The Structural Adjustment Program in Nigeria: Lessons and Implications

Introduction

Economic growth has taken a new turn since the end of the Second World War. Due to globalization - the increased interdependence when it comes to economics and politics - the development and growth of countries are to a higher degree affected by foreign and transnational interests, some of whom are aiming to improve the situation of developing countries and their habitants. The two major institutions, working for this, are the “International Monetary Fund” (IMF) and the World Bank, together called the Bretton Woods Institutions. They act by reforming the economic structure of their protégé countries by requiring the employment of open-market policies in accordance with neo-classical and neoliberal economic theory. Some reforms are demanded as requisitions before applying for membership with these institutions, and some reforms, as conditions to be fulfilled to be granted with loans. These reforms are collected in something called a “Structural Adjustment Program” (SAP) meant to create an environment more beneficial for investment and hence development by attracting the capital needed by countries with relatively low capital stock. Most of recent poverty alleviation has occurred in China1, a country relatively free from the interventions of the IMF and World Bank and in use of different economic policies. It’s not surprising that the discussion about how poverty best is encountered, and if SAPs are the way to go, remains one of great controversy and of varying opinions, expressed by different experts and interests. The Bretton Woods institutions have today 186 member nations, and their impact on the wellbeing and living conditions of their habitants is of the greatest magnitude.

The SAPs have not, unfortunately, been able to deliver the anticipated effects on growth and poverty alleviation. In many cases, they’ve had an impact opposite to the one strived for when justifying their implementation, with the most devastating effects being on the social level. This view - even though not fully shared by the IMF, World Bank, or some interests unrelated to these institutions – will be an underlying assumption for this thesis, and we would like to clarify that it is still disputed2. This paper will consist of a description of the most general SAPs, the theory behind them, and an attempt at explaining the development experienced. The major objective of the dissertation is to provide better understanding of the why, what and how of the structural adjustment program in Nigeria with a view to drawing relevant lessons for future reforms.

Methodology

Literature review

The available literature on this subject offers a variation of ideas regarding the best way to improve the living environments within underdeveloped countries and If SAPs are the greatest or worst alternative or if they could be redesigned in a more advantageous way. Today the controversy around the detrimental social and economic effects of SAPs is limited, however the root cause of the adversity from SAPs is still widely discussed in academia. The literature presented in this section is the most prominent and the foundation of my dissertation. Individuals with an optimistic attitude and outlook towards SAPs usually emphasis that SAPs are economically viable in the long term future because they increase productivity and industrialisation in developing states. They argue the negative circumstances observed is because of a lack of commitment and efficient implementation from the host countries side. In addition to this vast corruption and poor circumstance, a study from the world bank says:

“Part of the explanation for Africa's unsatisfactory cumulative growth is the lack of sustained reform and, not a failure of the reforms themselves.” “There is a real danger that the more privileged and articulate elite societies in African countries will forestall a redistribution of benefits accruing to the poor”.

The claims of the publication is greatly debated and disputed, for instance, in an analysis of the study done by Ardeshir Sepehri where he argues:

“The report manipulatively uses data to show that adjustment is working … A re-evaluation of the report’s own statistics suggests that there is appropriate evidence to be concerned about the sustainability of adjustment results. After many years of involvement with adjustment loans, growth rates are still poor, as are savings and investment rates, even for the strong adjusters”

M. Chossudovsky, a professor at the University of Ottawa with development economics as specialization has published a book that has been frequently used and quoted within this thesis. His publication explicitly handles the different adjustments composing the SAPs and their impacts on the receiving countries, and has therefore been beneficial for my work. I have also used other publication, not mentioned here, in order to answer those questions that arise during the work and to find supplementary information.

Chossudovsky argues:

“Economic reform programs designed by the International Monetary Fund and the World Bank—so-called ‘structural adjustment programs’—have formed one of the most influential policy agendas of the past four decades. To gain access to financial support from these organizations, countries—often in economic crisis—have reduced public spending, limited the role of the state, and deregulated economic activity”.

Sub-sharan African countries are the epi-center of failed strucutural adjustment programmes, According to Micheal chordowsky migeria has had the worst expirence with SAPs and the Nigeria expirence is just a microcosm of the greater problem of the economic inadequacies with SAPs. The Nigeria example demomstartes how the World bnk and IMFs role is more ideologically driven, in he sences that it is concerned with spreading and implementing neo-libreal economic polices rather that catering to individual states circumastances and devising a pragmatic economic strategy in conjunction with the subject states to work towards promoting beter economic growth and more suusctaible socio-economic circumstances for the pople suffering from poverty, malnutrition and diseases. In addition to this another key popint highlitehd by Chowerdosky is the controversial democratic defecit the persists in the World bank, IMF and other key international economic organisation such as the WTO (Domocratic deficit) is the democratic defict which is prevelant within these instutions. This lack of representation for African countries and the biggest of them all, Nigeria is fundemntaly flawed in the sense that the concerns and grivences of countries such a Nigeria a given little attention. The president of the World Bank is always an American and the IMF president (Cristien Lagarde) is always European. This futher preputates the north- south divide and gives a dictatorial act of power upon the countries reciving SAPs.

