Inside IBB’s controversial economic reforms

In his long-awaited autobiography, former Nigerian military president, Ibrahim Babangida, provided a rare, unfiltered account of the Structural Adjustment Programme (SAP) – a policy that reshaped Nigeria’s economic landscape, triggered nationwide protests, and remains a subject of intense debate decades later.

The memoir entitled, ‘A Journey In Service,’ Babangida offered an insider’s perspective on the circumstances that led to the adoption of the SAP and how it marked the beginning of Nigeria’s transition toward a market-driven economy.

On assuming office, Babangida said he was convinced that urgent reforms were necessary. He seized power in 1985, with Nigeria facing severe economic distress following the decline in global oil prices and mounting external debt.

The 83-year-old former military dictator said that he consulted extensively with leading economists and technocrats, assembling a team that included Gabriel Olusanya, Ojetunji Aboyade, Ikenna Nzimiro, Akin Mabogunje, Chu Okongwu, Kalu Idika Kalu, and others.

He and his team believed Nigeria had the resources and talent to implement a new economic direction, shifting towards a free-market system.

His predecessor, Muhammadu Buhari, had resorted to a system of market control, setting the price of everything from food items to petrol.

“We agreed that our most urgent priority was to rescue the national economy by putting it on a new footing of an open market,” Babangida said in his memoir.

“In the immediate post-Shagari military government, there was a shared consensus among the military leadership that our people needed to be saved from the prospect of a failed economy and state,” Babangida said.

Babangida’s government identified the economy’s core issues, including excessive state control, inefficient government-owned enterprises, and a rigid foreign exchange system.

Following extensive consultations, the SAP launched in 1986, aimed at liberalising the economy, reducing government intervention, and promoting private sector-led growth.

The option of taking an IMF loan was rejected during public consultations with Nigerians, but Babangida’s team were convinced that Nigerians wanted an economic reset which SAP- though with policies similar to the IMF loan conditionalities – offered.

Almost four decades later, the SAP remains one of Nigeria’s most controversial economic policies, evoking strong opinions on its impact.

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The highs, lows of SAP

Key measures of the SAP included floating the naira, lifting import restrictions, reducing subsidies, privatising state enterprises, and deregulating interest rates.

While SAP aimed to create a more dynamic economy, its rapid implementation led to severe inflation, a declining currency, and increased poverty.

The naira slumped from about N1/$1 in 1986 to N9/$1 by 1993.This worsened inflation, which surged past 40 percent by 1989, according to World Bank data, eroding purchasing power.

The programme worsened poverty, with 45 percent of Nigerians living below the poverty line by the early 1990s, sparking public unrest and protests.

Although the SAP sought to reduce Nigeria’s external debt burden, which stood at $19 billion in 1985, the external debt stock had ballooned to over $30 billion by 1993 due to continued borrowing and high-interest repayments.

State-owned enterprises were privatised, but critics say corruption undermined the process. Fiscal austerity measures failed to bridge the budget deficit, which persisted throughout the period.

A rare success was seen in agriculture, as import restrictions boosted local production, restoring Nigeria’s position in cocoa, palm oil, and rubber exports.

“Ultimately, SAP’s legacy remains mixed,” a senior business leader said. “While it introduced necessary economic reforms, poor execution led to widespread hardship and social unrest,” the business leader said on condition of anonymity.

“There’s a lesson in there for the current President, economic reforms if poorly executed could be just as devastating as doing the wrong things.”

Taking over the reins of the economy from Buhari is not the only similarity shared by Babangida and current president Tinubu.

The country is also in dire straits and in the middle of painful economic reforms that have led to Nigeria’s worst cost of living crisis in a generation.

“SAP introduced critical market-oriented reforms, but its rapid and poorly sequenced implementation led to economic distortions, increased inequality, and entrenched corruption,” another knowledgeable source told BusinessDay.

While privatisation and financial liberalisation remain relevant, Nigeria still grapples with the structural challenges that SAP sought to resolve, including currency instability and over-reliance on oil revenue.

Babangida scored his economic reforms highly, saying they were generally “aimed at transforming our country from a centralised mixed economy to a free market.”

“I knew the process would take many decades to achieve tangible results. But it was better to summon the courage to tell ourselves the truth,” he said.

The no-love-lost relationship between Nigerians and the IMF/World Bank duo can be traced back to implementation of the SAP by Babangida.

Given that the thrust of the SAP was anchored on the recommendations of the IMF, Nigerians are overly critical of the institution till date.

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The voice of Jacob but hand of Esau

Olu Fasan, a political economist, is of the view that Nigerians unfairly criticise the IMF for the failings of the economy.

“Those measures (SAP) are the hallmarks of every open and competitive liberal economy; and any economy that has been so badly mismanaged, as Nigeria’s has, needs those self-correcting measures,” Fasan said.

“General Babangida accepted the popular wishes of Nigerians and refused to take the IMF loan. However, he interpreted the outcome of the national dialogue to mean that while Nigerians rejected an IMF loan and its conditionalities, they were not opposed to the government introducing necessary reforms to tackle the economic crisis,” Fasan said.

In other words, the reforms would be designed at home, not imposed from the outside.

But it was a sleight of hand because the measures Babangida’s government introduced were almost the same as what the multilaterals had prescribed.

“For most Nigerians, it was the voice of Jacob but the hands of Esau, the latter being the IMF and the World Bank. Since then, most Nigerians have never stopped viewing both institutions with deep suspicion,” Fasan said.

“However, Nigerians rarely hold their government to account for mismanaging the economy through misguided policies and industrial-scale corruption,” Fasan said.