The Long Shadow Of Adjustment (II)

Last week, this column argued that the Structural Adjustment Programme, which turned forty years last month, did not emerge from a prosperous economy suddenly captured by neoliberal ideas. Rather, it was the outcome of contradictions that had accumulated since the oil boom of the 1970s. This week, we examine the adjustment itself, the intellectual battles it provoked, its complicated legacy, and why, four decades later, Nigeria continues to live under its long shadow.

The Great Economic Divide

When General Ibrahim Babangida introduced the Structural Adjustment Programme in July 1986, he was not merely announcing a package of economic reforms. He was challenging an entire philosophy of governance that had dominated Nigeria’s post-civil war development strategy. Since the 1970s, the state had become investor, banker, manufacturer, employer, importer and distributor. SAP proposed a different vision. Government should regulate more and produce less. Markets, rather than ministries, should determine prices. Competition should replace administrative controls. Foreign exchange should reflect economic realities rather than political influence.

The intellectual foundation of SAP was rooted in the global rise of market liberalism associated with economists such as Milton Friedman and Friedrich Hayek and later institutionalised through what became known as the Washington Consensus. Liberalisation, deregulation, privatisation, fiscal restraint and export competitiveness became the programme’s central pillars.

However, SAP arrived in Nigeria at a complicated historical moment. These ideas collided with a political economy shaped by oil rents, military centralisation and decades of state intervention. The result was not simply an economic disagreement. It became an ideological struggle over the future direction of the Nigerian state.

Painful Medicine, Necessary Surgery

The social consequences of SAP were immediate and often severe. Inflation increased. Real wages declined. The naira entered a prolonged period of depreciation. Imported goods became more expensive. Poverty deepened, while the middle class experienced one of the sharpest reductions in purchasing power in Nigeria’s history. Universities suffered from declining public investment. The migration of skilled professionals accelerated, contributing to the brain drain that remains a national challenge.

The manufacturing sector was among the biggest casualties. Textile industries in Kaduna and Kano struggled under rising production costs and import competition. Vehicle assembly plants, including Peugeot Automobile Nigeria in Kaduna, Volkswagen in Lagos, ANAMMCO in Enugu and Leyland in Ibadan, operated far below installed capacity. Thousands of jobs disappeared as industrial activity contracted.

These realities explain why SAP remains emotionally powerful. For many Nigerians, it was not an economic theory discussed in classrooms. It was a personal experience of declining living standards.

Yet historical honesty requires another observation. The economy SAP inherited was already deeply damaged. External debt had expanded dramatically. Import licensing had become a mechanism for political patronage. Foreign exchange allocation rewarded connections rather than productivity. Public enterprises consumed huge fiscal resources while many failed to deliver efficient services. Industrial decline had begun before July 1986.

Adjustment did not create every weakness in the Nigerian economy. Many problems were already deeply rooted. History therefore requires us to distinguish between the disease and the treatment.

From TCPC to BPE

Perhaps SAP’s most enduring legacy was not currency reform but the transformation of the state’s economic role.

The Technical Committee on Privatisation and Commercialisation, established in 1988 under Dr Hamza Zayyad, represented Nigeria’s first systematic attempt to redefine the relationship between government and enterprise. Commercialisation aimed to make public corporations financially responsible, while privatisation sought to transfer ownership where government involvement was considered unnecessary.

Following democratic transition in 1999, the Bureau of Public Enterprises lead by Mallam El-Rufai has its first formal executive Director-General, inherited and expanded this responsibility under the National Council on Privatisation. Between 1999 and 2007, more than one hundred enterprises were privatised, concessioned or commercialised. Banking, cement, hospitality, insurance, ports and telecommunications underwent significant restructuring.

The results were mixed. Telecommunications became one of Nigeria’s greatest reform successes. From fewer than half a million analogue telephone lines in the late 1990s, Nigeria developed one of Africa’s largest mobile communications markets, with hundreds of millions of active connections today. Port reforms improved efficiency. Banking consolidation created stronger financial institutions.

Electricity, however, demonstrates the limitations of ownership reform without institutional reform. Changing ownership cannot solve problems caused by weak regulation, inadequate infrastructure and poor governance. Privatisation is not development itself. It is only one tool available for achieving development.

The deeper lesson is that markets require institutions. Competition requires rules. Private ownership requires accountability. Reform without capacity often produces disappointment.

The Reform That Never Ended

The greatest irony of Nigerian economic history is that SAP never truly disappeared. Governments criticised it publicly while retaining many of its fundamental ideas. The National Economic Empowerment and Development Strategy under President Olusegun Obasanjo promoted private sector-led growth. President Umaru Musa Yar’Adua maintained market reforms while adjusting their pace. President Goodluck Jonathan continued financial reforms and pursued subsidy reform. President Muhammadu Buhari, despite his preference for stronger state intervention, eventually accepted exchange rate adjustments and greater private participation in infrastructure. President Bola Ahmed Tinubu’s removal of fuel subsidies and foreign exchange reforms represent perhaps the clearest continuation of policies associated with the adjustment philosophy.

The names changed. The argument remained.

This continuity creates an uncomfortable question. If SAP was an absolute disaster, why have successive governments, civilian and military, retained many of its major principles? Yet if SAP was the complete answer, why do many of the structural problems it sought to correct remain unresolved?

The answer lies beyond economics alone. It lies in institutions.

History’s Hardest Lesson

Economic history teaches a stubborn truth: nations do not become prosperous simply because they liberalise markets, privatise enterprises or remove subsidies. Neither do they prosper merely because the state expands its economic presence.

Britain industrialised behind protective policies. South Korea combined state direction with market competition. China liberalised gradually while maintaining strong bureaucratic coordination. Botswana converted mineral wealth into national development through institutional discipline.

These examples differ in ideology, but they share a common foundation. They built institutions capable of making policies work.

Nigeria’s enduring weakness has been treating policies as substitutes for institutions. We have mistaken economic programmes for economic transformation. We debate exchange rates while neglecting productivity. We argue about subsidies while ignoring human capital. We fight over ownership while overlooking governance.

Forty years after SAP, the most important adjustment Nigeria requires is not merely economic. It is institutional. It is the adjustment of incentives away from rent-seeking towards production. It is the adjustment of politics away from patronage towards accountability. It is the adjustment of national culture away from consuming wealth towards creating it.

The tragedy is not that Nigeria has experimented with reforms. The tragedy is that it has often changed policies without changing the structures that determine outcomes.

History rarely repeats itself exactly, but it often echoes. The long shadow of adjustment continues to stretch across Nigeria because the deeper reform remains unfinished. No decree, privatisation programme or exchange rate policy can achieve what only strong institutions, productive capacity and responsible governance can deliver.

Until that transformation occurs, each generation will inherit familiar economic problems, rename them according to the politics of the moment, and discover, once again, that history has been waiting patiently at the same crossroads.