In 1973, the Arab-Israel war led OPEC to enforce an embargo of crude oil supply to the USA and other countries that supported Israel. This was adopted as a retaliatory measure against countries that backed Israel during the course of the war.
The cut in crude oil supply resulted in a surge in crude oil prices. Nigeria is an OPEC member also greatly benefitted from this action as the country generated huge revenue in this oil boom era. In the words of General Yakubu Gowon, the then military head of state, “money is not the problem of Nigeria but how to spend it”.
This opulence was, however, short-lived as the leadership of the country mismanaged the revenue generated from crude oil, thereby exposing the country to economic recession in 1986.
As a result of the fall in global oil prices in 1986, the administration of General Ibrahim Babangida opted to finance the economy by seeking financial assistance from the World Bank and the International Monetary Fund (IMF). While this may appear to be a good move, the terms and conditions attached to the loans were unfavourable to most developing economies as these countries continue to find themselves in vicious debt servicing. These conditionalities include: Devaluation of the naira, privatization of major sectors, trade liberalization, and reduction of obstructions to foreign capital. Experts have opined that IMF loans and their conditions have been designed in such a way that will further degenerate the economies of developing countries as the economic measures proposed by the IMF have been discovered to be largely inappropriate in addressing the needs and challenges of Africa.
Felogene Anumo, the co-lead for the Building Feminist Economies (BFE) programme described the IMF intervention as a deliberate measure to keep formally colonized countries underdeveloped. In her reaction, she said “who the hell cuts a health budget in the middle of a pandemic” This reaction came as a result of the IMF’s stand that Nigeria must reduce its health expenditure by half before gaining access to the COVID-19 emergency financing. Wole Soyinka expressed his displeasure at the IMF on the ground that they were established to safeguard the economic interests of the colonial superpowers.
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Unravelling the Economics behind SAP
The loans were granted but not without gross economic repercussions which still persist up till today. For instance, one of the conditions given to the Nigerian government was to devalue the naira in relation to international currencies. It should be noted that prior to the period of devaluation, 1 dollar was exchanged for 77 kobo. Year in year out, the value of the Nigerian currency continues to depreciate in the foreign exchange market as a dollar is currently exchanged for over N400.
The negative consequences of SAP seem to be an endless tunnel as most of the countries that yielded to these conditionalities are yet to recover due to the fact that their currencies are not competitive enough to withstand global pressure. This is a result of the fact that most African economies have so much depended on foreign loans at the expense of their industrial base. The underdevelopment of the industrial sector implies that African countries will continue to depend on the importation of goods from developed countries. This also implies that African countries will need more of their local currencies per unit of commodities imported.
The implementation of the SAP also marked a paradigm shift in Nigeria as it reduced the role of the government in industrial participation on the ground that a lot of industries that were hitherto controlled by the government had to be sold off to private owners. While privatization might not be a bad step in its entirety, some industries are better off when controlled by the government especially when such industries are capital intensive. For instance, the SAP marked the beginning of the end of viable industries like the Ajaokuta mines and steel industry, Kaduna textile industry etc.
Fast forward to 2021, the IMF recommended that Nigeria would have to remove fuel subsidy if the country wants to recover from its dwindling economic position. This has generated a lot of reactions from Nigeria who continue to condemn the recommendation on the ground that the country’s economy is currently not at its best especially since the country is just recovering from the devastating effect of the COVID-19 global pandemic and, therefore, employing a contractionary measure such as subsidy removal will only plunge the nation’s economy into further retrogression. What is more disturbing is the fact that the IMF has failed to proffer a more sustainable solution by suggesting the total revamp of the 4 major refineries which have gone moribund since the military era thus, making the intention of the IMF questionable and suggestive of financial colonialism intent.
About 35 years after the introduction of SAP, Nigeria is still battling with the issue of economic imbalance and gross underdevelopment. One might begin to wonder whether the massive loans being collected have achieved any aim as far as development is concerned. The issue that might need redress is whether the recommendations offered by the institutions are not suitable for a developing economy or whether the institutions are intentionally proffering so that Africa can continue to be at the mercy of the developed nations. Whether these questions are true or not, African leaders cannot be exonerated from the blame as one cannot point to any tangible project that has been carried out as a result of the proceeds from the loans which clearly implies that the loans have been grossly mismanaged or embezzled.
Also, since a bulk of the loans are financed through sales of crude oil, Nigeria might not be able to pay up if there is a plunge in prices thereby further exposing the nation’s economy to more danger. This implies that beyond foreign recommendations, the Nigerian government has to do away with white supremacy which has only led to financial colonialism as the country continues to depend on external debt as a means of funding indigenous projects. Nigeria needs to discover its own economic model and overcome its development challenges by introducing and implementing policies that address its own economic peculiarity.
