There are those who argued then, even till date, that the SAP was the only remedy for us at that time; but for me, SAP was more destructive than the June 12, 1993 annulment. It was a venom. An economic toxin. One day I expect General Babangida to fully explain to us why he adopted SAP. Greece is the latest victim of the SAP dose. The same with Jamaica.
On getting to power on August 28, 1985, General Ibrahim Babangida told the nation that “the last twenty months have not witnessed any significant changes in the national economy. Contrary to expectations, we have so far been subjected to a steady deterioration in the general standard of living; and intolerable suffering by the ordinary Nigerians have risen higher, scarcity of commodities has increased, hospitals still remain mere consulting clinics, while educational institutions are on the brink of decay. Unemployment has stretched to critical dimensions. Due to the stalemate, which arose in negotiation with the International Monetary Fund, the former government embarked on a series of counter-trade agreements, Nigerians were forced to buy goods and commodities at higher prices than obtained in the international market. The government intends to review the whole issue of counter-trade. A lot has been said and heard about our position with the International Monetary Fund. Although we formally applied to the Fund in April 1983, no progress has as yet been made in the negotiation and a stalemate has existed for the last two years. We shall break the deadlock.” We were all very happy about the assurances.
While swearing in the new governors on September 2, 1985, General Babangida hinted that the IMF loan issue would be thrown open for debate. He then appointed Dr. Kalu Idika Kalu, from Ebem, Ohafia in Imo State, who was an economist from the World Bank as minister of finance. Dr Kalu had earlier served as commissioner of finance under the then governor of Imo State, Brigadier General (rtd) Ike Omar Sanda Nwachukwu. At the time General Babangida took over, 44 per cent of our revenue was utilised in servicing debts. On September 25, 1985, President Babangida inaugurated the Presidential Committee on the IMF Loan, with Professor Ojetunji Aboyade (December 9, 1931 – December 31, 1989) as chairman. He hailed from Awe in Oyo State, and served as vice chancellor, University of Ife (now Obafemi Awolowo University) between 1975 and 1978. The Committee had inputs from the then permanent secretary, Ministry of Finance, Alhaji Abubakar Alhaji from Sokoto, Dr. Chu S.P. Okongwu from Enugu, who was then appointed minister for national planning and Chief Samuel Oluyemi Falae from Akure, who was the secretary to the government of the federation. The Committee submitted its report on December 3, 1985. As far back as 1971, Alhaji Abubakar Alhaji was the executive director of Africa Development Bank and since 1990, he has been the Sardauna of Sokoto. At present, his daughter Aisha Abubakar is the minister for women affairs. Chief Falae is a product of Yale University, where he majored in Economics. Dr. Okongwu is a product of Harvard University, Massachusetts. He once worked in the World Bank, and wrote a book titled, The Eleemosynary of Traumatic Nigeria Economy. With his failing health and poor financial purse, like most Nigerians, the last time we heard from Dr. Okongwu was when he paid tribute to the former group executive director, commercial and investment of the Nigerian National Petroleum Corporation (NNPC), Reverend Benson Ilesanmi Omamukuyo on his 70th birthday on August 11 this year.
On December 12, 1985, General Babangida made a broadcast to the nation, he said, “After due consideration of all the opinions expressed by Nigerians and other residents as embodied in the Interim Report on the IMF loan, government has come to the conclusion that for now the part of honour and the essence of democratic patriotism lies in discontinuing the negotiations with IMF for a support loan. This is clearly the will of majority of our people on the issue. We have therefore decided to face the challenge of restructuring our economy not through an IMF loan, but a determination of our people to make all the sacrifices necessary to put the economy on the path of sustained growth; doing so at own pace and on our own volition.”
In retrospect, SAP was like poison. It created social problems throughout the country and the devaluation kept going on and on. On July 2, 1987, General Babangida was forced to merge the first and second tier exchange markets.
On July 6, 1986, General Babangida introduced Structural Adjustment Programme (SAP). A regime that rejected the IMF loan adopted the Structural Adjustment Programme. Till today, I can’t seem to understand the rationale for that action. For, SAP consist of loans provided by the International Monetary Fund (IMF) and the World Bank (WB) to countries that were experiencing economic crises. The programme was supposed to allow the economies of the developing countries to become more market oriented. This then forced them to concentrate more on trade and production, so as to boost their economies. Through conditions, the countries were made to generally implement “free market” programmes and policies. SAP included internal changes (notably privitisation and deregulation), as well as external ones, especially the reduction of trade barriers. Countries that fail to enact these programmes could be subjected to severe fiscal discipline at that time. Critics argued that the financial threats to poor countries involved amounted to blackmail, and that poor nations had no choice but to comply to these.
On September 29, 1986, General Babangida introduced the second-tier foreign exchange market. And suddenly we woke up to realise that our currency, the naira, had been devalued by about 500 per cent. We are yet to recover from the effect of SAP till date.
In retrospect, SAP was like poison. It created social problems throughout the country and the devaluation kept going on and on. On July 2, 1987, General Babangida was forced to merge the first and second tier exchange markets.
On February 28, 1989, General Babangida kicked off the debt conversion programme with Nigerian promissory notes being discounted at 36 per cent. He later abolished the autonomous market and dropped the Dutch auction system of bidding. Because the dollar had become scarce to come by at that time, Babangida had to merge the foreign exchange and autonomous markets on January 9, 1989
On July 27, 1992, General Babangida addressed members of the National Assembly-elect in Abuja.
He said: “At the root of all those related economic and financial problems is government’s inability to cater both for its minimum social agenda at home, as well as service (not to say, settle part of the principal) the nation’s external indebtedness. The stock of our external debt is now about $34 billion; and the debt service load for 1992 alone is about $3.5 billion. In financing that debt service load, there remains the problems of the availability of foreign exchange and then those of the budgetary provision for the naira in relation to available resources. Government’s policy of placing an upper limit of 30 per cent of the official foreign exchange receipts for external debt service only buys time and further postpones the compounded hardships. It is therefore not surprising that the problem of debt service has given rise directly and indirectly to persistent budget deficit, despite government’s determined effort to work towards a balanced budget”.
The counter-argument is simple: If SAP is the best remedy to economic engineering, why did the G8 countries not adopt it? It reminds me of a 361 page book titled, How Europe Underdeveloped Africa, written by Walter Rodney, with an introduction by Vincent Harding. It is a must read book.
After eight years in power, General Babangida handed over to Chief Earnest Adegunle Oladeinde Shonekan on August 26, 1993. He met the naira at an exchange rate of N2 to US$1 but left it at the official rate of N19 to US$1. It was worse than that in the black market, no thanks to SAP and those who introduced it to General Babangida. The major voice against SAP at that time was General Olusegun Obasanjo (rtd.), who attacked the programme as “lacking human face”, and he was quickly rebuked by the then military governor of Lagos State, Captain Mike Okhai Akhigbe (1946-2013) from Fugar in Etsako central local government area of the present Edo State.
There are those who argued then, even till date, that the SAP was the only remedy for us at that time; but for me, SAP was more destructive than the June 12, 1993 annulment. It was a venom. An economic toxin. One day I expect General Babangida to fully explain to us why he adopted SAP. Greece is the latest victim of the SAP dose. The same with Jamaica. The counter-argument is simple: If SAP is the best remedy to economic engineering, why did the G8 countries not adopt it? It reminds me of a 361 page book titled, How Europe Underdeveloped Africa, written by Walter Rodney, with an introduction by Vincent Harding. It is a must read book.
Eric Teniola, a former director in the Presidency, writes from Lagos.
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