STRUCTURAL ADJUSTMENT PROGRAMME AND ITS IMPACTS ON NIGERIA’S ECONOMIC PROBLEMS


The Nigerian economy has been undergoing a series of economic problems over the years now. The nature of the problem can best be understood by looking at the four key aspects of the economy such as the level of employment; the stability of prices; external equilibrium (balance of payment position); growth and development of the economy over time. The above indicators have shown that the Nigerian economy is not in very good shape, especially under the various military regimes and the civilians as well. The question that readily comes to mind is what have been the causes of the economic problems in Nigerian for such a long period of time. This term paper tries to analysis and provides possible solutions to the economic problems in Nigeria. 

Background  

Nigeria economy was faced with serious economic challenges immediately after the oil boom in late 1970s to early 1980s. prior to this period Nigeria economy after her independent was basically gaining huge amount from the importation of agricultural goods and later after the discovery of oil which became her major export earn much revenue to the government, this promopted the then president (Gen. Gowon) declare that Nigeria economy has sufficient money but spending of such money is her major problem. Economic problems in this country continue to be the focus of successive regime. The civilian administration under Alh – Aliyu Shehu Shagari introduced the economic stabilization measures in 1982. General Muhammed Buhari’s administration introduced the war against indiscipline. 

Despite all the various policies introduced by governments to revamp the economy, the economy remained depressed by 1985 as foreign exchange earnings continued its downward trend leading to a worsening of the deficit in the external debt burden, devaluation of naira, serious supply shortage and gross under utilization of industrial capacity and misallocation of resources (Ochojele, cited in Bawa 1990:4). This led to the ignorant debate on the international monetary fund (IMF) loan by the General Ibrahim Badamasi Babangidas intellectuals on whether or not Nigeria should accept the loan. 

To solve the problem, the government of General Ibrahim Babangida introduced an economic recovery programme supported by IMF and World Bank. 

The central philosophy of SAP is that government intervention in the economy is minimal to economic growth and that a market forces (demand and supply) should be allowed to operate freely to determine resource allocation. 

CONCEPTUAL AND THEORETICAL ISSUES 

The Nigeria economy has been undergoing economic problem for over years now, the causes of the Nigerian economic crisis can be broadly grouped into two: 

Conventional causes of Nigeria economic problems 

Many factors have been identified as been responsible fro the conventional economic problem in Nigeria. These conventional causes include the following; 

  1. Colonial and non – colonial legacy: that Nigeria is still suffering from colonial hang-over is not in doubt. This has no small measure fuelled the crisis that the economy has suffered from over the years. For instance, after Nigeria political independence one would have expected the country to have a homemade economic development policy suitable for the socio-cultural norms and value system of the society, but these were not forthcoming. Instead, the country tenaciously held to the colonial masters’ ideologies and value systems. This has not helped the economy at all. 
  2.  Improper management of the economy: in Nigeria successive government failed to properly manage the petroleum and other human natural resources available in the country. Indeed, the transformation of the economy during the oil – boom era was imperative. However, rather than investing in self – financing capital projects, the leaders then went on spending – spree. Constructing gigantic structures, hosting international jamborees like FESTAC (Black Festival of Arts and Culture), doubling of workers salaries (Udoji Salary Award), Etc. indeed there was confusion between income and wealth before you know what has hit the nation, the fortunes from oil dwindled due to drastic fall of oil revenue especially since the late 1970s and early 1980s.
  3. Bottlenecks and production rigidities in almost all sectors of the economy: all the sectors of the Nigerian economy are characterized by bureaucratic bottlenecks and production rigidities. For instance, the financial system is underdeveloped. Until very recently. I.e. 2006 when the sector was overhauled through some financial reform policy of minimum recapitalization by the banking sector. The industrial sector suffered from high-interest rate gross underutilization of capacity and assembly type industrial culture.   
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Non – Conventional causes of Nigeria economic problems 

Some factors have been identified as being responsible for the unconventional economic problems in Nigeria. Some of these include; 

