By the early 1980s, Nigeria’s once-thriving economy, buoyed by the oil boom of the 1970s, had entered deep crisis. The global fall in oil prices from 1981 sharply reduced national revenues. The country, heavily dependent on oil exports for foreign exchange, faced spiralling inflation, mounting foreign debt, and declining industrial production.
Government spending had expanded dramatically during the oil boom years, financing large-scale projects and imports while neglecting agriculture and manufacturing. When the oil market collapsed, Nigeria found itself unable to sustain the inflated public sector or service its growing debts.
It was against this background that the Structural Adjustment Programme (SAP) was introduced in July 1986 by the military regime of General Ibrahim Babangida. The policy was supported by the World Bank and influenced by International Monetary Fund (IMF) economic prescriptions, although Nigeria did not accept an IMF loan directly.
Objectives and Policy Framework
SAP aimed to correct structural distortions in the Nigerian economy and to promote growth based on market principles rather than state control. Its principal goals were to:
- Diversify the economy away from oil dependency.
- Achieve fiscal and balance of payments stability.
- Encourage private sector-led growth.
- Restructure trade policies and reduce import dependence.
- Reform the exchange rate system and remove subsidies.
To meet these objectives, several policy measures were implemented between 1986 and 1993:
- Exchange Rate Reform:
The Second-Tier Foreign Exchange Market (SFEM) was established in 1986 to allow the naira to find its market value. This led to a sharp devaluation intended to encourage exports and reduce imports. - Trade Liberalisation:
The government removed import licences, reduced tariffs, and opened the economy to global trade. - Privatisation and Commercialisation:
Under the Technical Committee on Privatisation and Commercialisation (TCPC), chaired by Dr. Hamza Zayyad, state-owned enterprises were either sold or restructured to reduce government expenditure. - Subsidy Reduction and Fiscal Austerity:
Subsidies on petroleum products and agricultural inputs were scaled back, while government spending on social services was significantly reduced. - Agricultural and Industrial Reform:
Programmes such as the Directorate for Food, Roads and Rural Infrastructure (DFRRI) and the Better Life Programme sought to revitalise rural production and encourage small-scale enterprise.
While these measures were meant to restore fiscal discipline, they also created widespread economic hardship.
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Economic Effects
In the initial years, SAP produced limited macroeconomic improvements. Nigeria’s balance of payments temporarily improved, and non-oil exports such as cocoa, palm produce, and rubber recorded slight growth between 1987 and 1989.
However, the devaluation of the naira caused severe inflation. The exchange rate fell from ₦1 to the US dollar in 1985 to nearly ₦8 by 1989. Import costs rose sharply, leading to price hikes in basic commodities and industrial inputs. Many manufacturing firms that relied on imported machinery could not cope with the higher costs and shut down.
Industrial output dropped significantly, and the hoped-for diversification of exports did not materialise. Instead, Nigeria became more dependent on oil revenues, as global demand for non-oil exports remained low.
Social and Labour Impact
The social consequences of SAP were far-reaching. As subsidies were removed and wages stagnated, living standards declined sharply. The cost of fuel, food, and transport rose, and urban households struggled to maintain purchasing power.
Public sector retrenchments increased unemployment. The education and healthcare systems, once heavily subsidised, suffered severe funding cuts. A 1989 Nigerian Institute of Social and Economic Research (NISER) report observed a rapid rise in poverty levels, especially in rural communities that lacked safety nets.
The austerity measures provoked mass protests. The Nigeria Labour Congress (NLC) led strikes in 1988 and 1989, demanding wage reviews and reinstatement of subsidies. Student movements also mobilised against what they termed “foreign-imposed” policies.
The government’s response alternated between repression and partial concessions, such as modest wage increases. However, public trust in the Babangida administration declined sharply as the human cost of SAP became evident.
Structural and Colonial Influences
The SAP reforms cannot be fully understood without recognising the colonial economic structure that Nigeria inherited. British colonialism had entrenched an export-based economy focused on primary commodities and dependent on external markets and capital.
After independence in 1960, Nigeria pursued import substitution industrialisation, which relied heavily on imported machinery and foreign expertise. The oil boom of the 1970s deepened this dependency, as easy oil revenue encouraged excessive imports and public sector expansion.
When oil prices crashed, the state’s fiscal structure proved unsustainable. SAP thus represented a shift from state-led development to market-oriented reform, aligning Nigeria with global neoliberal trends.
However, Nigerian scholars such as Claude Ake and Ojetunji Aboyade criticised SAP as externally driven and ill-suited to Nigeria’s social and economic realities. They argued that the programme ignored structural inequities, weak infrastructure, and the absence of industrial capacity needed to benefit from liberalisation.
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Political Reactions and Public Perception
Politically, SAP became a defining factor in public opposition to military rule. The government’s adherence to IMF-style prescriptions was perceived as surrendering national sovereignty. Labour unions, students, and professional groups formed alliances to resist economic hardship and political authoritarianism.
The social unrest of the late 1980s fed into the pro-democracy movements of the early 1990s, which eventually challenged the Babangida regime. The SAP era, therefore, was not merely an economic experiment, it was also a period of political awakening and civic resistance.
Long-Term Legacy
The long-term consequences of SAP were mixed. On the one hand, it introduced fiscal discipline and established a foundation for later economic liberalisation policies, such as the National Economic Empowerment and Development Strategy (NEEDS) of the 2000s.
On the other hand, SAP eroded public confidence in the state, deepened inequality, and entrenched poverty. By the early 1990s, according to the World Bank (1995 Nigeria Poverty Assessment), nearly 45% of Nigerians lived below the poverty line, an increase from 27% before SAP.
Although privatisation continued into the democratic era, transparency and accountability remained weak. Many state enterprises were sold at undervalued prices, benefiting a small elite rather than the broader public.
The structural imbalances SAP sought to correct, overreliance on oil, weak manufacturing, and poor social infrastructure, persist to this day. Nigeria’s ongoing debates on subsidy removal, currency reform, and economic diversification reflect unresolved tensions dating back to the SAP reforms of the 1980s.
The Structural Adjustment Programme stands as a watershed in Nigeria’s postcolonial economic history. It marked the transition from state-controlled economics to a liberal market system, but at immense social cost.
While SAP was intended to stabilise and diversify the economy, its design and execution failed to protect vulnerable populations. Instead, it widened inequality and eroded living standards, setting in motion challenges that continue to shape Nigeria’s socio-economic trajectory.
Its lessons remain vital today: sustainable economic reform must balance fiscal prudence with social justice and institutional accountability.
Author’s Note
This article presents a historically account of the Structural Adjustment Programme in Nigeria, tracing its origins, policy framework, and long-term effects. It highlights how an externally influenced economic reform reshaped Nigeria’s economy, deepened social inequality, and altered the course of national politics. The SAP experience remains a critical reference point in evaluating current economic reforms.
References
- Nigerian Institute of Social and Economic Research (NISER). Social and Economic Impact of the Structural Adjustment Programme in Nigeria. Ibadan: NISER Publications, 1989.
- World Bank. Nigeria: Poverty Assessment. Washington D.C.: World Bank Publications, 1995.
- Paul Collier. Labour and Poverty in Rural Tanzania and Nigeria. Oxford: Clarendon Press, 1988.
