On 1 October 1979, Nigeria formally returned to civilian government when the military administration led by Olusegun Obasanjo transferred power to President Shehu Shagari. The transition inaugurated the Second Republic under a presidential constitutional system. For many Nigerians, it marked a fresh beginning after years of military dominance that had begun in 1966.
The new administration assumed office at a time when Nigeria’s economy remained deeply tied to petroleum exports. Throughout the 1970s oil boom, rising crude prices and strong global demand had transformed public finance. Federal revenues increased sharply, public expenditure expanded, and large scale infrastructure projects were launched. The economy increasingly relied on oil earnings to finance imports, public sector wages, and capital development.
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Oil Revenue Decline and Economic Pressure
Beginning in 1981, global oil conditions shifted. Demand weakened and prices declined. Nigeria’s oil export earnings fell accordingly, reducing the foreign exchange available to finance imports and service external obligations.
The impact was swift. Foreign exchange reserves declined significantly as export receipts contracted while import commitments remained high. The pressure on the balance of payments intensified, forcing policymakers to confront an economy structured around high oil income that was no longer guaranteed.
As reserves tightened, the government introduced measures aimed at conserving foreign exchange. Administrative controls were expanded, import licensing became more restrictive, and spending limits were imposed in April 1982 as part of efforts to manage dwindling reserves.
The Economic Stabilization Act of 1982
The Economic Stabilization Act of 1982 became a central element of the government’s response. The Act sought to curb expenditure, reduce import demand, and stabilize the economy amid declining oil revenue. Import restrictions and foreign exchange controls were strengthened in an attempt to reduce pressure on external accounts.
These measures reflected the scale of adjustment required. During the oil boom years, public expectations and government commitments had expanded significantly. Cutting expenditure in a downturn required difficult decisions at federal and state levels, particularly in a newly restored democratic environment where political competition was active.
Rising External Debt
As oil revenues declined and foreign exchange remained constrained, Nigeria increased its reliance on external borrowing. Between 1980 and 1983, the country’s external debt stock rose substantially. Borrowing was used to help finance obligations and manage short term imbalances created by falling export earnings.
This rise in debt occurred alongside austerity measures rather than in place of them. The government pursued a combination of expenditure controls, import restrictions, and additional borrowing as it attempted to navigate the downturn. Nevertheless, the pace of debt accumulation added to fiscal pressure in an already strained environment.
Economic Strain and Everyday Impact
Foreign exchange restrictions and import compression affected businesses and consumers alike. When import dependent sectors struggled to access foreign currency, production and supply chains were disrupted. Scarcity of certain goods increased, and prices rose in several areas.
The oil driven growth model of the 1970s had supported an import oriented consumption pattern. When oil income fell and foreign exchange tightened, adjustment proved disruptive. Administrative controls could ration scarce resources, but they did not immediately generate alternative export earnings or diversify the economic base.
The 1983 Elections and Political Tension
Economic strain coincided with mounting political tension. The general elections held in August and September 1983 became highly contentious. President Shagari was declared re elected, but opposition parties alleged serious irregularities. The political atmosphere grew increasingly polarized in the months that followed.
Disputes over electoral conduct, combined with economic hardship, deepened uncertainty. In a country with a history of military intervention, the combination of contested politics and economic difficulty created an unstable climate.
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31 December 1983, The Military Returns
On 31 December 1983, the armed forces overthrew the Shagari administration. Major General Muhammadu Buhari assumed power as head of state. The coup brought an end to the Second Republic after just over four years of civilian governance.
The period from 1979 to 1983 therefore traced a clear arc. Nigeria returned to democratic rule with high expectations, faced a sharp oil revenue decline beginning in 1981, experienced foreign exchange stress and austerity measures in 1982, saw external debt rise significantly, and entered a phase of intense political contestation in 1983 before the military takeover.
Author’s Note
The story of Nigeria’s Second Republic is not only about elections or oil prices, but about how closely economic stability and political survival can be linked. A nation that returned to civilian rule in 1979 found itself confronting a global oil downturn, shrinking foreign exchange, difficult austerity choices, rising debt, and fierce political competition. By the last day of 1983, those pressures had converged, closing one democratic chapter and opening another era of military rule, a reminder that economic shocks can test even the strongest political transitions.
References
Library of Congress, Nigeria: A Country Study, Second Republic and economic conditions sections.
Central Intelligence Agency, Nigeria: Implications of the Oil Slump, declassified assessment, 1982.
World Bank, World Development Indicators, “External debt stocks, total, Nigeria.”