After reviweving vast amounts of scholarship in this field, my motivation behind narrowing it down to SAPs in Nigeria is because according to Ngaire woods it was “one of the worst SAP ever undertaken” and I want to critically analyse the reasons behind this. In this dissertation I endeavour to explore the following research questions: What were the aims and purposes of Structural Adjustment Programme (SAP)? What economic forces and circumstances demanded the implementation of the Structural Adjustment Programme (SAP) in Nigeria? How SAP was applied and what approaches were undertaken by the government in the enactment of SAP? More importantly, what was the effect of SAP on Nigeria’s social and economic development? Furthermore, in the latter half of this paper I discuss how reforming the two Bretton Woods institutions by redesigning their conditionality’s and democratising them could benefit many developing countries and facilitate growth.

The historical context of Structural Adjustment Programmes

The end of the empire in the 1950s and 1960s had significant political consequences in the developing world, but surprisingly little economic consequences. The established division of labour within the global economy between the improvised global south which was the primary source production, mainly raw materials and the advanced industrialized north which had become the home of hi-tech manufacturing. This structural imbalance had created a lack of economic diversification which was slowly intensifying the economic vulnerabilities in the less economically developed countries (LEDCs) in the global south who were highly susceptible to economic recession. This is mainly because many developing countries in the global south, especially states like Nigeria are highly dependant on export-led revenue on a single commodity or a narrow range of exportable goods, e.g.- oil, cotton, agricultural goods etc. To put this global south trade imbalance in into perspective in 2005 as many as 45 developing states were still dependent upon one commodity for over 25% of there total income from revenue from their exports. Any decline in a single economic sector often bought about high volatility in global export markets, this could therefore have catastrophic consequences for the economics of developing countries. On the other hand, from the 1970s to 80s onwards the IMF and the World Bank adopted a radically different approach to encourage development, implementing what today is known as SAPs or Structural adjustment programmes.

What is the purpose of the IMF and World Bank?

First, the main difference between the IMF and World bank is in their respective functions and purposes. The primary focus of the IMF is to make sure exchange rates remain stable, while the World banks objective is to reduce poverty in developing countries. These two organisations were the brainchild of the Bretton woods agreement in 1945.

The IMF encourages monetary cooperation globally and gives advice and guidance to help facilitate in building and maintaining a country’s economy. Just like the World bank the IMF also provides loans, in addition to helping countries device effective economic policies that address the balance of payment dilemma if a country’s unable to obtain sufficient finance to meet its international obligations. However, majority of loans offered by the IMF are riddled with terms and conditions. Most often a loan provided by the IMF is a form of emergency rescue for states in deep economic trouble or serious debt for example the recent Greek economic meltdown required emergency assistance from the IMF to stop Greece defaulting. Eventually the aim of the IMF is to stabilise International trade for the subject country and repayment of the loans is required with particularly high interest rates. Unsurprisingly the IMF has many critics arguing that making countries with economic difficulties pay astronomical interest rates on their loan repayments is unethical and pushes countries towards austerity.

The main purpose of the world bank is to invest into long term development projects and work with developing countries to reduce overall poverty. The world Bank does this by giving financial and technical expertise and support to developing countries. During its early period the Banks focus was on post world war two reconstruction of Western Europe then slowly turning its operational focus upon helping developing countries promote economic growth and meet Human Development Index (HDI) targets. The World Bank supports developing countries by helping then create more efficient and effective economic policies along with implementing key infrastructure projects which contribute to better socio-economic status. For example, projects can include things such as building schools, hospitals, clean water treatment facilities, hydropower dams for electricity and road projects for better connectivity with and with countries etc. The assistance provided by the world bank is generally long term and its man source of funding comes from its member states and their contribution. Their contributions also for a percentage of the voting power with the organisation, a rule which is seen as highly problematic and will be discussed later in this literature. The loans which the World banks issues are not a form of bailout, like the IMF, instead they are a long-term fund for major development projects which promote economic productivity within emerging market national or underdeveloped nations like Nigeria so I the long run they can greater revenue independently.

Structural Adjustment programs in detail

Structural adjustment programmes (SAPs) or sometimes Structural Adjustment Loans are economic devices that the world Bank and IMF have constantly used in the attempt to overcome what many economists see in the developing world as Structural inefficiencies which hinder economic growth. Accepting SAPs is a prerequisite to obtaining monetary loans, particularly in the 1980 and the 1990s they reflected a strong belief in economic liberalism and a framework in which the state was less active in economic decision-making, rolling back regulation, in the pursuit of creating a free market environment. SAPs generally tended to have similar aims and objectives foe all their recipient countries. The fundamental reforms SAPs encompass include:

• Cutting government spending, mainly through cut backs to public services and welfare or endeavours to balance government budgets through increasing government revenue (by charging higher fees for government services).
• Significantly reducing or completely removing government subsidies to local and domestic industries to save government revenue and limit the effect of import substitution strategies.
• Removing or reducing tariffs, quotas or any other for or restrictions on imported or exported goods.
• Cutting down red tape by deregulating the economy by cutting restriction on foreign investment to achieve capital market liberalisation.
• Privatizing national and government owned assets such as Power supply, rail and healthcare etc.
• Devaluing currency and maintaining low exchange rates to increase exports and reduce imports, in order to rectify balance of payment issues.

Why did this policy change occur?

The fundamental reason for this policy change was to tackle the ever-growing and worsening Debt crisis in the developing world. This happened directly as a result of poorer countries borrowing large amounts of loans from Western Banks and other private organisations which were already loaded with ‘Petro Dollars’ because of the significant increase in the price of oil bought about by the fledgling organisation of petroleum exporting countries (OPEC) in 1973. However, this crisis along with other key factors such as the sharp increase in interest rates and the stagnation in the world economy (partly due to the oil crisis) paved the way for damaging economic stagnation across much of the developing world, therefore making it extremely difficult and some cases near impossible to service their national debts. In this situation many developing states who mainly consisted of sub-Sharan African countries including Nigeria turned to institutions such as the IMF (to gain assistance and rectify the bourgeoning balance of payment crisis) and the World Bank (to fund investment into development projects). The pressure upon Global financial organisation was mounting and were confronted with the task of devising loan packages or restructuring loans in which economic growth can be promoted rather than the failing and burdensome loans of the past.

