Table of contents

• Editorial

• Impact of The  Structural Adjustment Program on the Nigerian Economy- S.A. Obansa

• Ehiedu Iweriebor's Nigerian Technology Development Since Independence:   A Review

 Editorial

       S. A. Obansa observes that Nigeria developed a serious debt crisis about two decades after her independence in 1960. This was due to decline in her external reserves as a result of worsening terms of trade against her primary agricultural products, her major exports. This has resulted in the widening gap between revenue and expenditure, acute shortage of basic consumer goods and drastic fall in the living standard of the people. In the light of these problems, Nigeria was forced to adjust her way of life if she was to attract World Bank and other International donor agencies. This gave birth to  the Structural Adjustment Programme (SAP) in 1986 under the  Babangida administration with the support of the International Monetary Fund (IMF) and other donors.

           SAP was meant to pay attention to export generation, especially in the agricultural sector, maintain macroeconomic stability, prevent an overvalued exchange rate, alter and restructure the consumption and production patternof the economy, limit price distortion and heavy dependence on the export of crude oil, and curtail the import of consumer goods.  However, SAP failed to address most of these economic problems. The external debts kept swelling up, the fiscal gap widened more than ever, and the objectives of price stability, economic growth, full employment and balance of payment equilibrium became a mere mirage. In his article, S.A Obansa explores these issues and gives a number of suggestions. We also include in this issue of Africa Update, a review of  Ehiedu Iweriebor's  Nigerian Technology Since Independence: The State of Development  and the Strategy of Transformation, Ibadan: Book Builders, 2004. 

Dr.Joseph Ohiare, Professor of History, University of Abuja,Nigeria.

Guest Editor

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IMPACT OF THE STRUCTURAL ADJUSTMENT PROGRAMME (SAP) ON NIGERIA'S ECONOMY,  S.A Obansa, Department of Economics, University of Abuja, Nigeria

INTRODUCTION

     With her vast mineral endowment, particularly petroleum resources at independence in 1960, many people believed Nigeria would attain a rapid economic development, and national transformation within the shortest possible time. Sadly, this projection has not only remained an unfulfilled dream, but it is becoming a fleeting illusion.

         As industrialization and trade in manufacturing become powerful engines of growth, the private entrepreneurs, including foreign investors, have shown slow response to these areas of crucial development. Unlike some Asians, Nigerians were unable to take advantage of the expansion witnessed in the volume of world trade in the past two decades and

participate in the construction of the national economy. It depended, instead, on traditional primary products, whose terms of trade kept deteriorating. This led eventually to a decisive resource gap in the Nigerian economy, a nation with pronounced structural rigidities.

            Given the prevailing severe political and economic situation in Nigeria, namely, a heavy foreign debt overhang, a fast-growing population, poor information network, lack of skilled labor, low inflow of foreign direct investment, low saving and investment ratios, worsening terms of trade of commodities and over reliance on petroleum mono-product or monoculture, she could not have performed better.                                                                         

               In an attempt to achieve export led growth, Nigeria has initiated policy reforms, including trade liberalization, to change her industrialization strategy from import substitution to an export orientation.

            Olu Falae (1999) justified the introduction of SAP as an attempt to revive the nation's economy and free Nigerian farmers and businessmen from the tyranny and oppression of both the marketing board and bureaucrats in the ministry of trade who, fleeced Nigerians through racketeering in import license. It is quite unclear whether Nigeria indeed took advantage of her geographical position and historical legacy to make success of the mission of SAP of export orientation and open door policies.

NIGERIAN ECONOMIC CRISIS IN PERSPECTIVE

            The Nigerian economy witnessed a major debt crisis from the early 1980s, the most serious in its history since its incorporation into the world capitalist system at the turn of the century. As with other third world countries, the nation's debt crisis is part of a wider crisis of accumulation which  resulted in a marked deterioration in the aggregate performance of the productive sectors of the economy, a chronic balance of payment deficit, a yearning gap between government revenue and expenditure, the collapse of social services and infrastructure, an escalating level of inflation, an acute shortage of basic consumer goods, and a  drastic decline in living standards and external assets.

            No doubt, the debt crisis of the 1980s was not the first in the nation's history. Indeed, at independence, Nigeria's external debt was N82.4 million which  increased to N435.2 million in 1965, and  N489 million in 1970.  (Bangura  1987.

            The oil boom of the1970s brought the country sufficient foreign exchange earnings, which enabled her meet her obligations. The enhanced inflow of foreign reserves from oil exports encourages the expansion in government expenditure on capital-intensive projects with huge import outlays. Such projects included the Ajaokuta Steel Complex. Agriculture was neglected while little attention was given to backward integration in the manufacturing sector of the economy.

