Ibrahim Badamasi Babangida assumed power on 27 August 1985, inheriting a balance-of-payments crisis, falling oil receipts, and mounting public debt. In 1986, his government launched a Structural Adjustment Programme (SAP) intended to stabilise macroeconomic fundamentals, liberalise trade and exchange-rate systems, commercialise and privatise state enterprises, and reduce fiscal deficits.
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The package combined internationally promoted reform prescriptions with domestically framed instruments. Nigeria sought multilateral support and advice, while also creating local mechanisms such as the Second-Tier Foreign Exchange Market (SFEM) to manage currency behaviour and establish a market-clearing naira rate.
Design and Instruments
SAP encompassed a broad set of policy tools. Principal elements included exchange-rate liberalisation and managed devaluation to restore external competitiveness, removal of subsidies (notably on petroleum products), dismantling import-licensing regimes, and tariff reform to open the economy.
The government launched the privatisation and commercialisation of loss-making public enterprises to reduce the fiscal burden. In 1988, it established the Technical Committee on Privatisation and Commercialisation (TCPC) to design and direct the sale and restructuring of public firms, creating a clear legal and institutional framework for the process.
The Central Bank and the Federal Treasury reinforced these reforms by managing the Second-Tier Foreign Exchange Market (SFEM) and coordinating related foreign-exchange policies that supported the programme’s financial objectives.
Economic Effects
SAP achieved some macroeconomic objectives: a more flexible exchange-rate regime was established, and Nigeria qualified for multilateral credit lines tied to reform performance.
However, trade liberalisation and currency depreciation exposed domestic manufacturers to intense foreign competition. The removal of subsidies and a weaker naira also pushed up prices for fuel, food, and industrial inputs.
Academic studies and central-bank analyses record a sharp rise in inflation after 1986 and reductions in industrial capacity utilisation, producing real hardship for many households and workers. In short, SAP eased certain balance-of-payments pressures but produced contractionary effects and inflationary shocks.
Social Response and Cushioning Measures
The Babangida administration introduced several social and infrastructure programmes as cushioning measures: rural-focused projects implemented through the Directorate for Food, Roads and Rural Infrastructure (DFRRI), graduate employment schemes, and targeted welfare initiatives aimed to blunt the impact of price rises.
Implementation, however, was frequently hampered by weak administrative capacity, limited finances, and corruption. Scholarly reviews of the period conclude that such measures were inadequate in scale and effectiveness.
Mass protests and strikes, especially those led by students and organised labour in the late 1980s, reflected deep popular resistance to austerity and liberalisation policies.
Governance, Privatisation and Political Cost
Privatisation proceeded, but unevenly. Some divestitures improved firm performance, while others generated allegations of insider advantage and opaque sales processes.
Politically, the regime sought to manage a transition back to civilian rule while maintaining elite control. Government-sanctioned political structures and a staged election calendar were introduced.
The political cost of economic adjustment became evident in the annulment of the 12 June 1993 presidential election. The cancellation of what many observers considered a free and credible poll produced a legitimacy crisis, widespread protests, and elite fragmentation that forced Babangida to relinquish power later that year.
The episode demonstrated that economic reform conducted without credible political arrangements and transparent processes is inherently destabilising.
Long-Term Legacy
SAP introduced key reform tools, exchange-rate flexibility, trade liberalisation, and privatisation, which later governments continued to apply in their economic strategies.
However, the programme also created a lasting memory of hardship. It produced inflation, unemployment, and widespread distrust of future market-oriented reforms, especially when leaders proposed subsidy removals or sharp currency devaluations.
This period clearly demonstrated that successful structural reform demands strong administrative capacity, transparent governance, and sufficient social protection to limit inequality and unrest. The 1993 political crisis showed how economic technocrats, once detached from public accountability, could not sustain legitimacy.
Author’s Note
Babangida’s Structural Adjustment Programme modernised policy instruments and corrected some macroeconomic imbalances. Yet it also produced severe short-term social pain and political backlash. Implemented in a constrained institutional environment and with inadequate mitigating programmes, SAP deepened hardship and undermined public confidence. The experience revealed both the potential and peril of economic reform in the absence of political inclusiveness.
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References
World Bank. Nigeria Structural Adjustment Program: Policies, Implementation and Impact.
Central Bank of Nigeria (CBN). History of Foreign Exchange Management and SFEM.
Bureau of Public Enterprises (BPE). Origins of the Technical Committee on Privatisation and Commercialisation (TCPC), 1988.
Falola, Toyin, and Matthew Heaton. A History of Nigeria. Cambridge University Press, 2008.
Olukoshi, Adebayo O. Crisis and Adjustment in the Nigerian Economy. Review of African Political Economy, 1990.
