The 1986 Structural Adjustment Program In Nigeria

Nmesoma Okwudili


November 25, 2023

In the mid-1980s, Nigeria found itself grappling with a profound economic crisis. Plunging oil prices, skyrocketing debt levels, and an economy that had grown overly reliant on its petroleum sector were causing significant strain. To confront these challenges head-on, the Nigerian government embarked on a transformative economic reform program known as the Structural Adjustment Program (SAP) in 1986. Guided by international institutions such as the International Monetary Fund (IMF) and the World Bank, the SAP aimed to comprehensively restructure Nigeria’s economy, stabilise it, and set the stage for sustainable long-term growth.

To fully appreciate the context in which the 1986 SAP was launched, it is vital to understand the circumstances that precipitated this pivotal moment. Nigeria had enjoyed a period of economic prosperity during the 1970s, buoyed by surging global oil prices. As a major oil producer, the country was flush with revenue from its oil exports. However, this heavy reliance on oil had hidden perils. By the 1980s, the global oil market took a dramatic downturn, leading to a sharp reduction in Nigeria’s oil income. This was further compounded by inefficient government practices and pervasive corruption, resulting in not only mounting debt but also a stagnant economy.

Historical Significance

The 1986 Structural Adjustment Program (SAP) in Nigeria stands as a historically significant chapter in the nation’s economic evolution for several compelling reasons, shedding light on its long-lasting impact and the complex debates it has sparked.

Pioneering Structural Reforms: Nigeria’s embrace of the SAP in 1986 was a pioneering move not only for the nation but also for the African continent as a whole. It was among the first African countries to adopt such a comprehensive structural adjustment program, effectively setting a precedent for other nations on the continent facing similar economic crises. This visionary step sent a clear message that African countries could, and indeed should, implement proactive reforms to navigate their unique economic challenges. Nigeria’s willingness to embark on such a journey inspired a wave of structural reforms in Africa, as other countries looked to follow its lead.

A Complex Legacy: The legacy of the SAP is undeniably complex, with both its merits and flaws contributing to the ongoing discourse surrounding its overall success and impact. While the program achieved notable macroeconomic objectives, including economic stabilisation and export diversification, it also carried a substantial social cost. The social and economic inequalities it inadvertently exacerbated continue to be subjects of discussion and debate. This complexity reminds us that the outcomes of major economic reforms are rarely one-dimensional. They often require careful consideration of not just economic metrics but also the broader social implications.

The shift in Economic Policy: The introduction of the SAP in 1986 marked a pivotal moment in Nigeria’s economic policy trajectory. For decades, the nation had adhered to a state-led approach to economic development. However, the SAP represented a significant departure from this norm. It ushered in a new era of more market-oriented economic policies, emphasising competition, efficiency, and a reduced role for the state in economic affairs. This shift fundamentally altered the framework guiding economic decision-making in Nigeria. Furthermore, it left a profound and lasting influence on subsequent economic policies in the nation, effectively shaping its economic landscape in the long term.

Key Objectives of the 1986 SAP

The 1986 Structural Adjustment Program was introduced to tackle the multifaceted economic crisis that Nigeria faced. Its key objectives were as follows:

1. Economic Diversification: The primary objective of the SAP was to reduce Nigeria’s over-dependence on oil revenues, a critical vulnerability that had become starkly evident in the face of plummeting global oil prices. The plan envisioned diversifying the Nigerian economy into non-oil sectors such as agriculture, manufacturing, and services. The intention behind this diversification was to ensure more sustainable and robust economic growth that could withstand the inherent volatility of the oil market.

2. Fiscal Discipline: Recognising that fiscal mismanagement and unrestrained government expenditures were exacerbating the economic crisis, the SAP sought to restore fiscal discipline. It did so by implementing a series of austerity measures. These measures included reducing government expenditures and implementing policies to control inflation, which was deemed essential to addressing Nigeria’s economic woes.

3. Exchange Rate Adjustment: One of the most contentious aspects of the SAP was the substantial devaluation of the Nigerian Naira. The devaluation aimed to make Nigerian exports more competitive in the global market. By reducing the exchange rate, the program intended to encourage foreign investments and reduce trade imbalances that had developed due to an overvalued currency.

4. Market Liberalisation: The program aimed to reduce the level of government intervention and control in various sectors of the economy. It envisioned a more market-driven economic system. This shift toward market liberalisation was underpinned by the belief that competition and efficiency in the marketplace would foster economic growth and innovation.

5. Privatisation: The SAP included plans for the privatisation of state-owned enterprises. This strategic move was intended to allow the private sector to play a more prominent role in driving economic development. Privatisation was seen as a means to reduce the financial burden on the government while promoting greater efficiency and productivity in formerly state-controlled industries.

These objectives collectively represented a holistic approach to addressing Nigeria’s economic challenges, addressing both the structural and policy issues that had contributed to the country’s economic woes. While the program had its merits, it was also met with considerable controversy and debate, particularly due to its social and economic consequences, making it a focal point of discussion for economists, policymakers, and scholars.

Impact and Controversies

The 1986 Structural Adjustment Program had a profound and lasting impact on Nigeria’s economic landscape, giving rise to significant debates and controversies.

Positive Impact

  • Macroeconomic Stability: One of the notable achievements of the SAP was the stabilisation of the Nigerian economy. The program effectively curtailed inflation and reduced fiscal deficits, contributing to a more stable economic environment.
  • Export Diversification: The controversial devaluation of the Naira proved successful in making Nigerian exports more competitive. This policy change facilitated a shift away from the over reliance on oil, a significant stride in improving the country’s economic prospects.
  • Foreign Investment: The market-oriented reforms and devaluation of the Naira attracted foreign investment. Nigeria began to appear as a more promising destination for global investors due to the potential for higher returns in a more market-oriented economy.

Negative Impact

  • Social Consequences: While the SAP achieved positive macroeconomic results, its implementation was not without adverse social consequences. Austerity measures, aimed at reining in government expenditures, led to job losses and reduced government spending on critical social services like healthcare and education. Regrettably, these effects disproportionately affected the most vulnerable segments of the population.
  • Income Inequality: The market liberalisation component of the program had unintended consequences. While promoting economic efficiency, it disproportionately benefited the wealthy, exacerbating income inequality in Nigeria. This inadvertently contributed to a growing divide between the rich and the poor.
  • Corruption: Despite the SAP’s intentions, it did not effectively address the deep-seated issue of corruption within the Nigerian government. The failure to combat corruption hindered long-term sustainable growth and fuelled public resentment.

The mixed legacy of the 1986 SAP underscores the complexities of implementing such far-reaching economic reforms. It highlights the importance of considering both macroeconomic objectives and their social consequences, making it a subject of ongoing debate among economists, policymakers, and scholars. The historical impact of the program on Nigeria’s economic policies and its long-term development trajectory continues to be a point of interest for those interested in the nation’s economic history and its future direction.

The 1986 Structural Adjustment Program in Nigeria was a watershed moment in the nation’s economic history. In response to a severe economic crisis, the Nigerian government implemented sweeping reforms with the goal of stabilising the economy, diversifying it away from oil, and attracting foreign investment. While the program succeeded in achieving some of its macroeconomic objectives, it also had significant social and economic consequences. The legacy of the 1986 SAP is a complex one, representing a pivotal moment in Nigeria’s economic evolution and a subject of continued debate among economists, policymakers, and scholars. As the nation continues to grapple with economic challenges and policy choices, the lessons learned from this critical period in Nigeria’s history remain relevant and thought-provoking.


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