            This trend was however undermined by the oil glut, which began in 1978,when Nigeria's revenue from the oil sector declined until it became expedient to borrow to bridge the domestic resource gap, support balance of payments and finance project that will accelerate economic development. Consequently, the favorable external sector position gave way to intense pressures from 1981. According to Ojo (1997), since 1981, the balance of payments remained in persistent and increasing deficits, averaging N1184.6 million in 1980-1985 and N47, 432.6 million in 1986-1996.

 WHY NIGERIA HAD TO ADJUST

The World Bank Policy Research Report (1995) painted a trenchant

picture of Africa's economic performance vis-�-vis other parts of the

globe. It stated that in 1965, Indonesia's GDP per capita was lower than

 Nigeria's, and Thailand's lower than Ghana's. Indonesia relied on oil,

 as much as Nigeria and Thailand, much like Ghana was a poor agricultural

country. It was unimaginable then to think that in 1990 Indonesia's GDP

would be three times that of Nigeria's or would anyone have believed

that Thailand would become one of the world's best performing economies,

 while Ghana would be struggling to regain its former income level.

         Few areas of economic activity were exempted from the observed stagnation and decline. After healthy increases in exports in 1970s, the growth slowed � and then plunged into negative levels between 1981 and 1986. Even agricultural exports slipped, from a previous healthy position to a dismal  one in the 1980s. The nation also lost ground in its exports of ores and minerals. Only  in oil did Nigeria improve its export share. Curiously, Nigeria failed to diversify her export base but continued to rely heavily on oil exports, because of the easy cash it generated. By the mid 1980s, symptoms of the economic malaise were evident almost everywhere. Nigeria was in recession.  The returns to World Bank and other donor agencies' investment projects were very low in Nigeria, and many of these projects failed to generate a positive rate of return. The physical infrastructure, already poor, deteriorated from lack of maintenance, and the quality of government services suffered; health and education indicators though quantitatively increasing, their quality fell below the minimum accepted global standards. Clearly, it was time for the Nigerian economy to begin an adjustment. Many reasons are responsible for the problems, nature and structure of the Nigerian economy. They are summarized as follows:  A narrow and technically backward production base.

�                    Economic and technological dualism

�                    Openness and extreme vulnerability to adverse external conditions.

�                    Inflexibility of production structure

�                    Dependence on one or a few primary product(s)

The above structural weaknesses made the nation's economy extremely vulnerable to cyclical and random shocks since the later 1970s, which, persisted; and warranted the introduction of the structural Adjustment program (SAP) in 1986. 

SAP DRIVEN REFORM: THE RESULTS

            The reform program that Nigeria initiated in the mid 1980s � with the support of the International Monetary Fund (IMF), the World Bank and other donors � reflected a new paradigm. It attempted to reduce the state's role in production and in regulating private economic activity. SAP was designed to pay more attention to exports, especially in the agricultural sector, which witnessed the worst neglect. Emphasis was more on maintaining macroeconomic stability and avoiding overvalued exchange rates. This process of revamping the policy framework in line with this new paradigm becomes known as structural adjustment.

            In  1973, after the Arab � Israel war, the Arab countries, as a result of American support for Israel placed an embargo on oil exports to USA. The consequence a sudden rise in oil price from $3.0 to about $14.0 ( Okunrounmu, 1993). The impact was such that other oil producing nations' revenue was more than doubled. Nigerian's federally collected revenue rose from N634.0 million in 1970 to N5,514.6 million in 1975. However, in the early 1980s, the supply of crude oil to the international market stabilized when the Arab-Israel political crisis had been settled. There was also the oil glut, a consequence of OPEC members over-shooting their allotted production quota eventually rocked the World oil market. Price fell drastically from $30 per barrel in 1980 to less than $5 per barrel in early 1986. The message was clear and pointed: Nigeria could no longer enjoy the previous condition of affluence.

            During the second half of 1986 the programme of economic recovery was developed into a formal IMF � supported structural Adjustment  SAP, which aimed at altering and restructuring the consumption and production patterns of the economy, limit price distortions and heavy dependence on the export of crude oil and imports of consumer goods. Below are the specific objectives of SAP:

�               Restructure and diversify the productive base of the economy in order to reduce         dependence on the oil sector and on imports

�               Achieve fiscal and balance of payments viability.

�               Lessen the dominance of unproductive investments in the public sector,                     improve the sector's efficiency and intensify the growth potential of the private sector.

�               Lay the basis for sustainable non-inflationary or minimum inflationary growth. 

MEASURES ADOPTED BY THE GOVERNMENT TO IMPLEMENT SAP INCLUDED: 

�               Achievement of realistic exchange rate policy hitherto administratively fixed, and liberalization of external trade and payment system;

�              Appropriate pricing policies in all sectors with greater reliance on market forces and reduction in complex administrative controls.

�              Further rationalization and restructuring of public expenditures.