The second reason for the policy shift was due to the ideological shift that had happened as a consequence of the collapse In the Bretton woods agreement in the early 1970s and giving way to the rise of the ‘Washington Consensus’. This was based upon the principles and understanding that the severe debt crisis and the economic problems were a consequence of structural inefficiencies in the fragile economies of many developing countries, compounded by misguided or inefficient government polices of the host country. The World Bank and IMF wanted to develop conditionality’s into the provision of any future loan packages. The key argument for the introduction of these conditionality’s was to bring about a basic market-orientated structural adjustment of economic policy in cohesion with the ideas of neo-liberalism.

On the other hand, the imposition of SAPs turned out to be very controversial. This was because the fundamental driving force behind SAPs was a core belief in neo-liberal economic policy. For the key figures within the World Bank and IMF, the cornerstone of development was through market reform. Market reform according to the officials within these institutions would foster entrepreneurship, innovation and dynamism. These components according to them are key to poverty reduction, employment and ultimately high economic growth. The IMF and World bank began a campaign to encourage governments of poor countries to adopt and introduce these policies they believed they were acting in the long-term prospects of these states and their populations. Furthermore, SAPS were not a forced upon any state or imposed upon any unwilling government, instead they were a consensual agreement between the institution and the governments of various countries. Many states had no choice but to accept the loans due to a lack of alternative finance from other sources of funding. The major benefit of SAPs as espoused by those in favour of SAPs argued the market reform and free trade would stimulate the global economy by the integration of national economies into the global economy, thereby offering opportunities for business and enterprise from the new global marketplace and hope to increase growth rates and diminish the poverty cycle. There seem to be evidence to suggest in the 60s and 70s that this thinking had some truth because the economic performance in east Asia and Africa had a striking difference. The GDP per capita income of many African states was not much different or in some cases higher than those east Asian countries.

However, in the late 1970s and 80s many east Asian countries made rapid economic progress and were know as the Asian tiger economies mainly due to their success in export-orientated strategies. Overall much of Asia adopted market reform including China and India. This bought about a wide divide between the developing economies of Asia and Africa, an example of this can be seen by the fact that Nigeria had a much larger Gross national product (GNP) compared to South Korea, but by 1996 the GNP of South Korea (591.1 billion) was 10 times larger the Nigeria’s (58 billion) along with the fact that Nigeria had over twice the size of Korea population at 110 million people made Nigeria economic state even more dire. However, the economic success of East Asia in the 1990s solely being put down to free trade and market reform should be taken with a pinch of salt because other contributory factors such as state aid, subsides and other forms of protectionism spurred growth. In order to get a good indication on how successful a country is we look at its economic indicators such as GDP, inflation rate, employment levels etc. and Human Development Index (HDI) targets such as healthcare, sanitation, education and poverty. However, countries which have achieved these targets and placed emphasis on free trade and economic integration are a far cry from highlighting the positive benefits of SAPs. On the contrary, SAPs have been incredibly inefficient and lackluster in achieving high economic targets and HDI targets, this was acknowledged by the World Bank and IMF (Vernon and prezworski, easterly 2001). The trickle-down economic paradigm programmes of the World bank and IMF which were a creation and highly influenced by the Chicago school of economic thinkers such a prominent economist, Milton Friedman and Fredrich Hayek would often neglect the needs of local population and individual societal circumstances, instead it was a “one size fits all policy” adopted by these institutions highlighting the lack of pragmatic strategy to cater for individual economic circumstances. This approach caused much economic disruption and political instability in states such as Mexico, where rebel groups such as the Zapatistas caused an uprising against the market reform and privatization of agricultural industries, and in Argentina where there was mass public demonstration again IMF involvement within the economy in the late 1990s.

Are Structural adjustment programs a flawed model of development?

Many scholar and academics associated with a more socialist model of development would unsurprisingly disagree with the conditionality’s of SAPs. However, a more damming indictment on the failure of SAPs came from former World Bank president Joseph Stiglitz who pointed out that SAPs have the opposite effect to their promised one which is they create greater poverty instead of less. For example, the pressure on the government to cut public spending often led to massive cuts in education, healthcare and welfare. This in turn had a negative and disproportionate impact upon the les well off in already poor countries and societies, women and girls who already lacked many basic rights. The exploitation by stronger economies against weaker ones by exposing them to foreign market competition was incremental in unemployment while depreciating wages and deteriorating working conditions, all done under the banner of more “labour flexibility” and “market competition”. Foreign direct Investment which was encouraged under SAPs mostly tended to focus on the manufacturing of consumer goods to sell on the global international market instead of building important infrastructure such as roads, hospitals and schools but the investment returns are less impressive in these projects so there was less incentive to invest.

