Structural Adjustment Programs (SAP) was the one-cap-fits all prescription of IMF and World Bank to developing countries during the early 1980s’ economic recession. The program comes with such incentives of obtaining loans at a very low rate to augment shortfall in earnings.

To obtain such cheap loans; developing countries were advised to privatise State-Owned-Enterprises (SOEs) and between 1988 and 1994 about 3,300 SOEs were sold in developing countries. It was posited that, privatisation will improve operational efficiency of privatised companies and will attract foreign investment.

The implementation of SAP in Africa became pronounced in the 80s. By 1981, Nigeria was actually beginning to cave under the debt burden of loans taken (even though there are claims, that most of these loans ended up in personal accounts of office holders); the oil glut of late 70s that resulted in dwindling oil revenues coupled with the international recession did not help the country’s case either.

SAP was implemented in Nigeria under the IBB’s regime (1985 -1993) with the basic policy elements of:

Deregulation  = Commercialise those industries that might not be able to attract foreign investors and privatise those that can attract foreign capitals

Realistic Exchange Rate = Devalue your currency so that your export will be cheaper (even if the price of your product is exogeneously determined, such as price of oil)

Debt-Equity-Swap = Transfer ownership of key industries to multinationals instead of paying your debt

Debt Rescheduling = Continuously pay only interest on your debts without paying down the principal (debt trap)

Realistic Pricing = Remove subsidy/incentives from all non-competitively priced essential goods and services.

There were lots of revolts from Nigerians (particularly from National Association of Nigerian Students) when the program was to be implemented but proponents of SAP asserted that there was “NO ALTERNATIVE TO SAP”.

Barely 15 years after SAP, we can see the unsatisfactory performance of privatised State-Owned-Enterprises despite the mirage of positive outcomes presented at the initial stage (short term).

We look at NITEL (Nigerian Telecommunication) for example. NITEL installed-capacity was reported to have increased from 295,370 to 780,000 between 1985 and 1993. Total revenue jumped from N280Million to N17Billion and profit after tax from N420Million losses to over N1Billion profit between 1985 and 1995 (unaudited accounts). Today NITEL is moribund, riddled in corruption with no viable investor willing to touch it with a long pole.

The deregulated banking sector comes to fore also.  Before SAP, Nigeria had 32 approved commercial banks. By 1992, there were 120 banks (commercial and merchant banks) and 500 finance houses. Today, the country has 20 struggling commercial banks with lots of debates still hanging on capital adequacy of some of the banks.

The introduction of FEM (Foreign Exchange Market) under SAP immediately devalued Nigeria currency from N0.77/USD to N1.76/USD. By 1995 Nigerians were exchanging N22 for $1USD in the official market and N84 for $1USD in the parallel market. Today Nigerians need N150 in exchange for $1USD.

If one is still in doubt of how much devastation the program brought on the national economy, (such as elimination of the middle class); a gaze at NIPOST, NNPC, Nigerian Railway, Nigerian Airways ghosts of once vibrant, important, publicly-run companies speaks further.

The challenge today is not just coping with the effects of SAP but with the fear that same old elements of SAP are been re-introduced into our economy under a different scheme of IMF and World Bank POVERTY REDUCTION STRATEGY PAPERS (PRSPs).

A common ground for the old concept and the new paradigm is that commercialisation under SAP was to reorganise those State –Owned-Enterprises into a profit making commercial ventures without subvention from government (this is the same objective that is been put forward by this administration for most of their proposals).

Campaign for realistic pricing of petroleum products is all over the airwaves just the way Professor Gana undertook the task of marketing government programs in the past.

Suddenly, Nigeria that paid out $12Billion as final payments for her debts to international lenders in 2008 is been issued International Standby Loan of $3.5Billion under the Flexible Credit Line of IMF. Same Nigeria is been encouraged to finance internal consumption with Euro Bond. Same Minister of Finance that supervised the depletion of Nigerian Reserve to paying down international creditors is to oversee the second issuance of Nigerian Euro Bond (after the $500 million issued in January of 2010).

Inconsistent policies towards Power Holding Company of Nigeria sends the signal that same destiny of NITEL, NIPOST, Nigerian Airways awaits NEPA.

Clear signals from the Central Bank of Nigeria about inability to sustain exchange rate at the present +- N150/USD is a preparation for further devaluation of the Naira.

One begins to wonder if the usual financial threats in which many analysts called blackmails from the Bretton Woods Institutions is responsible for the tacit second implementation of SAP in Nigeria or it is as a result of our leaders limited understanding of recent developments in the world economy (Greece, Portugal, France, Italy, Spain, US among others)?

Naijanomics is of the view that Nigerian government is reintroducing policy elements of SAP but this time not as a bundled program rather as pieces of well-sequenced action aimed at meeting Poverty Reduction Strategy Papers.

Their adopted strategy is to sell the short-term benefits of such programs to the citizens while they cover up the long term collateral damages associated with such proposals. We are been told how much will be saved in billions of dollar if “petroleum subsidy” is removed but they have not calculated how many people will be pushed further the poverty line?


