna State in March 1987, urban rioting in April 1988 in response to reduced gasoline subsidies, student-led violence in opposition to government economic policies in May and June 1989, and the second coup attempt against General Babangida in April 1990. 
.
The little that was gained from the SAP era was destroyed during the Abacha regime. The destruction was so deep that many years of economic reforms and democracy have not yet been able to fully repair the damage. SAP failed to achieve its objectives. It is either that the Nigeria-style was faulty or it was not implemented meticulously. 
.