  1. Poor work ethics and faulty salary structure: in Nigeria, there exist non–challant attitude towards government work service. This is usually attributed to a very faulty salary structure indeed in Nigeria. Public servants are seriously underpaid or their salaries held for several months without payment. All these no doubt fuelled people’s very poor work ethics since they have to find ways of making ends meet, until May 1999 when there appeared a little sigh of relief. 
  2. Absence of the role of religion, indiscipline and corruption: the near absence of the role of religion in public-private life of the leaders and the followers has no doubt fuelled the economic problems. In the past, Nigerians were God-fearing and highly disciplined in all ramifications. Those were the good old days when the socio-cultural norms and the values systems were upheld in high dignity. There was no cut-throat competition for wealth acquisition as obtained today. The syndrome of get–rich–quick has made people throw caution to the winds, hence get involved in looting the government treasury and other forms of corrupt practices. All these have helped in fuelling the economic problems, until the new democratic dispensation that introduced laws to curb the menace.  I.e. the Economic and Financial Crimes Commission (EFCC), and the Independent Corrupt Practices Commission (ICPC).        

Objectives of the SAP in Nigeria  

The broad objective of SAP in Nigeria is to alter and restructure the pattern of production and consumption of the economy and also to eliminate price distortions and heavy reliance on oil and imports. However, the specific objectives are: 

  1. To restructure and diversify the productive base of the economy in order to reduce dependence on the petroleum sector and on imports. 
  2. To achieve fiscal and balance of payment viability. 
  3. To lay the basis for sustainable and non – inflationary growth and
  4. To lessen the dominance of unproductive investment in the public sector and improve the growth potential of the private sector. 

Strategies of SAP in Nigeria  

The above objectives were supposed to be achieved through the following objectives: 

  1. The adoption of a realistic exchange rate for the naira through the foreign exchange market. 
  2. Reduction of complex administrative controls in the process of adopting an appropriate pricing policy. 
  3. Further rationalization and restructuring of public sector expenditures and customs tariffs. 
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Assessment of SAP in Nigeria  

This section attempts an assessment of SAP by analyzing how far the set objectives of the programme have been achieved using the strategies of the programme. 

Diversification of the productive base of the economy.  

It is evident that the contribution of the agricultural sector to the national economy has increased moderately since the introduction of SAP but it is also a known fact that developments in the Nigerian economy have continued to depend on the international market for crude petroleum. This objective is far from raised despite the current democratic government’s commitment towards revamping the agricultural sector, especially the rice and cassava project. 

Achieving balance of payment viability. 

Deficit budgeting has become seriously uncontrollable under the various military regimes for example between 1985 and 1991, budget deficit rose from 2.4% to 71% of GDP. According to the CBN report, the 1992 budget had projected a surplus of appropriately #2billion. But the same budget was already in deficit by September, 1992. the fiscal and financial indiscipline of the federal government is expressed in some of its since 1986 the good intentioned policies like mass mobilization for social justice and economic recovery (MAMSER), Directorates of food , roads and rural infrastructures (DFRRI), national directorate of employment (NDE) because avenues for personal enrichment. This has had a lot of implications on deficit budgeting since the inception of SAP. 

Laying the basis for a sustainable non – inflationary or minimal inflationary growth. 

The problem of inflation since the inception of SAP is indeed a real one. It is needless to mention here that the level of inflation between 1986 to may 1999 adversary affected economic recovery efforts. There are essentially two reasons for the persistence of inflation in recent years. 

  1. The increase in the cost of production (especially interest rate, transport etc). According to the CBN (1988), the expansionary monetary and fiscal policies pursued during the period also affected the price of most commodities. 
  2. The other reason for the upward trend in the price level is the depreciation of the naira exchange rate (Agua, 1990). 

Attempts at reducing the participation of the public sector and making it efficient. 

This is conducted through privatization and commercialization of public enterprises however, increasing the strength of the private sector to enable it to provide economic leadership to continue to elude the economy. Though under the current democratic dispensation, the privatization exercise has recorded some success story, especially in the telecommunication sector. 

