Economic impact of IBB’s SAP in five charts

The Structural Adjustment Program (SAP) remains one of the most controversial economic policies in Nigeria over three decades later.

In 1986, Ibrahim Babangida, then military head of state, developed the SAP, to reduce government intervention, promote the private sector and diversify the economy, but in turn, it sparked inflation, poverty and increased external debt.

The SAP was not all bad for Nigeria, however, as its recommendations were necessary to solve the economic crisis facing the country.

The scarcity of foreign exchange and essential items which dodged the period disappeared following the liberalisation of the FX market, even though it led to a sharp depreciation of the naira.

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Here are five charts showing the impact of IBB’s SAP on Nigeria’s economy.

External debt jumped to $23bn

Debt owed to external creditors spiked by 51.41 percent to $22.68 billion in 1990 from $14.98billion in 1986.

Multilateral creditors (such as the IMF and World Bank) rose by 103.17 percent, increasing to $3.84 billion in 1990 from $1.89 billion in 1986. This indicates Nigeria’s heavy dependence on bilateral loans from developed nations.

Paris club debt jumped by 69.91 percent to $17.171billion in 1990 from $10.228billion in 1986, while non-paris declined by 71.55 percent to $1.675billion in 1990 from $2.873billion in 1989

Rise in poverty levels

The implementation of SAP deepened poverty levels in Nigeria following its inflationary impact and the job losses it triggered.

Poverty rate increased to 13.6% from 12% between 1985 and 1993.

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Inflation rate peaked

Headline inflation rate rose from 5.72 percent to 59.97 percent within seven years due to depreciation of naira, removal of price control and subsidies as well as increased money supply.

Naira weakened from N2/$ to N22/$

The decline in naira value against the dollar from N2/$ to N22.05/$ between 1986 and 1993 happened as a result of the change to a system where the forces of demand and supply determine the rate as opposed to government fiat as was the case before SAP. It didn’t take time for the artificially propped currency to slide after the market was left to determine the exchange rate.

The decline in global oil prices also slashed oil revenues, the country’s biggest source of foreign exchange, heaping pressure on the naira.

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Key non-oil sectors benefited from SAP

Agriculture GDP recorded a tenfold increase from N35.70 billion to N295.32 billion between 1986 and 1993, this was because SAP was aimed at promoting self-sufficiency in farming.

Industry also increased to N417.06 billion in 1993 from N65.5 billion within seven years due to the SAP’s role in driving industrial expansion following a wave of privatisation of inefficient government assets. That helped to attract investments, liberalise trade.

Financial institutions and manufacturing GDP also jumped thanks to the reforms introduced by SAP.