Secondly, SAPs tended to preponderant donor states, primarily the USA who has unparalleled power within the decision-making process of both organisations. The promise of creating a system which would “lift all boats” in fact sank many because of IMF and World Bank attending to the interest of big donor states. The primary interest of powerful donor states such as the USA, which has 17% of the vote share in the IMF based on the quota system where a member state's vote power is measured by its financial contribution. Stiglitz argues that states such as the USA along with other prominent and powerful states in the IMF use the institution as an apparatus to expanded there global markets and seek greater trading opportunities in developing countries at the expense of decimating there local industries and consumer goods by allowing big multi0national western corporation to monopolise crucial industries, for example Royal Dutch shell monopolizing the Nigerian oil rich delta while domestic companies miss out on these opportunities. This argument exposes the deep underlying biases that plague the IMF and World Bank, based on the fact that they have little room to manoeuvre and freedom to influence when dealing with international organisations.

Thirdly, more crucially many scholars would argue that the root cause for the failure of SAPs is it flawed development model. This can be seen by fact that they have weak empirical underpinning to the philosophy of SAPs. Moreover, this argument is solidified by looking at the development path of developed countries because no economically developed country had actually followed the model advocated by SAPs. By implementing SAPs, advanced industrial countries were basically saying: “do as we say, not as we did”. Not only is this hypocritical as well as contradictory but it sends a sinister message to developing countries. Looking more closely at the record of states such as Germany, USA, Japan and more prominently and recently China is that in their early stages of industrialisation they adopted mainly protectionist polices in order to protect their industries and markets from foreign competition and imports, until their industrial sectors were strong enough to compete on the global market. The majority of the developed countries such as the G6 or G20 states only converted to polices of economic liberalism and free trade only when they had reached a certain level of economic maturity and ensured that their domestic industries were able to withstand the competition of the global market and less vulnerable to collapse. By stark contrast SAPs are based on a distorted myth of free trade being the holy grail of economic development, in that they see an open economy as prerequisite for development, instead of a consequence. As scrutiny of SAPs intensified during the 1990s, pressure on both organisations mounted for reform and eventually the IMF had conceded and accepted in 2002 that SAPs had created social and short-term economic disruption, more crucially they accepted they were an “unreliable means of boosting growth”.

Overview of Nigeria’s Economy before structural adjustment

The case of structural adjustment programmes in Nigeria stands out from the rest because it was described as having the “worst experience of Structural adjustment programmes” of any country. With a population of currently 194 million people it is Africas most populous nations which also has the largest economy in terms of GDP nominal at 413 billion as of 2017, in addition to have a GDP per capita of 2,192.5 (2017). Resources such as oil exports dominate the economy, totalling around 80% of national Government revenues. As well as 90% of the total earnings from foreign exchange. The country is facing a plethora of economic, social and political challenges with a declining per capita income, and adverse social prosperity indicators, Nigeria is one of the most underdeveloped oil-producing countries. After gaining independence in 1960 the country has been through major economic and political changes. The country has endeavoured to forge a cohesive and unified nation which consists of diverse religious, ethnic and regional groups through a centralised federal structure of government, whose leaderships has been unstable and has changed over eleven times, mainly through military coups.

The period of 1970 saw Nigeria transition from relatively poor agrarian economy to oil dominated and relatively rich economy. To put Nigeria economy into perspective, from the year 1969 the countries oil sector accounted for just 3% of the national GDP and a humble $370 million in oil exports, just shy of half the countries total exports; per capita income was a poor $140; and over half of national GDP was produced by the agricultural sector. However, from 1980 Nigeria’s economy evolved following the discover and exploration of oil field in the Nigerian Delta region which transformed the economy from agriculture to oil exporter. By 1985 the countries total oil exports amounted to $25 billion (95% of total exports) this increased per capita income to unprecedented levels of $1100. Many people saw the dominance of the oil sector and the lack of economic diversification as symptoms of the “Dutch disease”. The gradual crippling of competitiveness of non-oil tradable goods left the country at the mercy of the international price of commodities such as oil and raw materials.

The collapse of the global oil prices and a subsequent decline in the petroleum output which resulted from decreasing Nigeria’s OPEC oil quota in the late 1980s exposed the precarious economic and financial position the country found itself in. A lack of focus and neglect of the agricultural sector, higher and ill-thought-out state spending in the 1970 and inward-looking economic and industrial polices allowed Nigeria’s economic future to be dictated by significant changes in the external global factors in the coming decades. Therefore, the sharp decline in oil export income subsequently led to further deterioration of the country's balances of payments and public finances.

This ultimately led to the economy dipping into recession manifested by foreign exchange shortage, balance of payment and debt crisis, fiscal crisis rising unemployment, negative GDP growth to name a few of the economic issues. The Shagari Government in the 1980s was in turmoil over how to address the issues and even attempted to introduce Economic stabilisation act of 1982 but from 1982 to 1984 the economic figures were deteriorating as indicated by the decline of GDP growth figures for example; in 1982 GDP growth was 0.35%; -5.48% in 1983 and eventually -5.8% in 1984. Sustained budget and current account deficits resulting from stagnant oil prices meant that there was huge backlog of uncompleted infrastructure projects, mass factory closures and acute shortages of essential commodities saddled with high inflation. The dire state of economic affairs needed emergency assistance after the government failure to implement a failed austerity program and in addition to a government coup led by general Buhari Nigeria was in a state of chaos. The countries external debt rocketed to $4.8 billion or 5% of GDP and a debt service ratio of 3.6%. These circumstances were a result of the country being ill-prepared for the sudden collapse in the price of oil in the 1980s. The Correlation between oil export revenue and GDP growth is clear to see form the table below:

The vast oil revenues of about 65 billion naira that the government accumulated between the years 1972 to 1982 to some extent “insulated the economy from the shocks of the early phase of the world capitalist crisis”. The Nigerian economic economic prospects were fixed to external events and the price of oil as seen from the graph below. The Shagari administration was ill prepared to shield the economy from global events.

