How SAP Impacted Nigeria’s Economy in the 1980s

Nigeria’s political economy is often analyzed along three epochal movements; the pre-colonial, the colonial and the postcolonial epochs. A significant event in the postcolonial epoch is the introduction of the Structural Adjustment Programme which has been widely made reference to in various national economic discourses since 1980s.

Structural Adjustment Programme (SAP) is a set of economic reform policy introduced to many developing countries that approached international financial institutions such as World Bank and the International Monetary Fund (IMF) to secure credit facilities, particularly long-term loans. The Policy is anchored on the western capitalist ideology, hence, it includes elements such as reduced Government Spending, free market economy, devaluation of local currencies etc.

In 1986, the Structural Adjustment Programme was introduced in Nigeria under the Babangida-led military regime. The SAP had earlier been rejected by the Buhari-led regime in 1984. However, several conditions reportedly transpired internally and externally which influenced the adoption of the programme in 1986.

Before the adoption of SAP, Nigeria had prioritized the Public Sector Enterprises (PSEs) which thrived largely in the 1970s. Increased Government spending on the PSEs at the period was generally based on the assumption that the sector would facilitate optimal resource allocation and national development. Initially, the PSEs had constituted 16.3% of Nigeria’s GDP and 17% of sub-Saharan Africa’s GDP but later in the mid 1980s they had begun to reduce in economic efficiency and had continued to incur heavy loses even as government’s transfers and overdraft to them covered about 8-14% of the nation’s total GDP (Salako 1999).

The Nigerian Government was forced to adopt SAP based on the following reasons:

1. Pervasive corruption and political sentiments that developed in the PSEs
2. Failure of the various economic task force and commissions that the government had set up to combat the economic crisis at the period
3. Pressure from the people who were hard pressed by the prevailing economic condition
4. Pressure from the international community.

The philosophy of SAP was to correct the friction in the economy by offsetting the external components of the national income equation. Hence, emphasis was placed on exchange rate flexibility, credit control, devaluation of naira, reduction in government expenditure among others (Anyanwu 1992).

However, the policy aggravated rather than improve the adverse economic condition of the country. For instance, there was massive inflation, and Nigeria’s external debt more than quadrupled between 1986 and 1989.

The privatization and commercialization of Government corporations caused tariff hike, and increase in the production and optimal cost of firms. As a result many small firms wound out of business. Additionally, removal of subsidy from the economy resulted in harsh living conditions for the poor.

Since its official termination in 1996 the adverse effect of SAP had continued to impact the nation’s economy. The World Bank, International Monetary Fund (IMF) and some other international observers argue that the failure of SAP in Africa countries is not due to the policy per se but due to the abuse of the policy. However, many African critics have continued to contest this.