Why SAP has recorded minimal success story in Nigeria 

  1. Lack of political will 
  2. High cost of agricultural inputs 
  3. Low rate of capacity utilization in the manufacturing sector.
  4. Poor management of foreign exchange 

METHOD OF DATA ANALYSIS 

Source of data collection included secondary source, the secondary source included library research, by way of sourcing for materials through text books from the above data, to verify if the objectives of SAP are been reached. The chi – square techniques was use to analyze the data from the distributed questionnaires.   

Chi-square (X2) =   ∑ (O-E)2  

                            E 

Where; 

 O = observed value and  

   E = Expected value 

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Therefore chi-square test was used to evaluate whether or not the expected result was realized. 

Hypothesis; 

Ho; Structural Adjustment prograame has not significance impact on the Nigeria economic problems.  

H1; Structural Adjustment prograame has significance impact on the Nigeria economic problems.  

Contingency Table:  

RESPONSE I II III IV TOTAL 
YES 20 28     31 23 102 
NO 40 32 29 37 138 
TOTAL 60 60 60 60 240 

Source: Own computation, 2012 

Computation of expected frequency (Fe); 

Fe1-1 = 102*60 = 25.5                        Fe2-1 = 138*60 = 34.5 

    240                                                    240                      

Fe1-2 = 102*60 = 25.5                       Fe2-2 = 138*60 = 34.5 

             240                                                  240 

Fe1-3 = 102*60 = 25.5                         Fe2-3 = 138*60 = 34.5 

    240                                                    240 

Fe1-4 = 102*60 = 25.5                       Fe2-4 = 138*60 = 34.5 

             240                                                  240 

Table 2: Chi-square (X2) computation table 

Cell Fo Fe Fo -Fe (Fo – Fe)2    (Fo-Fe)2         Fe 
1-1 20 25.5 -5.5 30.25 1.186 
2-1 40 34.5 5.5 30.25 0.877 
1-2 28 25.5 2.5 6.25 0.245 
2-2 32 34.5 -2.5 6.25 0.181 
1-3 31 25.5 5.5 30.25 1.186 
2-3 29 34.5 -5.5 30.25 0.877 
1-4 23 25.5 -2.5 6.25 0.245 
2-4 37 34.5 2.5 6.25 0.181 
Total      4.978 

Source: own computation, 2012 

:. X2c = 4.978 

The critical value of X2 is obtained as: 

X20.05, df = (2-1) (4-1) 

X2t =X20.05, df =3 

One tail test  

X2t = 7.81 

Two tail test  

X2t = 9.35 

Interpretation of results 

Since X2c = 4.978 < X2t for both one and two tail test therefore, we accept the null hypothesis (H) and reject the alternative hypothesis concluding that Structural Adjustment prograame has not significance impact on the Nigeria economic problems.  

CONCLUSION AND RECOMMENDATION 

Conclusion 

From study so far the objectives of SAP are far from been realized. Nigeria has been a mixed economy, the government should create a conducive environment with infrastructural facilities for the private sector to strive. Emphases should be laid on agricultural exportable goods for the balance of payment equilibrium. 

Recommendation  

To achieve the broad objective of SAP incentives should be given to farmers to encourage them. The educational sector should be given strict attention in areas of facilities and structures, the teaching profession should be made attractive given that teachers are paid handsomely. Local producers should be given incentives to encourage them. The checks and balance mechanism should be strengthened and put into full force to ensure projects are executed up to standard focus should be laid on exportable goods. 

REFERENCES 

  • Abdullahi H. (MRS.) (2008). “History and Structure of the Nigerian Economy” Publish by Department of Economics Usman Danfodiyo University, Sokoto 
  • Tadaro M.P and S.C. Smith (2009) Economic Development
  • Agba, V. A (1994) Principles of Macroeconomics
  • UN Millennium Project (2005). A practical plan to Achieve the Millennium Development Goals
  • UNDP, (2010). Human Development Report in Nigeria 2008-2009, Achieving Growth with Equity United Nations Development Programme UNDP, (1999). Human development report, Nigeria

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