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Nigeria Structural Adjustment
Under World Bank structural adjustment, the government
tried
to eliminate inefficient state intervention and obtain
budgetary
relief by abolishing agricultural commodity marketing
boards and
liberalizing cash-crop exports. These measures, together
with
devaluation, increased the naira prices of export crops,
especially cocoa. The state also privatized many public
enterprises by selling equity to private investors, while
restructuring other parastatals to improve efficiency. The
federal government encouraged private investment in the
late
1980s, allowed foreign ownership in most manufacturing,
and
liberalized and accelerated administrative procedures for
new
investment.
The Babangida government, which came to power in August
1985
at a time of depressed oil prices, undertook its
structural
adjustment program between 1986 and 1988. In September
1986, the
government introduced a second-tier foreign exchange
market
(SFEM), sold on auction for a near equilibrium price and
used for
export earnings and import trade requirements. Under SFEM,
the
naira depreciated 66 percent to N1=US$0.64 (N1.56=US$1),
and
declined further in value through July 1987, when the
first and
second tiers were merged. When adopting the SFEM, Nigeria
abolished the ex-factory price controls set by the Prices,
Productivity, and Incomes Board, as well as the 30 percent
import
surcharge and import licensing system. It reduced its
import
prohibition list substantially and promoted exports
through
fiscal and credit incentives and by allowing those selling
abroad
to retain foreign currency. Although this action opened
the way
for an IMF agreement and debt rescheduling, the military
government declined to use an allocation of
Special Drawing Rights (see Glossary)
in IMF standby funds.
Meanwhile, the naira continued depreciating, especially
after
the relaxation of fiscal policy early in 1988. The effect
of the
SFEM in breaking bottlenecks, together with the slowing of
food
price increases, dampened inflation in 1986, but the
easing of
domestic restrictions in 1988 reignited it. Real interest
rates
were negative, and capital flight and speculative imports
resumed. In 1989 the government again unified foreign
exchange
markets, depreciating--but not stabilizing--the naira and
reducing the external deficit. Manufacturing firms
increased
their reliance on local inputs and raw materials, firms
depending
on domestic resources grew rapidly, and capacity
utilization
rose, although it was still below 50 percent.
Concurrently,
nonoil exports grew from US$200 million in 1986 to
US$1,000
million in 1988. This amount, however, represented only 13
percent of export value at the level of the 1970s, and
cash crops
like cocoa dominated the export market. Large firms
benefited
from the foreign exchange auction and enjoyed higher
capacity use
than smaller ones. Despite dramatically reduced labor
costs,
domestic industrial firms undertook little investment or
technological improvements.
Structural adjustment was accompanied by falling real
wages,
the redistribution of income from urban to rural areas,
and
reduced health, education, and social spending. The
decrease in
spending on social programs contributed to often
vociferous
domestic unrest, such as Muslim-Christian riots in Kaduna
State
in March 1987, urban rioting in April 1988 in response to
reduced
gasoline subsidies, student-led violence in opposition to
government economic policies in May and June 1989, and the
second
coup attempt against General Babangida in April 1990.
* * *
Current reliable information on the Nigerian economy is
scarce. Central Bank of Nigeria periodicals, Annual
Report and
Statement of Accounts, Economic and Financial
Review,
the Economist Intelligence Unit's annual Country
Profile, and irregularly issued Office of Statistics
publications are the major sources, but income and
employment
statistics are subject to a wide margin of error. The
World
Bank's annual World Development Report and frequent
studies on sub-Saharan Africa include Nigerian statistics.
African Business, Financial Times, West
Africa, Africa Research Bulletin (Economic
Series),
and Africa Report include informative articles on
the
economy. Pius N.C. Okigbo's National Development
Planning in
Nigeria is an excellent update. (For further
information and
complete citations,
see
Bibliography.)
Data as of June 1991
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