The austerity measure bought about by New President General Buhari which focused on tightening fiscal and monetary policy and applying administrative controls by stimulating economy through quantitative easing and encouraging other sectors of the economy to increase industrial output. The measure achieved success, though be it limited; the external current accounts moved from deficit to balanced, inflation fell to single digit, GDP growth jump to over 8%. However, the dramatic increase in GDP was down to OPEC increasing output quotas and the agricultural sector recovering from a drought. These successes were short-lived, and the government again failed to maintain stable economic growth due to external market variables.

The IMF and world banks' involvement within Nigeria

Eventually, after a large-scale national consultation and the IMF and World Bank knocking on the door, the Babiginda Government decided to adopt the SAP after failing to compile a national economic action plan to sustain economic growth. However, Babiginda government overlooked what was to come from these Loan conditionality which was a knee-jerk reaction to the economic difficulty the country was facing. Many Nigerians agreed that the economy demands restructuring, it was far to reliant on export-led growth, lack of diversification in industrial sectors and a greater focus on agriculture production was needed because according to the laws of Comparative advantage that was Nigeria’s strongest industry, oil dependence was its Achilles heel. The Government adopted the SAP in June 1986 which was a comprehensive adjustment program that bought about a radical departure from previous reform efforts. The program highlighted the need for market forces and propping up the private sector to rectify the issues of the economy. The Programme was meant to last two years; however, it was extended, and The World bank embarked on a $460 million export and trade policy diversification loan. Which would have enormous ramifications for the Nigerian currency because this diversification loan meant devaluing the Naira to make exports more competitive, however it had the opposite effect of raising inflation.

SAP programs were predominantly aimed at restructuring and diversifying of the industrious base of the economy in the objective to reduce dependence on the lucrative but uncertain oil sector and improve non-oil export revenue.

Lokesh clearly identified the Objectives of SAP to include the following:

• To redesign and diversify the manufacturing base of the economy by reducing Nigeria’s over-dependence on the oil sector. This meant, SAP was expected to stimulate growth in struggling sectors of the economy such as agriculture.
• To increase foreign exchange and increase export of non-oil commodities earnings
• Limit inflationary growth in the economy by cutting down or removing all barriers and tariffs to efficient and effective trade
• Encourage Foreign Direct Investment (FDI) to Nigeria through privatising state assets and implement deregulation in the business sphere.
• Enhance employment prospects for Nigeria
• Cutting public expenditure and implement fiscal disciple in the management of the economy

The immediate impact of economic reform in Nigeria

Fundamentally the primary objective of SAP was to roll back the Nigerian states involvement within the economy and allow the “magic of the Market” to bring success and economic prosperity. The process of exchange rate and domestic price regulation would allow market mechanism to distribute resources efficiently. The Second-Tier Foreign exchange rate (SFEM) Was introduced as part of the IMF and WB conditionality in 1986, it placed considerable emphasis on allowing the currency to be determined by market forces. However, the programmes underlying contradictions made it a recipe for disaster, in addition to the fact that the world was rapidly globalising at the time where Nigeria was simultaneously being forced to open its fragile economy to large foreign corporation who were keen to capitalise on its market and lucrative oil industry. Many state officials at the time were concerned about the economic and political costs of unregulated market forces.

The government was pessimistic to say the least about fully implementing or sometimes even delaying the price adjustment and deregulation to avoid disturbing the rather volatile and tenuous social and political balance. Privatization, for example was a highly controversial subject. There was sustained opposition from the public in addition to causing problems for the government because of the oligomictic environment privatisation was creating with the country when “private forces” were taking over many parastatals. Scrapping the marketing and regulatory boards in the country in the name of deregulation proliferated the oligopolistic companies which monopolised many sectors of the economy. For example, the Textiles Association of manufacturers dealing with cotton and the large coca Association of Nigeria, consisting of the big coca exporters, producers and buying agents. To show how this monopolisation affected society the price of coca had dramatically increased from 3000 Naira before implementing privatisation and deregulation polices to an all-time high of 6000 Naira, thus reducing profit margins for local exporters.

The SAP had created a more divided Nigerian society even along regional lines. The rivalry between the northern and southern members of the manufacturing Associations of Nigeria (MAN), concerning the modalities of the privatization of many federal parastatals. The Northern branch of MAN wanted regional equity (applying quotas and controls on manufacturing), however the southern branch was making the case for floating the companies on the stock exchange, so the market could determine the allocation of shares. The data below shows how poverty inequality along the line of the North/south divide deepened the resentment of the government because majority of investment was pumped in to the south at the expense and neglect of the north, SAP exacerbated this regional divide by focusing development projects in the south of the country.

The overall number of privatised companies was still limited, even though the Government made privatisation the cornerstone of the budget in January 1986. However, the allocation of most privatised companies being located in he rich southern end of the country and capital flows being invest in to the south created a regional North/south disparity. The structural adjustment programme backed by SFEM overtime caused mass fluctuations in prices and the devaluation of currency as part of the SAP deal had over time eroded the purchasing power of the average Nigerian consumer.

Industrial output in the economy declined by over 75% due to the unsustainable price fluctuations in the first quarter of 1986, mainly in the Lagos area where majority of the manufacturing base is. The central bank survey found that the highest decline in output was in the soap and detergent industry (74.8%)and the least decline was in the textiles (5.9%) In addition to this there was a sharp rise in the cost of production of 43.5% to 645.2 million Naira. There was mass job uncertainty and rocketing unemployment as domestic companies were finding it difficult to compete with more cost effective foreign imported goods which meant there was large-scale factory closures. The falling oil revenues and the price of oil being $11 a barrel in 1989 further limited the government budget and substantially reduced the amount of foreign exchange that would have possibly made available the importation of machinery, raw materials and spare parts.