Note: The reality and painting of abuses of the oil subsidy by the privileged few is quite scary and it makes economic sense to expunge the system of such leakages but certain actions such as functional local refineries is key.



How much is this unending-subsidy that every government since 1985 has been removing but it is never exhausted? The debate is often clouded with deception because same subsidy is an instrument of enriching the oil buccaneers and at the same time, a weapon of taking back the little government claims to do.

Students went on demonstration in 1990s (under IBB) because of one of the elements of SAP (Structural Adjustment Programme) that required commercialisation of the refineries and reduction of the subsidy on pump prices of petroleum products.

General Abacha after IBB also increased the pump prices and set up PTF (Petroleum Trust Fund) to utilise the saved fund from removed-subsidy for developmental projects. And between 1998 and date the pump price has been increased eleven (11) different times (from N11/Litre to N65/Litre) and the country is still awaiting another round of subsidy removal.

To conclude that there is no subsidy will be wrong but that the authority has been playing games with the figures and presenting only one side of the data is an open secret that needs annotating on.

Nigerian government does not hesitate to compare the pump price in Nigeria with pump prices in the US and UK to show that oil is still cheaper in Nigeria. Someone needs to raise it that, there is no ground for comparism. While US is a net importer of oil; it is more expensive to drill oil at the North Sea (UK) than at the Niger Delta. We should be compared with oil exporting, developing nations like Libya, Algeria, Venezuela, Saudia Arabia, Egypt among others when it comes to cost of petrol.

Record shows that Nigeria has the highest pump price of petrol among the key oil-exporting, developing countries (Venezuela 3p/Litre, Saudi Arabia 8p/Litre, Libya 9p/Litre, Kuwait 14p/Litre, Egypt 19p/Litre, Algeria 20p/Litre among others and Nigeria 43p/Litre). Nigerian government should be comparing Nigeria with US and UK when it comes to number of people depending on generators to have light or driving on bad roads with non-existent public transport.

Looking at the terrifying figures presented by proponents of oil subsidy removal; Nigeria spends $17.33Million daily on fuel subsidy and a whopping average of $485.33Million monthly because the actual cost comes to 96p while the selling price is 43p (53p subsidy on every litre) with only local refining capacity of less than half a million while about 32million litres required daily.

While this may be considered an economic waste (classical economic explanation) the other side of the figure not presented by government is how much is Nigeria earning? Simple arithmetic indicates earnings of about $242Million daily and $7Billion monthly (based on OPEC quota of 2.2mbp)

Because the country earns about $242Million daily is no justification why government should continue with $17Million daily subsidy but explanation should be offered that the subsidy has been crawling with the price our oil commands at the international market, since we have failed to develop enough refining capacity to meet our need.

Raising alarm on the increasing rate of the subsidy without mentioning that the present government in the history of the country (next to Obasanjo’s regime during 2008) is enjoying the highest rate of crude oil price is a tacit deceit. Not explaining that the whopping subsidy figure in Naira would have been better if Naira value has not been falling is another fact often hidden from the public.

Should we also believe the claim that the actual cost is 96p/Litre? Is it really possible for a litre of refined petrol to be costlier than a litre of crude oil, which contains light distillate, middle distillate and the residues? Otherwise 96p cost-claim for petrol (middle distillate) alone will translate to $153/barrel when the full bonny light was going for $110/barrel.

Devoid of all technicalities is the question why 53 years after discovery of commercial oil in the country we can only refined less than 2% of our required demand and 0.1% of our daily production?

Recent extensive analysis done by SUPA (Strategic Union of Professionals for the Advancement of Nigeria) shows that if Nigeria were to be refining the locally consumed fuel instead of just exporting crude and re-importing the refined petrol; government would have been making a profit of 22p/Litre (N33) at the current selling price of 43p/Litre (N65). That is because a litre of petrol would have been costing N32/Litre.

Beyond the deception with the figures; another line of argument is the need to save the subsidy for developmental projects. But our history does not support such hope. The only government that came close to trading off subsidy for roads construction was General Abacha. An attempt by Obasanjo regime to save excess earnings saw the wrath of state governors who believed that there was no provision in the constitution for Nigeria to save (because it was in an “unconstitutional account”).

Some are claiming that until subsidy is removed, smuggling of fuel into Cameroun, Republic of Niger and Benin Republic will not stop. It is never a good excuse to remove subsidy on ground of smuggling? Why not curb smuggling. Evidence has shown that the more the price goes up in Nigeria the more it goes up in the neighbouring countries (implying that selling across the border will always be more profitable).

And the most troubling explanation was echoed by the Central Bank Governor, Mallam Sanusi. “This subsidy is going to a small group of people. The greater Nigerian people are not benefitting …. the subsidy is creating a pool of funds for a cabal. These are the same people who borrow from banks and do not pay; the same people who are rigging elections.”