At inception, SAP was designed to last a period of two years, 1986-1988. On realizing the enormous economic nation was grappling with, the government modified of SAP. Even though a modified program it was meant to last seven years (1986-1993), the philosophy of SAP continued to influence to date, the nation's economic policy. 

PERFORMANCE APPRAISAL OF THE ECONOMY UNDER SAP

            A good starting point is the 1993 budget, which while appreciating the need for continued fine-tuning of policy measures of SAP, clearly drew attention to the lingering economic problems. In his 1993 budget speech, Ernest Shonekan the then Head of Government, appraised the SAP period in these words: 

The economy seemed to have responded positively to the structural

adjustment measures. This is best illustrated by the overall growth

of the economy, improved sectoral performance and reduced pressures

on the external sector.

            After a slow growth rate of 2.2 percent in 1986 and actual

decline of 0.3 percent in 1987, real output (GDP) at the 1984 factor

 cost registered a growth rate of 7.0 percent in 1988. Between 1989

 and 1991, the average growth rate of 5.0 percent was maintained.

In spite of the gains, certain macro-economic problems such as

continued depreciation of the Naira exchange rate, high inflation,

 volatile interest rate and depressed activities in the real sectors of the

 economy. Others are: fiscal deficit, excess money supply, growing

unemployment and falling standards of living.(Okunrounmu, 1993)

         Fiscal developments in Nigeria between 1986 and 1993 reflected the (mis) fortunes of the mono-cultural economy that depended on the oil sector, which provided over 90% of foreign exchange earning and over 80% revenue in the Federation Account. Due to an expansive nature of government fiscal operations in the 1980s, an average deficit/GDP of 5.7 percent was recorded between 1981, and 1985. A major policy of SAP, of course, was to reduce the ratio to 3.0 percent in the short-run, and eventually achieved fiscal balance in order to attain macro-economic stability.

          In the period under review (1986-1993), instead of narrowing the gap, the government's fiscal operations disappointingly resulted in an average deficit GDP ratio of 9.2 percent. Also, non-debt and debt service showed that the latter rose rapidly at the expense of the former, to the detriment of real economic growth. Non-debt expenditure (total expenditure less debt service) increased from N6, 759.4 million in 1986 to N41, 946.0 million in 1992; accounting for 46.6 percent of the total outlay. In the period between January and September 1993, non-debt expenditure accounted for 50.7 percent of N104, 617.3 million total expenditure. Debt service increased to N65, 777.3 million in 1992 from N8, 902.1 million in 1986.  It's share of total expenditure rose from 57.8 percent in 1986 to 61.1 percent on 1992 at an annual average of 53.4 percent.

         At the end of September 1993, the year SAP would have terminated, debt service payment amounted to N51, 616.9 million (49.31%) of the total expenditure. One obvious implication of high debt service payment is that available resources were not enough to provide goods and service to enhance citizens' welfare.

            Instead of enhancing competitiveness in the economy, deregulation of interest rate had an escalating impact on domestic debt service. Regrettably, minimum rediscount rate rose from 12.5 percent in 1988 to 26.0 percent in the second half of 1993.

            By relying on deficit finance from the CBN to meet inter-temporal resource gap, the government undermined macro-economic stability thereby making it difficult for SAP to achieve the objectives of price stability, economic growth, full employment and balance of payment equilibrium.

            In the agricultural sector, Nigeria achieved a measure of growth, as the rural poor (mostly producers) benefited from agricultural, trade and exchange rate reforms; and the de-monopolization of important commercial activities.  As consumers, both the urban and rural poor are always hurt by any rise in the prices of food. Lay offs of public sector employees, who are among the hardest hit by adjustment, did not significantly add to the number of the poor; because many of them were able to find other work, often by returning to the rural areas.

            The absence of empirical studies makes it difficult to document any clear and specific link between adjustment reforms and environmental changes in Nigeria.  To an extent, policy reforms encouraged sound pricing of energy, fertilizer and water resources, thereby reducing wasteful distribution and consumption.  A lot remains to be done as distortions such as natural resources pricing and taxation are yet to be eliminated. 

CONCLUSION AND RECOMMENDATION 

            That we are still battling with the thorny issue of deregulation and appropriate pricing 18 years after introduction of SAP and 11 years after its proposed terminal date is instructive. It is either that the policy of SAP was faulty or its implementation was not meticulous. Fact is that the economy remains mono-cultural with an over dose of public sector influence, and a private sector that is structurally marginalized.

            Given the pervasive imperfections and market failure in Nigeria, certain forms of selective intervention by government might be necessary in order to stimulate industrial growth and achieve international competitiveness. Likely areas of intervention would be aggressive export promotion, specialized training, technology capacity building (shifting emphasis from know how to know why), information marketing, foreign investment and technology inflows, infrastructure and institution building. Such intervention should be properly organized and made market friendly, to overcome market failure. 