Opinion was divided in Nigeria on whether the failure of the economic reform process to diversify the economy was due to inappropriateness or the weak application of the policies, which encompassed currency devaluation, the elimination of import licensing, deregulation of banking and Dismantling of commodity boards. The banking Sector is particularly fascinating because the IMF and WB pushed for greater financial institution to be built and greater availability of credit to consumers. The government through the central bank pumped millions of Naira into commercial banks which nearly doubled in number and made credit widely available to many consumers many of who would default. It is estimated 1 in 8 people defaulted on the credit repayment this led to a credit crisis in the banking sector and eventually increased unemployment. The government put restricts and regulation on the irresponsible banking sector who had been granted freedom through the deregulation under SAP.

Analysis and impact assessment of the Structural Adjustment in Nigeria

It would be fair to say that SAP was the most revolutionary endeavor to fix long standing economic issues in Nigeria. It constitutes the most radical and controversial economic reform package ever implemented in Nigeria. Therefore, the existing literature on the effects of SAP in Nigeria in subtle. The WB and many mainstream western academics have glorified SAPs as not only the greatest economic reform package ever designed in Nigeria but also in Africa, however they argue the rational for their failure is a lack of good governance, corruption, bribery and poor leadership. They claim that the advantages of SAP were noticeable in the “increased positive economic growth trend of the initial 1980s, considerable surge in prices of farming exports, enhancement in external payment provisions and improved international credit availability.” This element of thought has been disapproved by African academics and vindicated by the economic catastrophes that had categorised African countries since the implementation of SAPs. From this viewpoint, Afrocentric researchers such as Olatunbusu, Micheal Obadan, Idacbe, scrutinised SAP as the curse of Nigeria’s economic despairs predominantly through the 1980s and the 1990s. Implementing SAP did not convert the economy of Nigeria or initiate greater development. Many economic complications continued intractably. For example:

“There was ostensible lack of commitment and faith in adjustment and national development by preceding regimes and economic representatives who have control over resources. During the passage of implementation of SAP, many alterations surfaced while others defied answers. Of specific consequence were the difficulties of on-going depreciation of the Naira in foreign exchange market, sluggish growth and near paralysis of the retail sector, increased and unstable interest rates, bourgeoning inflation, unmanageable fiscal discrepancy profile, substantial outstanding external debt, swelling unemployment, rise of social movements and local militia groups among others were all the overlooked factors because of SAP”.

The elimination of government subsidies which were imposed by the introduction of SAP in 1986 adversely exaggerated Agricultural output in Nigeria. The Government barred import of wheat, maize, rice and vegetable oils. Furthermore, it ruled out food subsidies. These actions led to price rises for local produce because of the significant devaluation of Naira as prescribed in the SAP. Production also amplified, especially in poultry, fisheries and rice production had become less profitable because of rising importation costs such as agro-chemicals. But, subsidy removal dramatically limited profitability to the agricultural sector and many farmers struggled. This led to loss of overall farm holdings. More significantly, the depreciation of Naira negatively affected the manufacturing industry who imported majority of their machinery. As Jibril Ibrahim accurately, implies, “the positive benefits of SAPs are still to be witnessed”.

Subsequently, the “increase in the Privatization of public enterprises in Nigeria, its socio-economic consequences on the people had been disastrous”. To put this into perspective, by the late 1970s, Nigeria had over “15000 public enterprises which generated over 65 percent employment”. As a strategy measure, SAP implementation meant the rationalization of these Public enterprises through privatization. Between 1988 and 1999 for instance, over 55 Public enterprises were privatized. This scenario led to massive sack of workers. The adoption of the Structural Adjustment Programme in Nigeria worsened unemployment challenges in the country. Through the staff rationalization of a government department, parastatals and agencies, thousands of civil servants lost their jobs. The additional cutback caused social displacements as many families lost their jobs and had no alternative means of work.

More concerningly for local manufacturing companies who were doing well before the arrival of deregulation and the eventual devaluation of the currency, was that they were facing a crisis because heightened unemployment caused a major reduction in the national workforce. For example, the statistics at the time indicate that Workforce of the United Africa Company or UAC which happened to be one of Nigeria’s biggest conglomerates at the time had its workforce compressed from “23,850 employees in 1985 to just under 9,000workers in 1988”. As the economic disruption unraveled by SAP, there was a significant reduction the capacity utilisation which had remained very low between 32% and 38%, more worryingly the GDP income per capita between this time had collapsed from $778 to $110 in 1989. These unsavoury factors combined created galloping inflation, lower standard of living, and more underdevelopment in a country whose population was growing at 5% a year.

A closer look at SAP also shows a link between its implementation and the rise ethnic militia movements across Nigeria which had emerged through the neglect of government and its plight of its suffering people under the economic difficulty caused by SAP. Many of these social movement assemblies became uniting points for disenfranchised and marginalized masses to combine their power to challenge the state. “This facilitated the advent of political epitaphs like pre-bendal, neo-patrimonia, rentier state classification in Africa”.