Why not block the leakages instead of using it as a justification to remove the subsidy?

We are discussing a country where what an average household spends in a week on fuelling generator is more than Eon’s household monthly average electric bill in UK for uninterrupted light supply. A country where an average household must source its own water, trust God more for security not the state. Same country where labour is presently struggling to secure $120 monthly minimum wage!

Naijanomics does not support perpetual subsidy but under present scenario; the most appropriate action would be to develop refining capacity of the country to meet local demands then remove the subsidy.


We are no proponents of subsidy. Subsidy breeds inefficiency but probity demands that true and complete picture be painted before a decision is reached and whoever doubts the need for government intervention should look into the Common Agricultural Policy (CAP) in the EU.


Conversion rate used N150/USD



When Nigeria got independence from Britain (1960), we needed just 0.71 Nigerian Naira in exchange for 1 USD. The prospect was good and subsequent developments in the oil market was great, such that by 1980, we could get almost $2 USD with just N1 Nigerian Naira (N 0.5445/USD).

It was so good to be true that Nigerian Naira that was been exchanged for N2/GBP in 1960 became more valuable than the great British Pound Sterling in 1974, and it remained so until 1985.

But as Nigeria marks her 51st Independence Anniversary; it is not surprising that we now need N150 in exchange for 1 USD and N250 for 1 GBP but the rhetoric is “how did we get here as a nation”?

Trend of Nigerian Naira Exchange Rate with USD & GBP

Simple economics would explain that Non-competitive export, Rising Inflation, Falling Revenue, among others could explain such, but the trend of Nigerian revenue over the years coupled with the OPEC as a cartel negate such explanation in our own case. A rapidly growing revenue matched with a rapidly devalued currency!

High revenue does not translate into high worth, particularly in a growing population. But this cannot be blamed on our growing population. At independence, Nigeria had almost twice of India’s GDP per capital and three times that of China. Today, China has four times Nigeria’s GDP per capital and India is almost twice.

How did we get here?

The country was so blessed with the oil boom of the early 1970s beyond the administrative capacity of the then ruling class that a commission was set up in 1972 (Udoji Commission) to come up with ways to share the “Excess Petro Dollars” among households. The commission submitted that workers salaries be doubled and be paid in retroactive to 6 months.

The minimum wage was increased by 131% from N312 ($506) to N720 ($1,168) in 1974. But as the country marks her 51st independence anniversary (2011), the state governments are unable to afford $120 USD (N18,000) minimum wage to Nigerian workers. How did we get here?

Three (3) years after doubling salaries; Nigerian government organised a 28 days mammoth jamboree (January 15 – February 12, 1977) for African nations. It is called FESTAC 77, an “opportunity for recounting the achievements of our ancestors”, according to the then Head of State (General Obasanjo). – Up till date, no African country has attempted such a jamboree again.

Here is our snapshots of events thereafter:

Head of State Tenor Brief
Shagari Oct. 1, 1979 – Dec. 31, 1983 A gentleman ill-equipped for the murky waters of Nigerian politics and the moneybags. The oil glut came down on the nation and rumours of money disappearing from the treasury. The phrase “Empty- Treasury” entered Nigerian diction.
Buhari Dec. 31, 1983 – Aug. 27, 1985 Stringent and upright officer but with little competency on economy. Changed the Nigerian currency in an effort to punish those who looted and stacked Nigerian treasury. A similar extreme monetary policy taken by Germany after the world war.
IBB Aug. 27, 1985 – Aug. 26, 1993 Epitome of recent Nigeria. Oil windfall as a result of gulf war not properly accounted for ($2.2Billion). Promulgated the most controversial economic policy in conjunction with IMF, so far in the history of the country (Structural Adjustment Programme – SAP).
Abacha Aug. 26, 1993 – Jun. 8, 1998 Ran a close economy because of non-acceptance by the international community. The isolation had its own setback but there was massive abuse of the Treasury by close associates
Abdusalam Jun. 8, 1998 – May29, 1999 Depleted the Reserve (despite normal earnings) by 79% within 12 months
Obj. May29, 1999 – May29, 2007 Spent the first 4 years travelling on excuse of image laundry for the country and was surrounded by same of old minions. Got down to work by the second term but was too late and the 3rd term did not materialise.
Yaradua May29, 2007 -May 5, 2010 No plan to become Head of State but later developed genuine intention for change but ill health never permitted him.
Jonathan May 5, 2010 – Till Date Still Strategising but we maintain our reservation.

One of the Nigerian renowned scholars, Professor Pat Utomi asserted that “it seems clearer everyday that the poverty that holds Nigeria hostage and devalues the lives of so many, comes from a divorce from creative application of the intellect to the solution of people’s problem by those who offer leadership and the implementing bureaucracies.”

Naijanomics agrees that, we got to where we are because; we have been ruled by people low in Economic IQ but high in Looting Co-efficient.



Data Source – World Bank and Central Bank of Nigeria.

Devaluation has its own economic merits but only when you have a competitive export (China)