                 REFERENCES

Adjustment in Africa: Reforms, Results and the Road Ahead (A World Bank Policy Research Report) ISBN O � 19-520994 � x (1994). 

Bangura, Yusuf (1987) �The politics of Nigeria Debt Crisis� in Adebayo(1990) Nigeria External Debt Crisis, its Management. Moultous Press Limited, Ibadan.

 Olu Falae: �Why SAP Failed.� The Guardian, Monday, February 1, 1999. 

TOSHIHIKO KINOSHITA:(1995) How to facilitate Private Investment in Africa on the Experiences of East Asia Growth in External Assistance and Policies for Growth in Africa. Paris,  IMF and Ministry of Finance Japan Publication. 

               Okunrounmu, T.O.(1993) �Fiscal Policies of the Federal Government: Policies and                          and Strategies since 1986:� CBN Economic and Financial Review, Lagos.

               CBN Statistical Bulletin: Various Editions.

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Iweriebor, Ehiedu. Nigerian Technology Development Since Independence.                                                                              Book Builders,  2004. 322p. bibl  index ISBN 9783708236                                                                   Reviewer:  Gloria Emeagwali

Nigerian Technology Development Since Independence is a major resource, not only for policy makers and development planners, butalso, historians of technology and social scientists. The text provides detailed analysis of  Nigeria's development policy and strategy between 1960 and  the 1990s in terms of numerous plans, programs and institutions. Organizations such as the Nigerian Association of Chambers of Commerce and the Manufacturers Association of Nigeria (MAN) are among the business groups alluded to by Iweriebor and so, too, other pressure groups such as the Nigeria Labor Congress, the National Association of Nigerian Students (NANS) and  the Academic StaffUnion of  Universities (ASUU).  

         Iweriebor argues that Import Substitution Industrialization (ISI)  failed to develop engineering industries and a capital goods sector  because of its focus on assembly plants. All major inputs were imported, and a low level of  internal and integrated interdependence took place. Inadequate backward and forward linkages developed within the economy.

           By the 1990s there emerged some noticeable developments in the machine tools industry  in Enugu, Osogbo and Ajaokuta,  located in Eastern and Western Nigeria. The  completion of the foundry sector of the engineering components industry is also noted by the author and recognized as  one of the successes of the national agency for the development of a national engineering infrastructure, NASENI. The objective  of  this program is to create �endogenous design and mass production of industrial machinery' for the engineering, chemical, electronic and communications sectors. The emergence of small and medium scale engineering companies  is also discussed in this work. Some  useful autobiographical sketches are provided enabling esearchers to understand the socio-economic context of some of the newly emerging  Nigerian entrepreneurs.

          Iweriebor's work is a direct challenge to  afro-pessimistic negativism. It is a breath of fresh air and a practical optimistic approach for understanding the challenges ahead,  for well meaning scholars, and decision makers genuinely interested in Africa's economic independence. The Nigerian political class gets  some acclaim  but some of the policies that they adopted after 1960 come under fire. Iweriebor challenges their gullibility in believing that genuine industrialization would emanate from external forces and  from the proposals and plans of ex-colonizers and potential rivals.

           According to Iweriebor, in the 1980's Hindustan Machine Tool Company (HMT) exploded the myth of South-South solidarity  by inflating the price of machines and marginalizing Nigerians in upper management positions. Obsolete machines were supplied and inflated salaries paid to Indian staff. The significant components for the machine tool  plant were not brought in. But were the Russians different? I would have appreciated  also a discussion of  the  activities and attitude of  Russian experts at the Ajaokuta steel mill. 

           Iweriebor  concludes that self-directed growth, within the context of �liberated development,' has the potential to liberate the country and empower the region as a whole and that Nigeria has begun to take appreciable  steps in that direction in spite of debilitating programs such as the structural adjustment program which he characterizes as a dogmatic  all- purpose panacea propagated by �the apostles of neo-colonial capitalism' and �the self-appointed missionaries and guardians of global capitalism.' SAP, in the view of Iweriebor,  is a �profoundly reactionary doctrine' that has led to  �economic contraction', fallen industrial production, de-industrialization and �the erosion of national sovereignty.' The consequences of SAP have been destructive and debilitating but, according to Iweriebor, the strategy of liberated development as discussed in this text is designed to make it impossible for such programs to be imposed on  Nigeria. In fact one of the fundamental challenges that Nigerian policy makers  have through the strategy of �liberated development'  and self-sustained technological development is the  rescue of Nigeria from the ravages of SAP. A copy of Dr. Iweriebor's illuminating book should be on the bookshelf of every Nigerian politician, parliamentarian, policy maker, and scholar.

The model that follows is the reviewer's interpretation of  aspects of  Iweriebor's analysis.

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