Egwu, emphasizing the effects of SAP in Africa clearly suggested that:

“The obligation of neo-liberal macroeconomic restructuring policies which began with the Structural Adjustment Programme in the mid-1980s further reduced the capacity of the African state to deal with the challenges of development and welfare. The costs were the mounting unemployment problem, inflation, and extensive poverty on the continent. The social proportions of Adjustment are well known and detrimental especially in engineering social and political turmoil”.

The disintegration of the Nigerian state in Africa as a direct result of the acceptance and implementation of SAP formed enormous socio-political skirmishes in Africa and especially in Nigeria. The implementation and adoption of deregulation and Privatization which are fundamental values behind the neo-liberal philosophy of SAP, for instance, steadily led to loss of states power of providing basic social and welfare services to its people. Agway, in this viewpoint acknowledged four fundamental effects of SAP on the Nigerian state as:

First, it deteriorated the political, economic and cultural glues that wanted to integrate the different aspects of nation state. “second, it deepened the process of uneven development along ethnic and regional lines, leading to tension and feeling of exclusion at all levels of governance, third, the social division that accompanied the process destabilised the feasibility of the middle class that would have provided a stabilizing force for the state, fourth, it led to the boiling point of ethnic and religious extremism because the loss of social security represented by the state constituted religious and ethnic solidarities to alternative sites of organizing social life”.

The states sudden inability to give its people basic public services and act as a safety net for the most vulnerable in society further exacerbated the situation as there was a growing sense of discontent and oppression among the population against the military regime of Babangida and the total SAP package. More concerningly, “ inflation skyrocketed immediately after the implementation of SAP in July 1986 from 5.4% to a staggering 40.9% in 1989”. The ramifications of this high inflationary trend were vast; first, it affected the structure of Nigeria’s balance of payment which was generated by devaluation of Naira-the nation’s currency. moreover, the removal of crucial social subsidies especially in schools and agriculture had calamitous consequences on students and farmers while the eradication of commodity boards which regulated the prices of goods and services especially agro-allied products led to price downfall as local farmers could not contend with oversees produce. In fact, “with liberalization occasioned by SAP, Nigeria economy was opened and determined by the forces of demand and supply” not its state institutions.

Nigeria’s SAP from a Political economy perspective: Radicalising the Youth

By way of the political economy perspective, SAP established and most certainly institutionalised identity politics with its damaging and exploitive consequences on the state's development. The demise of the economy made the state the only uniting point for resource generation, distribution and accumulation. Unfortunately for the state it was no longer a productive arena but rather for “resource distribution among a select few comprising of the ruling elite, military echelon and the capitalist bourgeoisie”. Jega argues that:

“as manufacturing and productive activities were nearing collapse, Nigerian elite capitalist class gravitated around the state for patronage to source of accumulation through contracts, consultancies and other non-productive services, a situation which has greatly strengthened their compradorial attributes…politicians saw politics as a do or die affair, jettisoning the rule while the personalization of governance became the order of the day…The frugal spending of the military coupled with high inflationary trends made external borrowing inevitable. Through SAP, Nigeria external debt profile rose to an all-time high of over $4.8 billion”.

As Ya’u incisively argues, the economic crisis motivated by the structural Adjustment Programme produced a growing impoverishment of larger and growing sections of Nigerian society mainly the youth. “This impoverishment forced many socially (youth) disadvantaged groups to seek some means of surviving with the situation. Following mass increase in job losses during deregulated education system, there was high cases of youth school drop-out”. This would have detrimental consequences for future Nigerian generations and a perpetuating factor in the poverty cycle. “There was a sharp decrease in number of pupils transitioning from primary to secondary schools and secondary to university”. Removal or substantial cuts to social subsidies gave way to dramatic rise in the price of school fees which forced and gave many poor people no choice but to drop out of schools. Nigeria’s Education budget in 1989 was an abysmal $300 million, just 1.77% of GDP “SAP consequently, shaped an identity crisis in which violent youth gangs emerged and threatened societal peace and security”.

The decline in primary, secondary and higher education enrolment is illustrated in the table above. The lack of funding and government expenditure on education from the years 1985 and 1996 had detrimental effects on Nigerian youth as illiteracy was at a record high at the time structural adjustment which was specifically motivated by the austerity measures within the Nigerian public sector in the hope of reducing the deficit. Hoverer, the technocrats in the IMF overlook the consequences of reducing public services. According to UN estimates over “150 schools were closed and 800 were inadequate or unsuitable for teaching”. Only the elite in Nigerian society who could pay for private education flourished because the Government was advised by IMF and WB officials to invest and develop its privates sector services, which in turn according to them would boost its public sector by trickle down economics, however this approach was extremely flawed and would have serious ramifications for current and future generation of uneducated, unqualified youths.

To further support this argument the case of Yandaba in kano city is a prime example of the consequence of cutting social welfare and education subsides as direct by SAP. The Yandaba, were gangs of unemployed youths who rejected the improvised and poverty-stricken conditions to which their social background has condemned them to and by taking refuge in isolated places, (daba) spent much of their time in petty crimes, hunting, experimentation of drugs and in some cases clearing public spaces. However, with the emergence SAP, Yandaba had been transformed. SAP began certain changes which gave birth to a new violent identity in Yandaba. “The sharp upscale to violence by Yandaba was one of the ways in which SAP engineered social insecurity in Kano city, Nigeria”. The turn to violence was due to severe economic adversity and anguish of its members who needed to survive by any means necessary whether that is through crime. Social mobility for disadvantaged groups was non-existent and this was primarily the cause for a mass immigration exodus from the country in the 1980s, due to the lack of opportunities crated directly as a result of flawed SAP. “Capital flight”, where money was being taken out of the country and stored into offshore savings accounts to save for future investment when the economy would be stable, in addition to this the “brain drain” phenomena also played out because skilled, qualified and highly educated middle classes were struggling to find secure employment and opportunities and there was little incentive from the government who was being “held to ransom by IMF and WB officials to deliver on the SAP or risk losing future funding”, that they were forced to migrate from there native city and country to find opportunities elsewhere, primarily in Europe. This would also have serious consequences for Nigeria’s future development as “no country can advance economically without a strong middle class”.

Mass unemployment and Industrial action under SAP

Mass cost-cutting in government social security and welfare spending which was articulated under SAP, made many poor and vulnerable families unable to fend for and provide for their children. Therefore, criminal youth-dominated gangs like the Yandaba sprung up all over troubled and deprived provinces in the country and became a ready avenue to captivate the latent frustration and energy of these troubled youths. Other than the Yandaba in the North, the Egbesu boys and Area Boys in Lagos and other cities in South Western Nigeria sprang up and became more violent-driven. In Lagos, Area Boys engaged in violent criminal activities such as broad daylight theft, armed robbery and terrorizing civilians. “The rise in the phenomenon of militia movement in Nigeria gained prolificacy as from the 1980s through the 1990s because of the harsh economic situation orchestrated by the adoption of neo-liberal economic policies of SAP”. It would not be farfetched to say the violent terrorist group Boko Haram is a product of economic neglect, mismanagement and alienation which had its roots in the impoverished and hard-hit region Borno, northwester Nigeria which still has its remnants of failed adjustment policy and still to this day is a troubled region.

As can be seen from the table above, from the year 1987 unemployment hit a record high under the supervision of SAP. The unemployed in Nigerian society were condemned to a life of poverty and crime because as mentioned already SAP led austerity meant the Government could not provide social security for unemployed individuals which meant millions of families were in abject poverty. The link between youth violence and a dramatic rise in crime is elucidated when viewing these figures because economic failings led to societal turmoil.

From the perspective of the industrial sector, SAP acceptance and execution in Nigeria caused fierce trade disputes mainly against the numerous Labour organisations and Unions in Nigeria. “Organized labour largely responded against SAP and all it stood for by using its grievance weapons and other available subtle strategies, such as strike action, public enlightenment rallies and demonstrations” (Nwabugo,2011,p7). Therefore, affiliates of both labour and trade unions such as the influential Nigeria Labour Congress (NLC), National Association of Nigeria Students (NANS), Academic Staff Union of Universities (ASUU), and Trade Union Congress (TUC) amongst others determinedly resisted SAP reform policies in Nigeria(Nwabugo,2011). Their rational for their resistance was due to severe economic policies tied with rising job losses arising from cost-cutting and redundancy of workers in government and public sectors, increasing cost of goods and the stifling of freedom by the military regime which the IMF and WB turned a blind eye to. Students' discontent coupled with ASUU strike in many parts of the country disturbed academic activities in many universities in Nigeria. (Nwabugo,2011)

To illustrate this in 1982 the total number of trade disputes was 341, out of which 253 led to strikes. However, between 1986 and 1993, the amount of strikes tripled even as the military regime strengthened its survivalist strategies by prohibiting labour unions and arresting union members. The table above illustrations the amount and dynamic of labour strikes and disputes taking into consideration the amount of employees involved and days gone.

Exploitation by Multi-national corporations under SAP

Under the structural adjustment polices which had been extended by another four years to 1990 after IMF officials insisted the Government should “emphasis greater trade liberalisation and focus on attracting more FDI” to feel the economic benefits. However, in the pursuit of attracting FDI, the Nigerian Government felt compelled to reduce corporate tax levels. Nigeria, like many developing countries were participating in what Paul Collier refers to as the “race to the bottom theory”, this meant states would prematurely liberalise and financially deregulate their markets to lure in trade and capital investment. However the consequences of adopting a low tax policy meant large multi-national corporation would become dominant actors in state affairs and would want the Government to prioritise there needs over their people.

In 1989 the Nigerian government announced a fresh round of oil field licensing contracts, the biggest since the early 1960s. Non-violent opposition to the oil companies by the Ogoni people in the early 1990s over the contamination of their land and lack of financial benefit from the oil revenues attracted international attention.

Multinationals have taken advantage of the situation, even reverting to over-invoicing in certain instances. Economist C. V. Vaitos examined the basis of profit among multinational corporations in Columbia's pharmaceutical industry and found that multinationals defined effective returns to the parent company as the sum of reported profits of the subsidiary, royalty payments and intermediate products overpricing.3 The reported profit of a sample of the industry constituted 3.4% of declared profits, royalties 14.0%, and overpricing 82.6%. In 1990, the World Bank also reported deliberate overpricing deals in steel imported by African nations from Europe over a 26-year period, leading to capital flight estimated to be over 12 billion naira.

Conclusion

In conclusion, the Structural Adjustment Program implemented in Nigeria was intended to solve the country's economic problems, but it failed to produce the desired results. Instead, it exacerbated existing economic issues, leading to the loss of jobs, decreased productivity, and social unrest. The removal of government subsidies and privatization of public enterprises caused significant harm to the agricultural and manufacturing sectors, resulting in decreased profitability and increased unemployment. Furthermore, the implementation of SAP led to the emergence of ethnic militia movements and political turmoil in the country. The negative impact of SAP has been widely recognized, and it serves as a cautionary tale for policymakers on the consequences of implementing economic policies without considering their social and political implications.